-----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, DBYD7Jn8nTez85ab01AEkAT298oiprve5ByF0XdKCTUVYfcocWN44wgxzmfzbRKC OCJsDgk15kBlkGeR1zZVLQ== 0000950152-02-007085.txt : 20020919 0000950152-02-007085.hdr.sgml : 20020919 20020919121358 ACCESSION NUMBER: 0000950152-02-007085 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 20020919 GROUP MEMBERS: HAMILTON SORTER CO., INC. GROUP MEMBERS: HS MORGAN CORPORATION GROUP MEMBERS: HS MORGAN LIMITED PARTNERSHIP GROUP MEMBERS: MARK J. DESSY GROUP MEMBERS: MS TP LIMITED PARTNERSHIP GROUP MEMBERS: MSTP, LLC GROUP MEMBERS: T ACQUISITION CO. GROUP MEMBERS: T ACQUISITION L.P. GROUP MEMBERS: THADDEUS S. JAROSZEWICZ GROUP MEMBERS: WATKINS C. JOHNSTON SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: TAB PRODUCTS CO CENTRAL INDEX KEY: 0000096116 STANDARD INDUSTRIAL CLASSIFICATION: OFFICE FURNITURE (NO WOOD) [2522] IRS NUMBER: 941190862 STATE OF INCORPORATION: DE FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-12324 FILM NUMBER: 02767522 BUSINESS ADDRESS: STREET 1: 935 LAKEVIEW PARKWAY STREET 2: SUITE 195 CITY: VERNON HILLS STATE: IL ZIP: 60061 BUSINESS PHONE: 8479685400 MAIL ADDRESS: STREET 1: 935 LAKEVIEW PARKWAY STREET 2: SUITE 195 CITY: VERNON HILLS STATE: IL ZIP: 60061 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: COHEN PHILLIP EAN CENTRAL INDEX KEY: 0001054645 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 350 PARK AVE STREET 2: 5TH FL CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 2125486750 MAIL ADDRESS: STREET 1: 350 PARK AVE STREET 2: 5TH FL CITY: NEW YORK STATE: NY ZIP: 10022 SC 13D/A 1 l96187asc13dza.txt TAB PRODUCTS/PHILLIP EAN COHEN ET AL SC 13D/A SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 13D (Rule 13d-101) INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO RULE 13d-2(a) (Amendment No. 18) Tab Products Co. (Name of Issuer) Common Stock, $0.01 par value per share (Title of Class of Securities) 873197 10 7 (CUSIP Number) Edward E. Steiner, Esq. Keating, Muething & Klekamp, P.L.L. One East Fourth Street, 14th Floor Cincinnati, Ohio 45202 (513) 579-6468 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) September 17, 2002 (Date of Event Which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box - ------------------------------------------------------------------------------- CUSIP No. 873197107 Page 2 of 15 Pages - ------------------------------------------------------------------------------ 1 NAME OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) Phillip Ean Cohen - ------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |X| (b) - ------------------------------------------------------------------------------- 3 SEC USE ONLY - ------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* WC - See Item 3 - ------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) - ------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Australia - ------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER SHARES BENEFICIALLY 338,900 OWNED BY --------------------------------------- EACH 8 SHARED VOTING POWER REPORTING PERSON WITH -0- ---------------------------------------- 9 SOLE DISPOSITIVE POWER 338,900 ---------------------------------------- 10 SHARED DISPOSITIVE POWER -0- - ------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 338,900 - See Item 5 - ------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* - ------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 6.6% - ------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* IN - ------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! - ------------------------------------------------------------------------------- CUSIP No. 873197107 Page 3 of 15 Pages - ------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) Hamilton Sorter Co., Inc. 31-0722233 - ------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |X| (b) - ------------------------------------------------------------------------------- 3 SEC USE ONLY - ------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* WC - See Item 3 - ------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) - ------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Ohio - ------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER SHARES BENEFICIALLY 338,900 OWNED BY ----------------------------------- EACH 8 SHARED VOTING POWER REPORTING PERSON WITH -0- ----------------------------------- 9 SOLE DISPOSITIVE POWER 338,900 ----------------------------------- 10 SHARED DISPOSITIVE POWER -0- - ------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 338,900 - See Item 5 - ------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* - ------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 6.6% - ------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* CO - ------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- CUSIP No. 873197107 Page 4 of 15 Pages - ------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) HS Morgan Corporation 13-3526420 - ------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |X| (b) - ------------------------------------------------------------------------------- 3 SEC USE ONLY - ------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* WC - See Item 3 ------------------------------------------------------------------------------ 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) - ------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - ------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER SHARES BENEFICIALLY 338,900 OWNED BY ------------------------------------ EACH 8 SHARED VOTING POWER REPORTING PERSON WITH -0- ------------------------------------ 9 SOLE DISPOSITIVE POWER 338,900 ------------------------------------- 10 SHARED DISPOSITIVE POWER -0- - ------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 338,900 - See Item 5 - ------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* - ------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 6.6% - ------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* CO - ------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! - ------------------------------------------------------------------------------- CUSIP No. 873197107 Page 5 of 15 Pages - ------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) HS Morgan Limited Partnership 13-3526423 - ------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |X| (b) - ------------------------------------------------------------------------------ 3 SEC USE ONLY - ------------------------------------------------------------------------------ 4 SOURCE OF FUNDS* WC - See Item 3 - ------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) [ ] - ------------------------------------------------------------------------------ 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - ------------------------------------------------------------------------------ NUMBER OF 7 SOLE VOTING POWER SHARES BENEFICIALLY 338,900 OWNED BY ---------------------------------------- EACH 8 SHARED VOTING POWER REPORTING PERSON WITH -0- ----------------------------------------- 9 SOLE DISPOSITIVE POWER 338,900 ---------------------------------------- 10 SHARED DISPOSITIVE POWER -0- - ------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 338,900 - See Item 5 - ------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] - ------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 6.6% - ------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* PN - ------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! - ------------------------------------------------------------------------------- CUSIP No. 873197107 Page 6 of 15 Pages - ------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) Thaddeus S. Jaroszewicz - ------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |X| (b) - ------------------------------------------------------------------------------- 3 SEC USE ONLY - ------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* PF - ------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) [ ] - ------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION USA - ------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER SHARES BENEFICIALLY 100 OWNED BY ------------------------------------ EACH 8 SHARED VOTING POWER REPORTING PERSON WITH -0- ------------------------------------ 9 SOLE DISPOSITIVE POWER 100 ------------------------------------ 10 SHARED DISPOSITIVE POWER -0- - ------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 100 - See Item 5 ------------------------------------------------------------------------------ 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] - ------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) Less than 0.1% - ------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* IN - ------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! - ------------------------------------------------------------------------------- CUSIP No. 873197107 Page 7 of 15 Pages - ------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) Watkins C. Johnston - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |X| (b) - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* PF - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION USA - -------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER SHARES BENEFICIALLY 1,000 OWNED BY -------------------------------------- EACH 8 SHARED VOTING POWER REPORTING PERSON WITH -0- ------------------------------------- 9 SOLE DISPOSITIVE POWER 1,000 -------------------------------------- 10 SHARED DISPOSITIVE POWER -0- - ------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,000 - See Item 5 - ------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] ------------------------------------------------------------------------------ 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) Less than 0.1% - ------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* IN - ------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! - ------------------------------------------------------------------------------- CUSIP No. 873197107 Page 8 of 15 Pages - ------------------------------------------------------------------------------ 1 NAME OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) Mark J. Dessy - ------------------------------------------------------------------------------ 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |X| (b) - ------------------------------------------------------------------------------ 3 SEC USE ONLY - ------------------------------------------------------------------------------ 4 SOURCE OF FUNDS* PF - ------------------------------------------------------------------------------ 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) [ ] - ------------------------------------------------------------------------------ 6 CITIZENSHIP OR PLACE OF ORGANIZATION USA - ------------------------------------------------------------------------------ NUMBER OF 7 SOLE VOTING POWER SHARES BENEFICIALLY 5,000 OWNED BY ---------------------------------- EACH 8 SHARED VOTING POWER REPORTING PERSON WITH -0- ---------------------------------- 9 SOLE DISPOSITIVE POWER 5,000 ---------------------------------- 10 SHARED DISPOSITIVE POWER -0- - ------------------------------------------------------------------------------ 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 5,000 - See Item 5 - ------------------------------------------------------------------------------ 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] - ------------------------------------------------------------------------------ 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) Less than 0.1% - ------------------------------------------------------------------------------ 14 TYPE OF REPORTING PERSON* IN - ------------------------------------------------------------------------------ *SEE INSTRUCTIONS BEFORE FILLING OUT! - ------------------------------------------------------------------------------- CUSIP No. 873197107 Page 9 of 15 Pages - ------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) MS TP Limited Partnership 35-2162082 - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |X| (b) - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* WC - See Item 3 - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER SHARES BENEFICIALLY 338,900 OWNED BY -------------------------------------- EACH 8 SHARED VOTING POWER REPORTING PERSON WITH -0- -------------------------------------- 9 SOLE DISPOSITIVE POWER 338,900 -------------------------------------- 10 SHARED DISPOSITIVE POWER -0- - ------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 338,900 - See Item 5 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 6.6% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* PN - -------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! - ------------------------------------------------------------------------------- CUSIP No. 873197107 Page 10 of 15 Pages - ------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) MSTP, LLC - ------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |X| (b) - ------------------------------------------------------------------------------- 3 SEC USE ONLY - ------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* WC - See Item 3 - ------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) [ ] - ------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - ------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER SHARES BENEFICIALLY 338,900 OWNED BY ------------------------------------ EACH 8 SHARED VOTING POWER REPORTING PERSON WITH -0- ------------------------------------ 9 SOLE DISPOSITIVE POWER 338,900 ------------------------------------ 10 SHARED DISPOSITIVE POWER -0- - ------------------------------------------------------------------------------ 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 338,900 - See Item 5 - ------------------------------------------------------------------------------ 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] - ------------------------------------------------------------------------------ 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 6.6% - ------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* OO - ------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! - ------------------------------------------------------------------------------- CUSIP No. 873197107 Page 11 of 15 Pages - ----------------- ------------------------------------------------------------- 1 NAME OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) T Acquisition Co. - ----------------- ------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |X| (b) - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* WC - See Item 3 - ------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER SHARES BENEFICIALLY 338,900 OWNED BY ------------------------------------------- EACH 8 SHARED VOTING POWER REPORTING PERSON WITH -0- ------------------------------------------ 9 SOLE DISPOSITIVE POWER 338,900 ------------------------------------------ 10 SHARED DISPOSITIVE POWER -0- - ------------------------------------------------------------------------------ 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 338,900 - See Item 5 - ------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] - ------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 6.6% - ------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* CO - ------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! - ------------------------------------------------------------------------------- CUSIP No. 873197107 Page 12 of 15 Pages - ------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) T Acquisition L.P. - ------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |X| (b) - ------------------------------------------------------------------------------- 3 SEC USE ONLY - ------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* WC - See Item 3 - ------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER SHARES BENEFICIALLY 338,900 OWNED BY ----------------------------------------- EACH 8 SHARED VOTING POWER REPORTING PERSON WITH -0- ----------------------------------------- 9 SOLE DISPOSITIVE POWER 338,900 ----------------------------------------- 10 SHARED DISPOSITIVE POWER -0- - ------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 338,900 - See Item 5 - ------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] - ------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 6.6% - ------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* PN - ------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! 13 This Amendment No. 18 to Schedule 13D amends Items 3 and 7 of the Schedule 13D filed on February 8, 2001, as amended by Amendment Nos. 1-17 by Phillip Ean Cohen ("Mr. Cohen"), Hamilton Sorter Co., Inc., an Ohio corporation ("Hamilton Sorter"), HS Morgan Limited Partnership, a Delaware limited partnership ("HSMLP"), Thaddeus S. Jaroszewicz ("Mr. Jaroszewicz"), HS Morgan Corporation, a Delaware corporation ("HS Morgan"), Watkins C. Johnston ("Mr. Johnston"), Mark J. Dessy ("Mr. Dessy"), MS TP Limited Partnership, a Delaware limited partnership ("MS TP"), MSTP, LLC, a Delaware corporation ("MSTP"), T Acquisition Co., a Delaware corporation and T Acquisition L.P., a Delaware corporation (collectively, the "Filers"). This filing relates to the Common Stock, $0.01 par value ("Common Stock") of Tab Products Co., a Delaware corporation ("Tab" or the "Corporation"). ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. As announced by Tab on September 18, 2002, HSMLP has provided to Tab definitive agreements for the financing of the acquisition of Tab. On September 17, 2002, LaSalle Bank National Association ("LaSalle") and T Acquisition Co. entered into a Loan and Security Agreement (the "Loan Agreement"), pursuant to which LaSalle agreed to make revolving loans, term loans, capital expenditure loans, letters of credit, and other advances up to an aggregate principal amount of $23.5 million. The terms of the Loan Agreement which is attached hereto as Exhibit 1 are incorporated herein by reference into this Item 3. Pursuant to a Note and Warrant Purchase Agreement (the "Note Agreement") also entered into on September 17, 2002, Banc One Mezzanine Corporation ("Banc One") agreed to provide $7 million to Workstream Inc. through the issuance of a Senior Subordinated Note by Workstream Inc. and its wholly owned subsidiaries, Hamilton Sorter Co., Inc. and New Maverick Desk, Inc. In connection with this loan, Workstream Inc. also will issue Banc One a Stock Purchase Warrant, the exercise price of which is $100 and which Warrant will entitle Banc One to acquire up to 26% of the outstanding aggregate capital stock of Workstream Inc. on a fully diluted basis at the time of exercise. The terms of the Note Agreement which is attached hereto as Exhibit 2 are incorporated herein by reference into this Item 3. ITEM 7. MATERIALS TO BE FILED AS EXHIBITS. 1. Loan and Security Agreement by and between LaSalle Bank National Association and T Acquisition Co. dated as of September 17, 2002 (Schedules, exhibits and attachments to this document are not filed herewith). 2. Note and Warrant Purchase Agreement by and among HS Morgan Limited Partnership, Workstream, Inc., Hamilton Sorter Co., Inc., New Maverick Desk, Inc. and Banc One Mezzanine Corporation dated as of September 17, 2002 (Schedules, exhibits and attachments to this document are not filed herewith). 14 Dated: September 17, 2002 --------------------------------------- *Phillip Ean Cohen /s/ Thaddeus S. Jaroszewicz --------------------------------------- Thaddeus S. Jaroszewicz --------------------------------------- *Watkins C. Johnston ---------------------------------------- *Mark J. Dessy HAMILTON SORTER CO., INC., an Ohio corporation By: /s/ Thaddeus S. Jaroszewicz ------------------------------------ Title: Chief Executive Officer --------------------------------- HS MORGAN LIMITED PARTNERSHIP, a Delaware limited partnership. By: HS MORGAN CORPORATION, the General Partner By: /s/ Thaddeus S. Jaroszewicz ------------------------------------ Its: President ----------------------------------- HS MORGAN CORPORATION, a Delaware corporation By:/s/ Thaddeus S. Jaroszewicz ------------------------------------- Its: President ----------------------------------- 15 MS TP LIMITED PARTNERSHIP, a Delaware limited partnership By: MSTP, LLC, the General Partner By: /s/ Thaddeus S. Jaroszewicz ------------------------------------- Its: President ------------------------------------- MSTP, LLC By: /s/ Thaddeus S. Jaroszewicz ------------------------------------- Its: President ------------------------------------- T ACQUISITION CO. By: /s/ Thaddeus S. Jaroszewicz ------------------------------------- Its: President ------------------------------------- T ACQUISITION L.P. By: MSTP, LLC, Its General Partner By: /s/ Thaddeus S. Jaroszewicz ------------------------------------- Its: President ------------------------------------- *By: /s/ Thaddeus S. Jaroszewicz ------------------------------------ Thaddeus S. Jaroszewicz Attorney-in-Fact EX-1 3 l96187aexv1.txt EXHIBIT 1 Exhibit 1 ================================================================================ LOAN AND SECURITY AGREEMENT BY AND BETWEEN LASALLE BANK NATIONAL ASSOCIATION, AND T ACQUISITION CO. DATED AS OF SEPTEMBER 17, 2002 ================================================================================ TABLE OF CONTENTS
PAGE ---- 1. DEFINITIONS...................................................................................1 2. LOANS.........................................................................................9 (a) Revolving Loans...........................................................................9 (b) Term Loan A..............................................................................11 (c) Term Loan B..............................................................................11 (d) Capital Expenditure Loans................................................................11 (e) Repayments...............................................................................12 (f) Notes....................................................................................13 3. LETTERS OF CREDIT............................................................................13 (a) General Terms............................................................................13 (b) Requests for Letters of Credit...........................................................14 (c) Obligations Absolute.....................................................................14 (d) Expiration Dates of Letters of Credit....................................................14 4. INTEREST, FEES AND CHARGES...................................................................15 (a) Interest Rate............................................................................15 (b) Fees And Charges.........................................................................15 (c) Maximum Interest.........................................................................16 5. COLLATERAL...................................................................................16 (a) Grant of Security Interest to Lender.....................................................16 (b) Other Security...........................................................................17 (c) Possessory Collateral....................................................................17 (d) Electronic Chattel Paper.................................................................17 (e) Lender as Collateral Agent...............................................................18 6. PRESERVATION OF COLLATERAL AND PERFECTION OF SECURITY INTERESTS THEREIN...................................................................18 7. POSSESSION OF COLLATERAL AND RELATED MATTERS.................................................18 8. COLLECTIONS..................................................................................19 9. COLLATERAL, AVAILABILITY AND FINANCIAL REPORTS AND SCHEDULES.................................21 (a) Daily Reports............................................................................21 (b) Monthly Reports..........................................................................21 (c) Financial Statements.....................................................................21 (d) Annual Projections.......................................................................22 (e) Explanation of Budgets and Projections...................................................22 (f) Public Reporting.........................................................................22 (g) Other Information........................................................................22 10. TERMINATION; AUTOMATIC RENEWAL...............................................................22 11. REPRESENTATIONS AND WARRANTIES...............................................................23
-i- (a) Financial Statements and Other Information...............................................23 (b) Locations................................................................................24 (c) Loans by Borrower........................................................................24 (d) Accounts and Inventory...................................................................24 (e) Liens....................................................................................24 (f) Organization, Authority and No Conflict..................................................24 (g) Litigation...............................................................................25 (h) Compliance with Laws and Maintenance of Permits..........................................25 (i) Affiliate Transactions...................................................................25 (j) Names and Trade Names....................................................................26 (k) Equipment................................................................................26 (l) Enforceability...........................................................................26 (m) Solvency.................................................................................26 (n) Indebtedness.............................................................................26 (o) Margin Security and Use of Proceeds......................................................26 (p) Parent, Subsidiaries and Affiliates......................................................27 (q) No Defaults..............................................................................27 (r) Employee Matters.........................................................................27 (s) Intellectual Property....................................................................27 (t) Environmental Matters....................................................................27 (u) ERISA Matters............................................................................28 12. AFFIRMATIVE COVENANTS........................................................................28 (a) Maintenance of Records...................................................................28 (b) Notices..................................................................................28 (c) Compliance with Laws and Maintenance of Permits..........................................29 (d) Inspection and Audits....................................................................30 (e) Insurance................................................................................30 (f) Collateral...............................................................................31 (g) Use of Proceeds..........................................................................32 (h) Taxes....................................................................................32 (i) Intellectual Property....................................................................32 (j) Checking Accounts........................................................................32 (k) Interest Rate Protection.................................................................32 13. NEGATIVE COVENANTS...........................................................................33 (a) Guaranties...............................................................................33 (b) Indebtedness.............................................................................33 (c) Liens....................................................................................33 (d) Mergers, Sales, Acquisitions, Subsidiaries and Other Transactions Outside the Ordinary Course of Business..............................................................33 (e) Dividends and Distributions..............................................................34 (f) Investments; Loans.......................................................................34 (g) Fundamental Changes, Line of Business....................................................34 (h) Equipment................................................................................34 (i) Affiliate Transactions...................................................................35 (j) Settling of Accounts.....................................................................35 (k) Management Fees..........................................................................35
-ii- 14. FINANCIAL COVENANTS..........................................................................35 (a) Tangible Net Worth.......................................................................35 (b) Fixed Charge Coverage....................................................................36 (c) Capital Expenditure Limitations..........................................................36 (d) EBITDA...................................................................................36 15. DEFAULT......................................................................................36 (a) Payment..................................................................................36 (b) Breach of this Agreement and the Other Agreements........................................37 (c) Breaches of Other Obligations............................................................37 (d) Breach of Representations and Warranties.................................................37 (e) Loss of Collateral.......................................................................37 (f) Levy, Seizure or Attachment..............................................................37 (g) Bankruptcy or Similar Proceedings........................................................38 (h) Appointment of Receiver..................................................................38 (i) Judgment.................................................................................38 (j) Death or Dissolution of Obligor..........................................................38 (k) Default or Revocation of Guaranty........................................................38 (l) Criminal Proceedings.....................................................................39 (m) Change of Control........................................................................39 (n) Change of Management.....................................................................39 (o) Material Adverse Change..................................................................39 16. REMEDIES UPON AN EVENT OF DEFAULT............................................................39 17. CONDITIONS PRECEDENT.........................................................................40 18. INDEMNIFICATION..............................................................................42 19. NOTICE.......................................................................................42 20. CHOICE OF GOVERNING LAW; CONSTRUCTION; FORUM SELECTION.......................................43 21. MODIFICATION AND BENEFIT OF AGREEMENT........................................................43 22. HEADINGS OF SUBDIVISIONS.....................................................................44 23. POWER OF ATTORNEY............................................................................44 24. CONFIDENTIALITY..............................................................................44 25. COUNTERPARTS.................................................................................44 26. ELECTRONIC SUBMISSIONS.......................................................................45 27. WAIVER OF JURY TRIAL; OTHER WAIVERS..........................................................45
-iii- EXHIBIT A -- BUSINESS AND COLLATERAL LOCATIONS EXHIBIT B -- COMPLIANCE CERTIFICATE EXHIBIT C -- COMMERCIAL TORT CLAIMS SCHEDULE 1 -- PERMITTED LIENS SCHEDULE 11(c) -- LOANS BY BORROWER SCHEDULE 11(g) -- LITIGATION SCHEDULE 11 (i) -- AFFILIATE TRANSACTIONS SCHEDULE 11(j) -- NAMES & TRADE NAMES SCHEDULE 11 (n) -- INDEBTEDNESS SCHEDULE 11 (p) -- PARENT, SUBSIDIARIES AND AFFILIATES SCHEDULE 11(q) -- DEFAULTS UNDER MATERIAL CONTRACTS SCHEDULE 11(s) -- FAILURE TO MAINTAIN INTELLECTUAL PROPERTY SCHEDULE 11(t) -- ENVIRONMENTAL MATTERS SCHEDULE 17(a) - CLOSING DOCUMENT CHECKLIST -iv- LOAN AND SECURITY AGREEMENT THIS LOAN AND SECURITY AGREEMENT (as amended, modified or supplemented from time to time, this "AGREEMENT") made this 17th day of September, 2002 by and between LASALLE BANK NATIONAL ASSOCIATION, a national banking association ("LENDER"), 135 South LaSalle Street, Chicago, Illinois 60603-4105, and T ACQUISITION CO., a Delaware corporation, having its principal place of business at 935 Lakeview Parkway, Suite 195, Vernon Hills, Illinois 60061 ("BORROWER"). W I T N E S S E T H: - - - - - - - - - - WHEREAS, Borrower has entered into the Merger Agreement with Tab Products Co. ("TAB") and T Acquisition L.P. pursuant to which Borrower will be merged with and into Tab, with Tab being the surviving entity; WHEREAS, upon consummation of the Merger, Tab will assume all of the rights and obligations of Borrower hereunder and thereafter all references to Borrower hereunder shall be deemed to mean Tab; WHEREAS, Borrower may, from time to time, request Loans from Lender, and the parties wish to provide for the terms and conditions upon which such Loans or other financial accommodations, if made by Lender, shall be made; NOW, THEREFORE, in consideration of any Loan (including any Loan by renewal or extension) hereafter made to Borrower by Lender, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by Borrower, the parties agree as follows: 1. DEFINITIONS. "ACCOUNT", "ACCOUNT DEBTOR", "CHATTEL PAPER", "COMMERCIAL TORT CLAIMS", "DEPOSIT ACCOUNTS", "DOCUMENTS", "ELECTRONIC CHATTEL PAPER", "EQUIPMENT", "FIXTURES", "GENERAL INTANGIBLES", "GOODS", "INSTRUMENTS", "INVENTORY", "INVESTMENT PROPERTY", "LETTER-OF-CREDIT RIGHT", "PROCEEDS" and "TANGIBLE CHATTEL PAPER" shall have the respective meanings assigned to such terms in the Illinois Uniform Commercial Code, as the same may be in effect from time to time. "AFFILIATE" shall mean any Person (i) which directly or indirectly through one or more intermediaries controls, is controlled by, or is under common control with, Borrower, (ii) which beneficially owns or holds five percent (5%) or more of the voting control or equity interests of Borrower, or (iii) five percent (5%) or more of the voting control or equity interests of which is beneficially owned or held by Borrower. "BUSINESS DAY" shall mean any day other than a Saturday, a Sunday or any day that banks in Chicago, Illinois are required or permitted to close. "CAPITAL EXPENDITURE LOANS" shall mean the Loans made pursuant to SUBSECTION 2(d) hereof. "CAPITAL EXPENDITURES" shall mean with respect to any period, the aggregate of all expenditures (whether paid in cash or accrued as liabilities and including expenditures for capitalized lease obligations) by Borrower and its Subsidiaries during such period that are required by generally accepted accounting principles, consistently applied, to be included in or reflected by the property, plant and equipment or similar fixed asset accounts (or intangible accounts subject to amortization) on the balance sheet of Borrower and its Subsidiaries. "COLLATERAL" shall mean all of the property of Borrower described in SECTION 5 hereof, together with all other real or personal property of any Obligor or any other Person now or hereafter pledged to Lender to secure, either directly or indirectly, repayment of any of the Liabilities. "EBITDA" shall mean, with respect to any period, Borrower's and its Subsidiaries' net income after taxes for such period (excluding any after-tax gains or losses on the sale of assets (other than the sale of Inventory in the ordinary course of business) and excluding other after-tax extraordinary gains or losses) plus interest expense, income tax expense, depreciation and amortization for such period, PLUS or MINUS any other non-cash charges or gains which have been subtracted or added in calculating net income after taxes for such period, all on a consolidated basis. "ELIGIBLE ACCOUNT" shall mean an Account owing to Borrower which is acceptable to Lender in its sole discretion for lending purposes. Without limiting Lender's discretion, Lender shall, in general, consider an Account to be an Eligible Account if it meets, and so long as it continues to meet, the following requirements: (i) it is genuine and in all respects what it purports to be; (ii) it is owned by Borrower, Borrower has the right to subject it to a security interest in favor of Lender or assign it to Lender and it is subject to a first priority perfected security interest in favor of Lender and to no other claim, lien, security interest or encumbrance whatsoever, other than Permitted Liens; (iii) it arises from (A) the performance of services by Borrower in the ordinary course of Borrower's business, and such services have been fully performed and acknowledged and accepted by the Account Debtor thereunder; or (B) the sale or lease of Goods by Borrower in the ordinary course of Borrower's business, and (x) such Goods have been completed in accordance with the Account Debtor's specifications (if any) and delivered to the Account Debtor, (y) such Account Debtor has not refused to accept, returned or offered to return, any of the Goods which are the subject of such Account, and (z) Borrower has possession of, or Borrower has delivered to Lender (at Lender's request) shipping and delivery receipts evidencing delivery of such Goods; provided, however, that absent the occurrence of an Event of Default, Lender will consider for inclusion in Eligible Accounts (to the -2- extent such items are not included as Inventory for Eligible Inventory purposes) up to $100,000 of pre-billed Accounts with respect to which Inventory has been completed but is to be installed and as to which the Account Debtor is the United States of America or any agency or instrumentality thereof; (iv) it is evidenced by an invoice rendered to the Account Debtor thereunder, is due and payable within ninety (90) days after the date of the invoice and does not remain unpaid ninety (90) days past the invoice date thereof; provided, however, that with respect to Accounts for which the Account Debtor is the United States of America or any department, agency or instrumentality thereof, it is evidenced by an invoice rendered to the Account Debtor thereunder, is due and payable within one hundred twenty (120) days after the date of the invoice and does not remain unpaid one hundred twenty (120) days past the invoice date thereof; and provided further, that if more than twenty-five percent (25%) of the aggregate dollar amount of invoices owing by a particular Account Debtor remain unpaid ninety (90) days (or one hundred twenty (120), days if the Account Debtor is the United States of America or any department, agency or instrumentality thereof) after the respective invoice dates thereof, then all Accounts owing by that Account Debtor shall be deemed ineligible; (v) it is a valid, legally enforceable and unconditional obligation of the Account Debtor thereunder, and is not subject to setoff, counterclaim, credit, allowance or adjustment by such Account Debtor, or to any claim by such Account Debtor denying liability thereunder in whole or in part; (vi) it does not arise out of a contract or order which fails in any material respect to comply with the requirements of applicable law; (vii) the Account Debtor thereunder is not a director, officer, employee or agent of Borrower, or a Subsidiary, Parent or Affiliate; (viii) it is not an Account with respect to which the Account Debtor is the United States of America or any state or local government, or any department, agency or instrumentality thereof, unless Borrower assigns its right to payment of such Account to Lender pursuant to, and in full compliance with, the Assignment of Claims Act of 1940, as amended, or any comparable state or local law, as applicable; provided, however, that absent the occurrence of an Event of Default Lender will consider up to the lesser of (i) $3,000,000 and (ii) 30% of the aggregate of Borrower's Accounts (whether or not such Accounts otherwise constitute Eligible Accounts) for inclusion in the Eligible Accounts without compliance with the Assignment of Claims Act or such comparable state of local law; (ix) it is not an Account with respect to which the Account Debtor is located in a state which requires Borrower, as a precondition to commencing or maintaining an action in the courts of that state, either to (A) receive a certificate of authority to do business and be in good standing in such state; or (B) file a notice of -3- business activities report or similar report with such state's taxing authority, unless (x) Borrower has taken one of the actions described in clauses (A) or (B); (y) the failure to take one of the actions described in either clause (A) or (B) may be cured retroactively by Borrower at its election; or (z) Borrower has proven, to Lender's satisfaction, that it is exempt from any such requirements under any such state's laws; (x) the Account Debtor is located within the United States of America or Canada; (xi) it is not an Account with respect to which the Account Debtor's obligation to pay is subject to any repurchase obligation or return right, as with sales made on a bill-and-hold, guaranteed sale, sale on approval, sale or return or consignment basis; (xii) it is not an Account (A) with respect to which any representation or warranty contained in this Agreement is untrue; or (B) which violates any of the covenants of Borrower contained in this Agreement; (xiii) it is not an Account which, when added to a particular Account Debtor's other indebtedness to Borrower, exceeds 10% of all Accounts of Borrower or a credit limit determined by Lender in its sole discretion for that Account Debtor (except that Accounts excluded from Eligible Accounts solely by reason of this clause (xiii) shall be Eligible Accounts to the extent of such credit limit); and (xiv) it is not an Account with respect to which the prospect of payment or performance by the Account Debtor is or will be impaired, as determined by Lender in its sole discretion. "ELIGIBLE INVENTORY" shall mean Inventory of Borrower which is acceptable to Lender in its sole discretion for lending purposes. Without limiting Lender's discretion, Lender shall, in general, consider Inventory to be Eligible Inventory if it meets, and so long as it continues to meet, the following requirements: (i) it is owned by Borrower, Borrower has the right to subject it to a security interest in favor of Lender and it is subject to a first priority perfected security interest in favor of Lender and to no other claim, lien, security interest or encumbrance whatsoever, other than Permitted Liens; (ii) it is located on one of the premises listed on EXHIBIT A (or other locations of which Lender has been advised in writing pursuant to SUBSECTION 12(b)(i) hereof) and is not in transit; (iii) if held for sale or lease or furnishing under contracts of service, it is (except as Lender may otherwise consent in writing) new and unused and free from defects which would, in Lender's sole determination, affect its market value; -4- (iv) it is not stored with a bailee, consignee, warehouseman, processor or similar party unless Lender has given its prior written approval and Borrower has caused any such bailee, consignee, warehouseman, processor or similar party to issue and deliver to Lender, in form and substance acceptable to Lender, such Uniform Commercial Code financing statements, warehouse receipts, waivers and other documents as Lender shall require; (v) Lender has determined, in accordance with Lender's customary business practices, that it is not unacceptable due to age, type, category or quantity; (vi) it does not consist of work-in-process Inventory; and (vii) it is not Inventory (A) with respect to which any of the representations and warranties contained in this Agreement are untrue; or (B) which violates any of the covenants of Borrower contained in this Agreement. "ENVIRONMENTAL LAWS" shall mean all federal, state, district, local and foreign laws, rules, regulations, ordinances, and consent decrees relating to health, safety, hazardous substances, pollution and environmental matters, as now or at any time hereafter in effect, applicable to Borrower's business or facilities owned or operated by Borrower, including laws relating to emissions, discharges, releases or threatened releases of pollutants, contamination, chemicals, or hazardous, toxic or dangerous substances, materials or wastes into the environment (including, without limitation, ambient air, surface water, ground water, land surface or subsurface strata) or otherwise relating to the generation, manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended, modified or restated from time to time. "EVENT OF DEFAULT" shall have the meaning specified in SECTION 15 hereof. "EXCESS AVAILABILITY" shall mean, as of any date of determination by Lender, the sum of (i) the Tab Canada Excess Availability plus (ii) the excess, if any, of the lesser of (a) the Maximum Revolving Loan Limit less the sum of the outstanding Revolving Loans and Letter of Credit Obligations and (b) the Revolving Loan Limit less the sum of the outstanding Revolving Loans and Letter of Credit Obligations, in each case as of the close of business on such date and assuming, for purposes of calculation, that all accounts payable which remain unpaid more than thirty (30) days after the due dates thereof as the close of business on such date are treated as additional Revolving Loans outstanding on such date. "FISCAL YEAR" shall mean each twelve (12) month accounting period of Borrower, which ends on March 31 of each year. "FIXED CHARGES" shall mean for any period, without duplication, scheduled payments of principal during the applicable period with respect to all indebtedness for borrowed money of Borrower and its Subsidiaries, on a consolidated basis, plus scheduled -5- payments of principal during the applicable period with respect to all capitalized lease obligations of Borrower and its Subsidiaries, on a consolidated basis, plus scheduled payments of interest during the applicable period with respect to all indebtedness for borrowed money of Borrower and its Subsidiaries, on a consolidated basis, including capital lease obligations, plus scheduled cash payments with respect to accrued severance obligations incurred in connection with the Merger, plus unfinanced Capital Expenditures of Borrower and its Subsidiaries, on a consolidated basis, during the applicable period, plus payments during the applicable period in respect of income or franchise taxes of Borrower and its Subsidiaries, on a consolidated basis. "HAZARDOUS MATERIALS" shall mean any hazardous, toxic or dangerous substance, materials and wastes, including, without limitation, hydrocarbons (including naturally occurring or man-made petroleum and hydrocarbons), flammable explosives, asbestos, urea formaldehyde insulation, radioactive materials, biological substances, polychlorinated biphenyls, pesticides, herbicides and any other kind and/or type of pollutants or contaminants (including, without limitation, materials which include hazardous constituents), sewage, sludge, industrial slag, solvents and/or any other similar substances, materials, or wastes and including any other substances, materials or wastes that are or become regulated under any Environmental Law (including, without limitation any that are or become classified as hazardous or toxic under any Environmental Law). "INDEMNIFIED PARTY" shall have the meaning specified in SECTION 18 hereof. "INTEREST RATE PROTECTION AGREEMENT" shall mean any interest rate swap, collar or similar interest rate hedging strategy or agreement now existing or hereafter entered into by any Person. "INTEREST RATE PROTECTION LIABILITIES" shall mean all obligations, liabilities, charges, costs, expenses and other amounts payable to Lender or any of its affiliates under any Interest Rate Protection Agreement. "LASALLE CANADA" shall mean LaSalle Business Credit, a division of ABN AMRO Bank N.V., Canada Branch. "LASALLE CANADA LIABILITIES" shall mean the obligations of Borrower under its Guaranty of the Tab Canada Liabilities under the Tab Canada Loan Agreement. "LETTER OF CREDIT" shall mean any Letter of Credit issued on behalf of Borrower in accordance with this Agreement. "LETTER OF CREDIT OBLIGATIONS" shall mean, as of any date of determination, the sum of (i) the aggregate undrawn face amount of all Letters of Credit, and (ii) the aggregate unreimbursed amount of all drawn Letters of Credit not already converted to Loans hereunder. "LIABILITIES" shall mean any and all obligations, liabilities and indebtedness of Borrower to Lender or to any parent, affiliate or subsidiary of Lender of any and every kind -6- and nature, howsoever created, arising or evidenced and howsoever owned, held or acquired including, without limitation, any Interest Rate Protection Liabilities, whether now or hereafter existing, whether now due or to become due, whether primary, secondary, direct, indirect, absolute, contingent or otherwise (including, without limitation, obligations of performance), whether several, joint or joint and several, and whether arising or existing under written or oral agreement or by operation of law. "LOANS" shall mean all loans and advances made by Lender to or on behalf of Borrower hereunder. "LOCK BOX" and "LOCK BOX ACCOUNT" shall have the meanings specified in SUBSECTION 8(a) hereof. "MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on the business, property, assets, operations or condition, financial or otherwise, of a Person. "MAXIMUM LOAN LIMIT" shall mean Eighteen Million Five Hundred Thousand and No/100 Dollars ($18,500,000). "MAXIMUM REVOLVING LOAN LIMIT" shall have the meaning specified in SUBSECTION 2(a) hereof. "MERGER" shall mean the merger of Borrower with and into Tab pursuant to the Merger Agreement. "MERGER AGREEMENT" shall mean that certain Merger Agreement among T Acquisition L.P., Borrower and Tab dated July 29, 2002. "OBLIGOR" shall mean Borrower and each other Person who is or shall become primarily or secondarily liable for any of the Liabilities. "ORIGINAL TERM" shall have the meaning specified in SECTION 10 hereof. "OTHER AGREEMENTS" shall mean all agreements, instruments and documents, other than this Agreement, including, without limitation, guaranties, mortgages, trust deeds, pledges, powers of attorney, consents, assignments, contracts, notices, security agreements, leases, financing statements, Interest Rate Protection Agreements and all other writings heretofore, now or from time to time hereafter executed by or on behalf of Borrower, Tab Canada or any other Person and delivered to Lender or to any parent, affiliate or subsidiary of Lender in connection with the Liabilities or the transactions contemplated hereby, as each of the same may be amended, modified or supplemented from time to time. "PARENT" shall mean any Person now or at any time or times hereafter owning or controlling (alone or with any other Person) at least a majority of the issued and outstanding equity of Borrower and, if Borrower is a partnership, the general partner of Borrower. -7- "PBGC" shall have the meaning specified in SUBSECTION 12(b)(v) hereof. "PERMITTED LIENS" shall mean (i) statutory liens of landlords, carriers, warehousemen, processors, mechanics, materialmen or suppliers incurred in the ordinary course of business and securing amounts not yet due or declared to be due by the claimant thereunder; (ii) liens or security interests in favor of Lender (including Lender in its capacity as collateral agent for LaSalle Canada); (iii) liens for taxes or similar impositions not yet due or payable; (iv) zoning restrictions and easements, licenses, covenants and other restrictions affecting the use of real property that do not individually or in the aggregate have a material adverse effect on Borrower's ability to use such real property for its intended purpose in connection with Borrower's business; (v) liens in connection with purchase money indebtedness and capitalized leases otherwise permitted pursuant to this Agreement, provided, that such liens attach only to the assets the purchase of which was financed by such purchase money indebtedness or which is the subject of such capitalized leases; (vi) liens set forth on Schedule 1; and (vii) liens specifically permitted by Lender in writing. "PERSON" shall mean any individual, sole proprietorship, partnership, joint venture, trust, unincorporated organization, association, corporation, limited liability company, institution, entity, party or foreign or United States government (whether federal, state, county, city, municipal or otherwise), including, without limitation, any instrumentality, division, agency, body or department thereof. "PLAN" shall have the meaning specified in SUBSECTION 12(b)(v) hereof. "PRIME RATE" shall mean Lender's publicly announced prime rate (which is not intended to be Lender's lowest or most favorable rate in effect at any time) in effect from time to time. "RENEWAL TERM" shall have the meaning specified in SECTION 10 hereof. "REVOLVING LOAN LIMIT" shall have the meaning specified in SUBSECTION 2(a) hereof. "REVOLVING LOANS" shall have the meaning specified in SUBSECTION 2(a) hereof. "SUBSIDIARY" shall mean any corporation of which more than fifty percent (50%) of the outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether at the time stock of any other class of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time, directly or indirectly, owned by Borrower, or any partnership, joint venture or limited liability company of which more than fifty percent (50%) of the outstanding equity interests are at the time, directly or indirectly, owned by Borrower or any partnership of which Borrower is a general partner. "TAB" shall mean Tab Products Co. -8- "TAB CANADA" shall mean Tab Products of Canada Limited, an Ontario Corporation. "TAB CANADA BORROWING BASE" shall mean the "Borrowing Base" as defined in the Tab Canada Loan Agreement. "TAB CANADA EXCESS AVAILABILITY" shall mean, as of any date of determination, the excess, if any of the Tab Canada Borrowing Base less the Tab Canada Obligations as of the close of business on such date and assuming, for purposes of calculation, that all accounts payable of Tab Canada which remain unpaid more than thirty (30) days after the due dates thereof as of the close of business on such date are treated as additional Tab Canada Obligations. "TAB CANADA LOAN AGREEMENT" shall mean that certain Credit Agreement to be entered into as a condition to the initial Loans hereunder between Tab Canada and LaSalle Canada. "TAB CANADA LIABILITIES" shall mean all "Liabilities" as defined in the Tab Canada Loan Agreement. "TAB CANADA OBLIGATIONS" shall mean the sum of the outstanding "Loans" (as defined in the Tab Canada Loan Agreement) and L/C Liabilities (as defined in the Tab Canada Loan Agreement) of Tab Canada to LaSalle Canada under the Tab Canada Loan Agreement. "TANGIBLE NET WORTH" shall have the meaning specified in SUBSECTION 14(a) hereof. "TERM LOAN A" shall have the meaning specified in SUBSECTION 2(b) hereof. "TERM LOAN B" shall have the meaning specified in SUBSECTION 2(c) hereof. "TERM LOANS" shall mean, collectively, Term Loan A, Term Loan B and the Capital Expenditure Loans. 2. LOANS. (a) REVOLVING LOANS. Subject to the terms and conditions of this Agreement and the Other Agreements, during the Original Term and any Renewal Term, Lender shall, absent the occurrence of an Event of Default, make revolving loans and advances (the "REVOLVING LOANS") in an amount up to the sum of the following sublimits (the "REVOLVING LOAN LIMIT"): (i) Up to eighty-five percent (85%) of the face amount (less maximum discounts, credits and allowances which may be taken by or granted to -9- Account Debtors in connection therewith in the ordinary course of Borrower's business) of Borrower's Eligible Accounts; plus (ii) Up to sixty percent (60%) of the lower of cost or market value of Borrower's Eligible Inventory or Two Million Five Hundred Thousand and No/100 Dollars ($2,500,000), whichever is less; MINUS (iii) such reserves as Lender elects, in its sole discretion to establish from time to time including, without limitation, but without duplication, a reserve for slow-moving inventory as reserved on Borrower's books and records and a reserve with respect to all shares of stock for which payment is not made at the time of the Merger as a result of any shareholders' dissent, in an amount equal to the number of such shares multiplied by the price agreed to for such shares in the Merger Agreement; provided, that the Revolving Loan Limit shall in no event exceed Eighteen Million Five Hundred Thousand and No/100 Dollars ($18,500,000) less the then-outstanding principal balance of the Term Loans (the "MAXIMUM REVOLVING LOAN LIMIT") except as such amount may be increased by Lender, in its sole discretion or decreased by Lender in its sole discretion following the occurrence of an Event of Default. The aggregate unpaid principal balance of the Revolving Loans shall not at any time exceed the lesser of the (i) Revolving Loan Limit minus the Letter of Credit Obligations and (ii) the Maximum Revolving Loan Limit minus the Letter of Credit Obligations. If at any time the outstanding Revolving Loans exceeds either the Revolving Loan Limit or the Maximum Revolving Loan Limit, in each case minus the Letter of Credit Obligations, or any portion of the Revolving Loans and Letter of Credit Obligations exceeds any applicable sublimit within the Revolving Loan Limit, Borrower shall immediately, and without the necessity of demand by Lender, pay to Lender such amount as may be necessary to eliminate such excess and Lender shall apply such payment to the Revolving Loans in such order as Lender shall determine in its sole discretion. Borrower hereby authorizes Lender, in its sole discretion, to charge any of Borrower's accounts or advance Revolving Loans to make any payments of principal, interest, fees, costs or expenses required to be made under this Agreement or the Other Agreements. A request for a Revolving Loan shall be made or shall be deemed to be made, each in the following manner: Borrower shall give Lender same day notice, no later than 1:00 P.M. (determined based on the local time of Borrower at its principal place of business) for such day, of its request for a Revolving Loan. In the event that Borrower maintains a controlled disbursement account at Lender, each check presented for payment against such controlled disbursement account and any other charge or request for payment against such controlled disbursement account shall constitute a request for a Revolving Loan as a Prime Rate Loan. As an accommodation to Borrower, Lender may permit telephone requests for Revolving Loans and may permit or require, pursuant to SECTION 26 the use of Approved Electronic Forms of instructions, authorizations, agreements or reports to Lender by -10- Borrower. Unless Borrower specifically directs Lender in writing not to accept or act upon telephonic communications or Approved Electronic Forms from Borrower, Lender shall, in the absence of gross negligence, have no liability to Borrower for any loss or damage suffered by Borrower as a result of Lender's honoring of any requests, execution of any instructions, authorizations or agreements or reliance on any reports communicated to it telephonically or by Approved Electronic Forms and purporting to have been sent to Lender by Borrower and Lender shall have no duty to verify the origin of any such communication or the authority of the Person sending it. Borrower hereby irrevocably authorizes Lender to disburse the proceeds of each Revolving Loan requested by Borrower, or deemed to be requested by Borrower, as follows: the proceeds of each Revolving Loan requested under SECTION 2(a) shall be disbursed by Lender in lawful money of the United States of America in immediately available funds, in the case of the initial borrowing, in accordance with the terms of the written disbursement letter from Borrower, and in the case of each subsequent borrowing, by wire transfer or Automated Clearing House (ACH) transfer to such bank account as may be agreed upon by Borrower and Lender from time to time, or elsewhere if pursuant to a written direction from Borrower. (b) TERM LOAN A. Subject to the terms and conditions of this Agreement and the Other Agreements, on the date that the conditions to the initial Loans are satisfied, Lender shall make a term loan to Borrower in an amount equal to One Million Three Hundred Thirty-Five Thousand and No/100 Dollars ($1,335,000) with respect to Borrower's Equipment ("TERM LOAN A"). Amounts repaid with respect to Term Loan A may not be reborrowed. (c) TERM LOAN B. Subject to the terms and conditions of this Agreement and the Other Agreements, on the date that the conditions to the initial Loans are satisfied, Lender shall make a term loan to Borrower in an amount equal to Three Million Six Hundred Sixty-Five Thousand and No/100 Dollars ($3,665,000) with respect to Borrower's real property located at Mayville, Wisconsin and Turlock, California ("TERM LOAN B"). Amounts repaid with respect to the Term Loan B may not be reborrowed. (d) CAPITAL EXPENDITURE LOANS. Subject to the terms and conditions of this Agreement and the Other Agreements, from time to time after the initial Loans are advanced hereunder, Lender shall, absent the occurrence of an Event of Default, make advances to Borrower up to eighty percent (80%) of the purchase price (exclusive of sales taxes, delivery charges and other "soft" costs related to such purchase) of Equipment to be purchased with the proceeds of such advances, which Equipment is acceptable to Lender in its sole discretion, and upon which Lender shall have a first priority perfected security interest; provided, that (i) the aggregate amount advanced for such purchases shall not exceed Two Million and No/100 -11- Dollars ($2,000,000), (ii) at least five (5) Business Days prior to any such advance hereunder, Borrower shall have furnished to Lender an invoice and acceptance letter for the Equipment being purchased and shall have executed such documents and taken such other actions as Lender shall require to assure that Lender has a first priority perfected security interest in such Equipment, and (iii) each advance hereunder shall be in an amount not less than Two Hundred Thousand and No/100 Dollars ($200,000). Amounts repaid with respect to the Capital Expenditure Loans may not be reborrowed. (e) REPAYMENTS. The Liabilities shall be repaid as follows: (i) REPAYMENT OF REVOLVING LOANS. The Revolving Loans and all other Liabilities (other than the Term Loans) shall be repaid on the last day of the Original Term or any Renewal Term if this Agreement is renewed pursuant to SECTION 10 hereof. (ii) REPAYMENT OF TERM LOAN A. Term Loan A shall be repaid in sixty (60) equal monthly installments of Twenty-Two Thousand Two Hundred Fifty and No/100 Dollars ($22,250.00) payable on the twenty-fifth (25th) day of each month; provided, that any remaining outstanding principal balance of Term Loan A shall be repaid at the end of the Original Term or any Renewal Term if this Agreement is renewed pursuant to SECTION 10 hereof. If any such payment due date is not a Business Day, then such payment may be made on the next succeeding Business Day and such extension of time shall be included in the computation of the amount of interest and fees due hereunder. (iii) REPAYMENT OF TERM LOAN B. Term Loan B shall be repaid in sixty (60) equal monthly installments of Sixty-One Thousand Eighty Three and 33/100 Dollars ($61,083.33) payable on the twenty-fifth (25th) day of each month; provided that (x) in addition to such payments, Borrower shall make a principal payment of One Million and No/100 Dollars ($1,000,000) on December 31, 2003 (which payment shall reduce the scheduled payments of principal described above in the inverse order of their maturities) and (y) any remaining outstanding principal balance of the Term Loan shall be repaid at the end of the Original Term or any Renewal Term if this Agreement is renewed pursuant to SECTION 10 hereof. If any such payment due date is not a Business Day, then such payment may be made on the next succeeding Business Day and such extension of time shall be included in the computation of the amount of interest and fees due hereunder. (iv) REPAYMENT OF CAPITAL EXPENDITURE LOANS. Each Capital Expenditure Loan shall be repaid in sixty (60) equal monthly installments in an amount sufficient to repay such Capital Expenditure Loan in full by the final payment. Such payments shall be made on the thirtieth (30th) day following the date of each such advance, and on the corresponding day of each month thereafter (or if there is no corresponding day, on the last day of each such month); provided that any remaining -12- outstanding principal balance of the Capital Expenditures Loan shall be repaid at the end of the Original Term or any Renewal Term if this Agreement is renewed pursuant to SECTION 10 hereof. If any such payment due date is not a Business Day, then such payment may be made on the next succeeding Business Day and such extension of time shall be included in the computation of the amount of interest and fees due hereunder. (v) MANDATORY PREPAYMENTS OF THE TERM LOANS. Upon receipt of the proceeds of the sale or other disposition of any Equipment or real property of Borrower which is subject to a mortgage in favor of Lender, or if any of the Equipment or real property subject to such mortgage is damaged, destroyed or taken by condemnation in whole or in part, the proceeds thereof shall be paid by Borrower to Lender as a mandatory prepayment of Term Loan A, Term Loan B or the Capital Expenditure Loan which was advanced against the value of such asset, such payment to be applied against the remaining installments of principal in the inverse order of their maturities until such Term Loan A, Term Loan B or Capital Expenditure Loan is repaid in full, and then against the remaining Term Loan and Capital Expenditure Loan as determined by Lender in its sole discretion, in the inverse order of their maturities until repaid in full, and then against the other Liabilities, as determined by Lender, in its sole discretion. (vi) MANDATORY PREPAYMENT UPON PREPAYMENT OF TAB CANADA LIABILITIES. In the event that Tab Canada prepays in full the Tab Canada Liabilities and terminates the Tab Canada Loan Agreement, Borrower shall simultaneously prepay the Liabilities hereunder in accordance with the provisions of SECTION 10 hereunder and terminate this Agreement upon such prepayment. (f) NOTES. The Loans shall, in Lender's sole discretion, be evidenced by one or more promissory notes in form and substance substantially the same as the notes executed on the date hereof. However, if such Loans are not so evidenced, such Loans may be evidenced solely by entries upon the books and records maintained by Lender. 3. LETTERS OF CREDIT. (a) GENERAL TERMS. Subject to the terms and conditions of the Agreement and the Other Agreements, during the Original Term or any Renewal Term, Lender may, in its sole discretion, from time to time issue, upon Borrower's request, commercial and/or standby Letters of Credit; provided, that the aggregate undrawn face amount of all such Letters of Credit shall at no time exceed One Million and No/100 Dollars ($1,000,000). Payments made by Lender to any Person on account of any Letter of Credit shall constitute Loans hereunder and Borrower agrees that each payment made by Lender in respect of a Letter of Credit shall constitute a Loan hereunder. Borrower shall remit to Lender a Letter of Credit fee equal to one-quarter of one percent (0.25%) per month on the aggregate undrawn face amount of all Letters of Credit outstanding, which fee shall be payable monthly in arrears on the last Business Day of each month. Borrower shall also pay on demand the normal and customary -13- administrative charges of the Lender for issuance, amendment, negotiation, renewal or extension of any Letter of Credit. (b) REQUESTS FOR LETTERS OF CREDIT. Borrower shall make requests for Letters of Credit in writing at least two (2) Business Days prior to the date such Letter of Credit is to be issued. Each such request shall specify the date such Letter of Credit is to be issued, the amount thereof, the name and address of the beneficiary thereof and a description of the transaction to be supported thereby. Any such notice shall be accompanied by the form of Letter of Credit requested and any application or reimbursement agreement required by the issuer of such Letter of Credit. If any term of such application or reimbursement agreement entered into by Borrower and Lender is inconsistent with this Agreement, then the provisions of this Agreement shall control to the extent of such inconsistency. (c) OBLIGATIONS ABSOLUTE. Borrower shall be obligated to reimburse Lender, for any payments made in respect of any Letter of Credit, which obligation shall be unconditional and irrevocable and shall be paid regardless of: (i) any lack of validity or enforceability of any Letter of Credit, (ii) any amendment or waiver of or consent or departure from all or any provisions of any Letter of Credit, this Agreement or any Other Agreement, (iii) the existence of any claim, set off, defense or other right which Borrower or any other Person may have against any beneficiary of any Letter of Credit or Lender, (iv) any draft or other document presented under any Letter of Credit proving to be forged, fraudulent, invalid, or insufficient in any respect or any statement therein being untrue or inaccurate in any respect, (v) any payment under any Letter of Credit against presentation of a draft or other document that does not comply with the terms of such Letter of Credit, and (vi) any other act or omission to act or delay of any kind, the Lender or any other Person or any other event or circumstance that might otherwise constitute a legal or equitable discharge of Borrower's obligations hereunder. It is understood and agreed by Borrower that Lender may accept documents that appear on their face to be in order without further investigation or inquiry, regardless of any notice or information to the contrary. (d) EXPIRATION DATES OF LETTERS OF CREDIT. The expiration date of each Letter of Credit shall be no later than the earlier of (i) one (1) year from the date of issuance and (ii) the thirtieth (30th) day prior to the end of the Original Term or any Renewal Term. Notwithstanding the foregoing, a Letter of Credit may provide for automatic extensions of its expiration date for one or more one (1) year periods, so long as the issuer thereof has the right to terminate the Letter of Credit at the end of each one (1) year period and no extension period extends past the thirtieth (30th) day prior to the end of the Original Term or any Renewal Term. -14- 4. INTEREST, FEES AND CHARGES. (a) INTEREST RATE. Each Loan shall bear interest at the rate of three-quarters of one percent (0.75%) per annum in excess of the Prime Rate in effect from time to time, payable on the last Business Day of each month in arrears. Said rate of interest shall increase or decrease by an amount equal to each increase or decrease in the Prime Rate effective on the effective date of each such change in the Prime Rate. Upon the occurrence of an Event of Default and during the continuance thereof, each Loan shall bear interest at the rate of two percent (2%) per annum in excess of the interest rate otherwise payable thereon, which interest shall be payable on demand. All interest shall be calculated on the basis of a 360-day year. (b) FEES AND CHARGES. (i) FACILITIES FEE: Borrower shall pay to Lender an annual facilities fee equal to one-half of one percent (0.50%) of the Maximum Loan Limit, which fee shall be fully earned by Lender and payable on the date that Lender makes its initial disbursement under this Agreement and on each anniversary of the date hereof during the Original Term and any Renewal Term. (ii) CLOSING FEE: Borrower shall pay to Lender a closing fee of Two Hundred Sixty-Two Thousand Five Hundred Dollars ($262,500), which fee shall be fully earned and payable on the date of disbursement of the initial Loans hereunder. (iii) COSTS AND EXPENSES: Borrower shall reimburse Lender for all costs and expenses, including, without limitation, legal expenses and reasonable attorneys' fees, actually incurred by Lender in connection with the (i) documentation and consummation of this transaction and any other transactions among Borrower, Tab Canada, Lender and LaSalle Canada, including, without limitation, Uniform Commercial Code and other public record searches and filings, overnight courier or other express or messenger delivery, appraisal costs, surveys, title insurance and environmental audit or review costs; (ii) collection, protection or enforcement of any rights in or to the Collateral; (iii) collection of any Liabilities; and (iv) administration and enforcement of any of Lender's rights under this Agreement or any Other Agreement. Borrower shall also pay all normal service charges with respect to all accounts maintained by Borrower with Lender and any additional services requested by Borrower from Lender. All such costs, expenses and charges shall constitute Liabilities hereunder, shall be payable by Borrower to Lender on demand, and until paid, shall bear interest at the highest rate then applicable to Loans hereunder. (iv) CAPITAL ADEQUACY CHARGE. If Lender shall have determined that the adoption of any law, rule or regulation regarding capital adequacy, or any change therein or in the interpretation or application thereof, or compliance by Lender with any request or directive regarding capital adequacy (whether or not having the force of law) from any central bank or governmental authority enacted after the date hereof, does or -15- shall have the effect of reducing the rate of return on such party's capital as a consequence of its obligations hereunder to a level below that which Lender could have achieved but for such adoption, change or compliance (taking into consideration Lender's policies with respect to capital adequacy) by a material amount, then from time to time, after submission by Lender to Borrower of a written demand therefor ("CAPITAL ADEQUACY DEMAND") together with the certificate described below, Borrower shall pay to Lender such additional amount or amounts ("CAPITAL ADEQUACY CHARGE") as will compensate Lender for such reduction, such Capital Adequacy Demand to be made with reasonable promptness following such determination. A certificate of Lender claiming entitlement to payment as set forth above shall be conclusive in the absence of manifest error. Such certificate shall set forth the nature of the occurrence giving rise to such reduction, the amount of the Capital Adequacy Charge to be paid to Lender, and the method by which such amount was determined. In determining such amount, Lender may use any reasonable averaging and attribution method, applied on a non-discriminatory basis. (c) MAXIMUM INTEREST. It is the intent of the parties that the rate of interest and other charges to Borrower under this Agreement and the Other Agreements shall be lawful; therefore, if for any reason the interest or other charges payable under this Agreement are found by a court of competent jurisdiction, in a final determination, to exceed the limit which Lender may lawfully charge Borrower, then the obligation to pay interest and other charges shall automatically be reduced to such limit and, if any amount in excess of such limit shall have been paid, then such amount shall be refunded to Borrower. 5. COLLATERAL. (a) GRANT OF SECURITY INTEREST TO LENDER. As security for the payment of all Loans now or in the future made by Lender to Borrower hereunder and for the payment or other satisfaction of all other Liabilities and the LaSalle Canada Liabilities, Borrower hereby assigns to Lender and grants to Lender a continuing security interest in the following property of Borrower, whether now or hereafter owned, existing, acquired or arising and wherever now or hereafter located: (a) all Accounts (whether or not Eligible Accounts) and all Goods whose sale, lease or other disposition by Borrower has given rise to Accounts and have been returned to, or repossessed or stopped in transit by, Borrower; (b) all Chattel Paper, Instruments, Documents and General Intangibles (including, without limitation, all patents, patent applications, trademarks, trademark applications, trade names, trade secrets, goodwill, copyrights, copyright applications, registrations, licenses, software, franchises, customer lists, tax refund claims, claims against carriers and shippers, guarantee claims, contract rights, payment intangibles, security interests, security deposits and rights to indemnification); (c) all Inventory (whether or not Eligible Inventory); (d) all Goods (other than Inventory), including, without limitation, Equipment, vehicles and Fixtures; (e) all Investment Property; (f) all Deposit Accounts, bank accounts, deposits and cash; (g) all Letter-of-Credit Rights; (h) Commercial Tort Claims -16- listed on EXHIBIT C hereto (i) any other property of Borrower now or hereafter in the possession, custody or control of Lender or any agent or any parent, affiliate or subsidiary of Lender or any participant with Lender in the Loans, for any purpose (whether for safekeeping, deposit, collection, custody, pledge, transmission or otherwise) and (j) all additions and accessions to, substitutions for, and replacements, products and Proceeds of the foregoing property, including, without limitation, proceeds of all insurance policies insuring the foregoing property, and all of Borrower's books and records relating to any of the foregoing and to Borrower's business. (b) OTHER SECURITY. Lender, in its sole discretion, without waiving or releasing any obligation, liability or duty of Borrower under this Agreement or the Other Agreements or any Event of Default, may at any time or times hereafter, but shall not be obligated to, pay, acquire or accept an assignment of any security interest, lien, encumbrance or claim asserted by any Person in, upon or against the Collateral. All sums paid by Lender in respect thereof and all costs, fees and expenses including, without limitation, reasonable attorney fees, all court costs and all other charges relating thereto actually incurred by Lender shall constitute Liabilities, payable by Borrower to Lender on demand and, until paid, shall bear interest at the highest rate then applicable to Loans hereunder. (c) POSSESSORY COLLATERAL. Promptly upon Borrower's receipt of any portion of the Collateral evidenced by an agreement, Instrument or Document, including, without limitation, any Tangible Chattel Paper and any Investment Property consisting of certificated securities, Borrower shall deliver the original thereof to Lender together with an appropriate endorsement or other specific evidence of assignment thereof to Lender (in form and substance acceptable to Lender). If an endorsement or assignment of any such items shall not be made for any reason, Lender is hereby irrevocably authorized, as Borrower's attorney and agent-in-fact, to endorse or assign the same on Borrower's behalf. (d) ELECTRONIC CHATTEL PAPER. To the extent that Borrower obtains or maintains any Electronic Chattel Paper, Borrower shall create, store and assign the record or records comprising the Electronic Chattel Paper in such a manner that (i) a single authoritative copy of the record or records exists which is unique, identifiable and except as otherwise provided in clauses (iv), (v) and (vi) below, unalterable, (ii) the authoritative copy identifies Lender as the assignee of the record or records, (iii) the authoritative copy is communicated to and maintained by the Lender or its designated custodian, (iv) copies or revisions that add or change an identified assignee of the authoritative copy can only be made with the participation of Lender, (v) each copy of the authoritative copy and any copy of a copy is readily identifiable as a copy that is not the authoritative copy and (vi) any revision of the authoritative copy is readily identifiable as an authorized or unauthorized revision. -17- (e) LENDER AS COLLATERAL AGENT. In order to facilitate the granting by Borrower of liens on and security interests in the Collateral to secure the LaSalle Canada Liabilities owing by Borrower to LaSalle Canada, Lender has agreed to act as collateral agent for LaSalle Canada and with respect to the LaSalle Canada Liabilities, agrees that the liens and security interests granted to Lender hereunder shall be for the benefit of LaSalle Canada (without limitation of the liens and security interests granted in favor of Lender with respect to the Liabilities). The respective rights and priorities of the liens and security interests in favor of Lender that secure the Liabilities and the LaSalle Canada Liabilities shall be as set forth in an intercreditor agreement between Lender and LaSalle Canada and the scope, rights and obligations of Lender's agency appointment are as set forth in an Agency Agreement between Lender and LaSalle Canada. 6. PRESERVATION OF COLLATERAL AND PERFECTION OF SECURITY INTERESTS THEREIN. Borrower shall, at Lender's request, at any time and from time to time, authenticate, execute and deliver to Lender such financing statements, documents and other agreements and instruments (and pay the cost of filing or recording the same in all public offices deemed necessary or desirable by Lender) and do such other acts and things or cause third parties to do such other acts and things as Lender may deem necessary or desirable in its sole discretion in order to establish and maintain a valid, attached and perfected security interest in the Collateral in favor of Lender (free and clear of all other liens, claims, encumbrances and rights of third parties whatsoever, whether voluntarily or involuntarily created, except Permitted Liens) to secure payment of the Liabilities, and in order to facilitate the collection of the Collateral. Borrower irrevocably hereby makes, constitutes and appoints Lender (and all Persons designated by Lender for that purpose) as Borrower's true and lawful attorney and agent-in-fact to execute and file such financing statements, documents and other agreements and instruments and do such other acts and things as may be necessary to preserve and perfect Lender's security interest in the Collateral. Borrower further agrees that a carbon, photographic, photostatic or other reproduction of this Agreement or of a financing statement shall be sufficient as a financing statement. Borrower further ratifies and confirms the prior filing by Lender of any and all financing statements which identify the Borrower as debtor, Lender as secured party and any or all Collateral as collateral. 7. POSSESSION OF COLLATERAL AND RELATED MATTERS. Until an Event of Default has occurred, Borrower shall have the right, except as otherwise provided in this Agreement, in the ordinary course of Borrower's business, to (a) sell, lease or furnish under contracts of service any of Borrower's Inventory normally held by Borrower for any such purpose; and (b) use and consume any raw materials, work in process or other materials normally held by Borrower for such purpose; provided, however, that a sale in the ordinary course of business shall not include any transfer or sale in satisfaction, partial or complete, of indebtedness of Borrower for borrowed money. -18- 8. COLLECTIONS. (a) Borrower shall direct all of its Account Debtors to make all payments on the Accounts directly to a post office box (the "LOCK BOX") designated by, and under the exclusive control of, Lender, at a financial institution acceptable to Lender. Borrower shall establish an account (the "LOCK BOX ACCOUNT") in Lender's name with a financial institution acceptable to Lender, into which all payments received in the Lock Box shall be deposited, and into which Borrower will immediately deposit all payments received by Borrower on Accounts in the identical form in which such payments were received, whether by cash or check. If Borrower, any Affiliate or Subsidiary, any shareholder, officer, director, employee or agent of Borrower or any Affiliate or Subsidiary, or any other Person acting for or in concert with Borrower shall receive any monies, checks, notes, drafts or other payments relating to or as Proceeds of Accounts or other Collateral, Borrower and each such Person shall receive all such items in trust for, and as the sole and exclusive property of, Lender and, immediately upon receipt thereof, shall remit the same (or cause the same to be remitted) in kind to the Lock Box Account. The financial institution with which the Lock Box Account is established shall acknowledge and agree, in a manner satisfactory to Lender, that the amounts on deposit in such Lock Box and Lock Box Account are the sole and exclusive property of Lender, that such financial institution will follow the instructions of Lender with respect to disposition of funds in the Lock Box and Lock Box Account without further consent from Borrower, that such financial institution has no right to setoff against the Lock Box or Lock Box Account or against any other account maintained by such financial institution into which the contents of the Lock Box or Lock Box Account are transferred, and that such financial institution shall wire, or otherwise transfer in immediately available funds to Lender in a manner satisfactory to Lender, funds deposited in the Lock Box Account on a daily basis as such funds are collected. Borrower agrees that all payments made to such Lock Box Account or otherwise received by Lender, whether in respect of the Accounts or as Proceeds of other Collateral or otherwise, will be applied on account of the Liabilities in accordance with the terms of this Agreement. Borrower agrees to pay all customary and normal fees, costs and expenses in connection with opening and maintaining the Lock Box and Lock Box Account. All of such customary and normal fees, costs and expenses if not paid by Borrower, may be paid by Lender and in such event all amounts paid by Lender shall constitute Liabilities hereunder, shall be payable to Lender by Borrower upon demand, and, until paid, shall bear interest at the highest rate then applicable to Loans hereunder. All checks, drafts, instruments and other items of payment or Proceeds of Collateral shall be endorsed by Borrower to Lender, and, if that endorsement of any such item shall not be made for any reason, Lender is hereby irrevocably authorized to endorse the same on Borrower's behalf. For the purpose of this section, Borrower irrevocably hereby makes, constitutes and appoints Lender (and all Persons designated by Lender for that purpose) as Borrower's true and lawful attorney and agent-in-fact (i) to endorse Borrower's name upon said items of payment and/or Proceeds of Collateral and upon any Chattel Paper, Document, Instrument, invoice or similar document or agreement relating to any Account of Borrower or Goods pertaining thereto; (ii) to take control in any manner of any item of payment or Proceeds thereof and (iii) to have access to any lock box or postal box into which any of Borrower's -19- mail is deposited, and open and process all mail addressed to Borrower and deposited therein. (b) Lender may, at any time and from time to time after the occurrence and during the continuance of an Event of Default, whether before or after notification to any Account Debtor and whether before or after the maturity of any of the Liabilities, (i) enforce collection of any of Borrower's Accounts or other amounts owed to Borrower by suit or otherwise; (ii) exercise all of Borrower's rights and remedies with respect to proceedings brought to collect any Accounts or other amounts owed to Borrower; (iii) surrender, release or exchange all or any part of any Accounts or other amounts owed to Borrower, or compromise or extend or renew for any period (whether or not longer than the original period) any indebtedness thereunder; (iv) sell or assign any Account of Borrower or other amount owed to Borrower upon such terms, for such amount and at such time or times as Lender deems advisable; (v) prepare, file and sign Borrower's name on any proof of claim in bankruptcy or other similar document against any Account Debtor or other Person obligated to Borrower; and (vi) do all other acts and things which are necessary, in Lender's sole discretion, to fulfill Borrower's obligations under this Agreement and the Other Agreements and to allow Lender to collect the Accounts or other amounts owed to Borrower. In addition to any other provision hereof, Lender may at any time after the occurrence and during the continuance of an Event of Default, at Borrower's expense, notify any parties obligated on any of the Accounts to make payment directly to Lender of any amounts due or to become due thereunder. (c) For purposes of calculating interest and fees, Lender shall, within two (2) Business Days after receipt by Lender at its office in Chicago, Illinois of (i) checks and (ii) cash or other immediately available funds from collections of items of payment and Proceeds of any Collateral, apply the whole or any part of such collections or Proceeds against the Liabilities in such order as Lender shall determine in its sole discretion. For purposes of determining the amount of Loans available for borrowing purposes, checks and cash or other immediately available funds from collections of items of payment and Proceeds of any Collateral shall be applied in whole or in part against the Liabilities, in such order as Lender shall determine in its sole discretion, on the day of receipt, subject to actual collection. (d) On a monthly basis, Lender shall deliver to Borrower an account statement showing all Loans, charges and payments, which shall, in the absence of manifest error, be deemed final, binding and conclusive upon Borrower unless Borrower notifies Lender in writing, specifying any error therein, within thirty (30) days of the date such account statement is sent to Borrower and any such notice shall only constitute an objection to the items specifically identified. -20- 9. COLLATERAL, AVAILABILITY AND FINANCIAL REPORTS AND SCHEDULES. (a) DAILY REPORTS. Borrower shall deliver to Lender an executed daily loan report and certificate in Lender's then current form on each day on which Borrower requests a Revolving Loan, and in any event at least once each week, which shall be accompanied by copies of Borrower's sales journal, cash receipts journal and credit memo journal for the relevant period. Such report shall reflect the activity of Borrower with respect to Accounts for the immediately preceding week, and shall be in a form and with such specificity as is satisfactory to Lender and shall contain such additional information concerning Accounts and Inventory as may be reasonably requested by Lender including, without limitation, but only if specifically requested by Lender, copies of all invoices prepared in connection with such Accounts. (b) MONTHLY REPORTS. Borrower shall deliver to Lender, in addition to any other reports, as soon as practicable and in any event: (i) within fifteen (15) days after the end of each month, (A) a detailed trial balance of Borrower's Accounts aged per invoice date, in form and substance reasonably satisfactory to Lender including, without limitation, the names and addresses of all Account Debtors of Borrower, and (B) a summary and detail of accounts payable (such Accounts and accounts payable divided into such time intervals as Lender may require in its sole discretion), including a listing of any held checks; and (ii) within ten (10) days after the end of each month, the general ledger inventory account balance, a perpetual inventory report and Lender's standard form of Inventory report then in effect or the form most recently requested from Borrower by Lender, for Borrower by each category of Inventory, together with a description of the monthly change in each category of Inventory. (c) FINANCIAL STATEMENTS. Borrower shall deliver to Lender the following financial information, all of which shall be prepared in accordance with generally accepted accounting principles consistently applied, and shall be accompanied by a compliance certificate in the form of EXHIBIT B hereto, which compliance certificate shall include a calculation of all financial covenants contained in this Agreement: (i) no later than twenty (20) days after each calendar month, copies of internally prepared financial statements, including, without limitation, balance sheets and statements of income, retained earnings and cash flow of Borrower, certified by the Chief Financial Officer of Borrower (as to which certificate there shall be no personal, as opposed to corporate, liability); and (ii) no later than ninety (90) days after the end of each of Borrower's Fiscal Years, audited annual financial statements with an unqualified opinion by independent certified public accountants selected by Borrower and reasonably satisfactory to Lender, which financial statements shall be accompanied by copies of any management letters sent to the Borrower by such accountants. -21- (d) ANNUAL PROJECTIONS. As soon as practicable and in any event prior to the beginning of each Fiscal Year, Borrower shall deliver to Lender projected balance sheets, statements of income and cash flow for Borrower, for each of the twelve (12) months during such Fiscal Year, which shall include the assumptions used therein, together with appropriate supporting details as reasonably requested by Lender. (e) EXPLANATION OF BUDGETS AND PROJECTIONS. In conjunction with the delivery of the annual presentation of projections or budgets referred to in SUBSECTION 9(d) above, Borrower shall deliver a letter signed by the President or a Vice President of Borrower and by the Treasurer or Chief Financial Officer of Borrower, describing, comparing and analyzing, in detail, all changes and developments between the anticipated financial results included in such projections or budgets and the historical financial statements of Borrower. (f) PUBLIC REPORTING. Promptly upon the filing thereof, Borrower shall deliver to Lender copies of all registration statements and annual, quarterly, monthly or other regular reports which Borrower or any of its Subsidiaries files with the Securities and Exchange Commission, as well as promptly providing to Lender copies of any reports and proxy statements delivered to its shareholders. (g) OTHER INFORMATION. Promptly following request therefor by Lender, such other business or financial data, reports, appraisals and projections as Lender may reasonably request. 10. TERMINATION; AUTOMATIC RENEWAL. THIS AGREEMENT SHALL BE IN EFFECT FROM THE DATE HEREOF UNTIL AUGUST 31, 2005 (THE "ORIGINAL TERM") AND SHALL AUTOMATICALLY RENEW ITSELF FROM YEAR TO YEAR THEREAFTER (EACH SUCH ONE-YEAR RENEWAL BEING REFERRED TO HEREIN AS A "RENEWAL TERM") UNLESS (A) THE DUE DATE OF THE LIABILITIES IS ACCELERATED PURSUANT TO SECTION 16 HEREOF; OR (B) BORROWER OR LENDER ELECTS TO TERMINATE THIS AGREEMENT AT THE END OF THE ORIGINAL TERM OR AT THE END OF ANY RENEWAL TERM BY GIVING THE OTHER PARTY WRITTEN NOTICE OF SUCH ELECTION AT LEAST NINETY (90) DAYS PRIOR TO THE END OF THE ORIGINAL TERM OR THE THEN CURRENT RENEWAL TERM AND BY PAYING ALL OF THE LIABILITIES IN FULL ON THE LAST DAY OF SUCH TERM. If one or more of the events specified in clauses (A) and (B) occurs or this Agreement otherwise expires, then (i) Lender shall not make any additional Loans on or after the date identified as the date on which the Liabilities are to be repaid; and (ii) this Agreement shall terminate on the date thereafter that the -22- Liabilities are paid in full. At such time as Borrower has repaid all of the Liabilities and this Agreement has terminated, Borrower shall deliver to Lender a release, in the form of EXHIBIT D hereto of all obligations and liabilities of Lender and its officers, directors, employees, agents, parents, subsidiaries and affiliates to Borrower, and if Borrower is obtaining new financing from another lender, Borrower shall deliver such lender's indemnification of Lender, in form and substance satisfactory to Lender, for checks which Lender has credited to Borrower's account, but which subsequently are dishonored for any reason or for automatic clearinghouse or wire transfers not yet posted to Borrower's account. If, during the term of this Agreement, Borrower prepays all of the Liabilities from any source other than income from the ordinary course operations of Borrower's business and this Agreement is terminated, Borrower agrees to pay to Lender as a prepayment fee, in addition to the payment of all other Liabilities, an amount equal to (i) three percent (3%) of the Maximum Loan Limit if such prepayment occurs two (2) years or more prior to the end of the Original Term, (ii) two percent (2%) of the Maximum Loan Limit if such prepayment occurs less than two (2) years, but at least one (1) year prior to the end of the Original Term, or (iii) one percent (1%) of the Maximum Loan Limit if such prepayment occurs less than one (1) year prior to the end of the Original Term or any then current Renewal Term. 11. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and warrants to Lender, which representations and warranties (whether appearing in this SECTION 11 or elsewhere) shall be true at the time of Borrower's execution hereof and the closing of the transactions described herein or related hereto (including after giving effect to the Merger), shall remain true until the repayment in full and satisfaction of all the Liabilities and termination of this Agreement, and shall be remade by Borrower at the time each Loan is made pursuant to this Agreement, provided, that representations and warranties made as of a particular date shall be true and correct as of such date. (a) FINANCIAL STATEMENTS AND OTHER INFORMATION. The financial statements and other historical information delivered or to be delivered by Borrower to Lender at or prior to the date of this Agreement and the date of the Merger accurately reflect in all material respects the financial condition of Borrower and Tab and its subsidiaries as of the dates indicated in such financial statements and other historical information, and there has been no material adverse change in the financial condition, the operations or any other status of Borrower, Tab and its subsidiaries, taken as a whole since the date of the financial statements delivered to Lender most recently prior to the date of this Agreement. The written historical information now or heretofore furnished by Borrower to Lender with respect to Borrower, Tab and their subsidiaries, taken as a whole, is true and correct in all material respects as of the date with respect to which such information was furnished. -23- (b) LOCATIONS. The office where Borrower keeps its books, records and accounts (or copies thereof) concerning the Collateral, Borrower's principal place of business and all of Borrower's other places of business, locations of Collateral and post office boxes and locations of bank accounts are, with respect to Borrower as of the date hereof and with respect to Borrower after giving effect to the Merger, as set forth in EXHIBIT A and at other locations within the continental United States of which Lender has been advised by Borrower in accordance with SUBSECTION 12(b)(i). The Collateral, including, without limitation, the Equipment (except any part thereof which Borrower shall have advised Lender in writing consists of Collateral normally used in more than one state) is kept, or, in the case of vehicles, based, only at the addresses set forth on EXHIBIT A, and at other locations within the continental United States of which Lender has been advised by Borrower in writing in accordance with SUBSECTION 12(b)(i) hereof. (c) LOANS BY BORROWER. Except as set forth on Schedule 11(c) hereto, both before and after the Merger, has not made any loans or advances to any Affiliate or other Person except for advances authorized hereunder to employees, officers and directors of Borrower for travel and other expenses arising in the ordinary course of Borrower's business. (d) ACCOUNTS AND INVENTORY. Each Account or item of Inventory which Borrower shall, expressly or by implication, request Lender to classify as an Eligible Account or as Eligible Inventory, respectively, shall, as of the time when such request is made, conform in all respects to the requirements of such classification as set forth in the respective definitions of "ELIGIBLE ACCOUNT" and "ELIGIBLE INVENTORY" as set forth herein and as otherwise established by Lender from time to time in accordance with the provisions of this Agreement. (e) LIENS. Borrower, both before and after the Merger, is the lawful owner of all Collateral now purportedly owned or hereafter purportedly acquired by Borrower, free from all liens, claims, security interests and encumbrances whatsoever, whether voluntarily or involuntarily created and whether or not perfected, other than the Permitted Liens. (f) ORGANIZATION, AUTHORITY AND NO CONFLICT. Prior to the Merger, Borrower is a corporation, duly organized, validly existing and in good standing in the State of Delaware and its state organizational identification number is 3356256 and after the Merger, Borrower is a corporation, duly organized, validly existing and in good standing in the State of Delaware and its organizational identification number is 2100598. Both before and after the Merger, Borrower is duly qualified and in good standing in all states where the nature and extent of the business transacted by it or the ownership of its assets makes such qualification necessary except to the extent any failure to -24- so qualify would not have a Material Adverse Effect on Borrower or affect Lender's rights. Both before and after the Merger, Borrower has the right and power and is duly authorized and empowered to enter into, execute and deliver this Agreement and the Other Agreements and perform its obligations hereunder and thereunder. Borrower's execution, delivery and performance of this Agreement and the Other Agreements does not conflict with the provisions of the organizational documents of Borrower, any statute, regulation, ordinance or rule of law, or any agreement, contract or other document which may now or hereafter be binding on Borrower, and Borrower's execution, delivery and performance of this Agreement and the Other Agreements shall not result in the imposition of any lien or other encumbrance upon any of Borrower's property under any existing indenture, mortgage, deed of trust, loan or credit agreement or other agreement or instrument by which Borrower or any of its property may be bound or affected. (g) LITIGATION. Except as set forth on SCHEDULE 11(g), there are no actions or proceedings which are pending or threatened against Borrower, prior to the Merger and after the Merger, which might have a Material Adverse Effect on Borrower, and Borrower shall, promptly upon becoming aware of any such pending or threatened action or proceeding, give written notice thereof to Lender. Borrower has no Commercial Tort Claims pending, prior to the Merger and after giving effect to the Merger, other than those set forth on Exhibit C hereto as Exhibit C may be amended from time to time. (h) COMPLIANCE WITH LAWS AND MAINTENANCE OF PERMITS. Borrower, both prior to the Merger and after giving effect to the Merger, has obtained all governmental consents, franchises, certificates, licenses, authorizations, approvals and permits, the lack of which would have a Material Adverse Effect on Borrower. Borrower is in compliance in all material respects with all applicable federal, state, local and foreign statutes, orders, regulations, rules and ordinances (including, without limitation, Environmental Laws and statutes, orders, regulations, rules and ordinances relating to taxes, employer and employee contributions and similar items, securities, ERISA or employee health and safety) the failure to comply with which would have a Material Adverse Effect on Borrower. (i) AFFILIATE TRANSACTIONS. Except as set forth on SCHEDULE 11(i) hereto or as permitted pursuant to SUBSECTION 11(c) hereof, both prior to the Merger and after giving effect to the Merger, Borrower is not conducting, permitting or suffering to be conducted, transactions with any Affiliate other than transactions with Affiliates for the purchase or sale of Inventory or services in the ordinary course of business pursuant to terms that are no less favorable to Borrower than the terms upon which such transactions would have been made had they been made to or with a Person that is not an Affiliate. -25- (j) NAMES AND TRADE NAMES. Borrower's name, prior to the Merger, has always been as set forth on the first page of this Agreement. Tab's name, prior to the Merger has always been Tab Products Co. Neither Borrower nor Tab, before the Merger or after giving effect to the Merger, uses any trade names, assumed names, fictitious names or division names in the operation of its business, except as set forth on SCHEDULE 11(j) hereto. (k) EQUIPMENT. Prior to, and after the Merger, Borrower has good and indefeasible and merchantable title to and ownership of all Equipment, subject only to Permitted Liens. Neither before nor after the Merger is any Equipment a Fixture to real estate unless such real estate is owned by Borrower and is subject to a mortgage in favor of Lender, or if such real estate is leased, is subject to a landlord's agreement in favor of Lender on terms acceptable to Lender, or an accession to other personal property unless such personal property is subject to a first priority lien in favor of Lender. (l) ENFORCEABILITY. Prior to, and after the Merger, this Agreement and the Other Agreements to which Borrower is a party are the legal, valid and binding obligations of Borrower and are enforceable against Borrower in accordance with their respective terms. (m) SOLVENCY. Borrower is, after giving effect to the transactions contemplated hereby (including, without limitation, the Merger), solvent, able to pay its debts as they become due, has capital sufficient to carry on its business, now owns property having a value both at fair valuation and at present fair saleable value greater than the amount required to pay its debts, and will not be rendered insolvent by the execution and delivery of this Agreement or any of the Other Agreements or by completion of the transactions contemplated hereunder or thereunder. (n) INDEBTEDNESS. Prior to, and after the Merger, except as set forth on SCHEDULE 11(n) hereto, Borrower is not obligated (directly or indirectly), for any loans or other indebtedness for borrowed money other than the Loans. (o) MARGIN SECURITY AND USE OF PROCEEDS. Borrower, both before and after the Merger, does not own any margin securities, and none of the proceeds of the Loans hereunder shall be used for the purpose of purchasing or carrying any margin securities or for the purpose of reducing or retiring any indebtedness which was originally incurred to purchase any margin securities or for any -26- other purpose not permitted by Regulation U of the Board of Governors of the Federal Reserve System as in effect from time to time. (p) PARENT, SUBSIDIARIES AND AFFILIATES. Except as set forth on SCHEDULE 11(p) hereto, both before and after the Merger, Borrower has no Parents, Subsidiaries or other Affiliates or divisions, nor is Borrower engaged in any joint venture or partnership with any other Person. (q) NO DEFAULTS. Except as set forth on SCHEDULE 11(q), both before and after the Merger, Borrower is not in default under any material contract, lease or commitment to which it is a party or by which it is bound, nor does Borrower know of any dispute regarding any contract, lease or commitment, which default or dispute would have a Material Adverse Effect on Borrower. (r) EMPLOYEE MATTERS. Both before and after the Merger, there are no controversies pending or threatened between Borrower and any of its employees, agents or independent contractors other than employee grievances arising in the ordinary course of business which would not, in the aggregate, have a Material Adverse Effect on Borrower, and Borrower is in compliance with all federal and state laws respecting employment and employment terms, conditions and practices except for such non-compliance which would not have a Material Adverse Effect on Borrower. (s) INTELLECTUAL PROPERTY. Except as set forth on SCHEDULE 11(s), both before and after the Merger, Borrower possesses adequate licenses, patents, patent applications, copyrights, service marks, trademarks, trademark applications, tradestyles and trade names to continue to conduct its business as heretofore conducted by it. (t) ENVIRONMENTAL MATTERS. Both before and after the Merger, except as set forth on SCHEDULE 11(t), Borrower has not generated, used, stored, treated, transported, manufactured, handled, produced or disposed of any Hazardous Materials, on or off its premises (whether or not owned by it) in any manner which at any time violates any Environmental Law or any license, permit, certificate, approval or similar authorization thereunder and the operations of the Borrower comply in all material respects with all Environmental Laws and all licenses, permits, certificates, approvals and similar authorizations thereunder. Both before and after the Merger, there has been no investigation, proceeding, complaint, order, directive, claim, citation or notice by any governmental authority or any other Person, nor is any pending or to the best of the Borrower's knowledge threatened with respect to any non-compliance with or violation of the requirements of any Environmental Law by the Borrower or the release, spill -27- or discharge, threatened or actual, of any Hazardous Materials or the generation, use, storage, treatment, transportation, manufacture, handling, production or disposal of any Hazardous Materials or any other environmental, health or safety matter, which affects the Borrower or its business, operations or assets or any properties at which the Borrower has transported, stored or disposed of any Hazardous Materials. Both before and after the Merger, Borrower has no material liability (contingent or otherwise) in connection with a release, spill or discharge, threatened or actual, of any Hazardous Materials or the generation, use, storage, treatment, transportation, manufacture, handling, production or disposal of any Hazardous Materials. (u) ERISA MATTERS. Both before and after the Merger, Borrower has paid and discharged all obligations and liabilities arising under ERISA of a character which, if unpaid or unperformed, might result in the imposition of a lien against any of its properties or assets. 12. AFFIRMATIVE COVENANTS. Until payment and satisfaction in full of all Liabilities and termination of this Agreement, unless Borrower obtains Lender's prior written consent waiving or modifying any of Borrower's covenants hereunder in any specific instance, Borrower covenants and agrees as follows: (a) MAINTENANCE OF RECORDS. Borrower shall at all times keep accurate (in all material respects) and complete books, records and accounts with respect to all of Borrower's business activities, in accordance with sound accounting practices and generally accepted accounting principles consistently applied, and shall keep such books, records and accounts, and any copies thereof, only at the addresses indicated for such purpose on EXHIBIT A. (b) NOTICES. Borrower shall: (i) LOCATIONS. Promptly (but in no event less than ten (10) days prior to the occurrence thereof) notify Lender of the proposed opening of an new place of business or new location of Collateral, the closing of any existing place of business or location of Collateral, any change of in the location of Borrower's books, records and accounts (or copies thereof), the opening or closing of any post office box, the opening or closing of any bank account or, if any of the Collateral consists of Goods of a type normally used in more than one state, the use of any such Goods in any state other than a state in which Borrower has previously advised Lender that such Goods will be used. (ii) ELIGIBLE ACCOUNTS AND INVENTORY. Promptly upon becoming aware thereof, notify Lender if any Account or Inventory identified by Borrower to Lender as an Eligible Account or Eligible Inventory becomes ineligible for any reason. -28- (iii) LITIGATION AND PROCEEDINGS. Promptly upon becoming aware thereof, notify Lender of any actions or proceedings which are pending or threatened against Borrower which might have a Material Adverse Effect on Borrower and of any Commercial Tort Claims of Borrower which may arise, which notice shall constitute Borrower's authorization to amend EXHIBIT C to add such Commercial Tort Claim. (iv) NAMES AND TRADE NAMES. Notify Lender within ten (10) days of the change of its name or the use of any trade name, assumed name, fictitious name or division name not previously disclosed to Lender in writing. (v) ERISA MATTERS. Promptly notify Lender of (x) the occurrence of any "reportable event" (as defined in ERISA) which might result in the termination by the Pension Benefit Guaranty Corporation (the "PBGC") of any employee benefit plan ("PLAN") covering any officers or employees of the Borrower, any benefits of which are, or are required to be, guaranteed by the PBGC, (y) receipt of any notice from the PBGC of its intention to seek termination of any Plan or appointment of a trustee therefor or (z) its intention to terminate or withdraw from any Plan. (vi) ENVIRONMENTAL MATTERS. Immediately notify Lender upon becoming aware of any investigation, proceeding, complaint, order, directive, claim, citation or notice with respect to any non-compliance with or violation of the requirements of any Environmental Law by Borrower or the generation, use, storage, treatment, transportation, manufacture handling, production or disposal of any Hazardous Materials or any other environmental, health or safety matter which affects Borrower or its business operations or assets or any properties at which Borrower has transported, stored or disposed of any Hazardous Materials. (vii) DEFAULT; MATERIAL ADVERSE CHANGE. Promptly advise Lender of any material adverse change in the business, property, assets, prospects, operations or condition, financial or otherwise, of Borrower or any of its Subsidiaries, the occurrence of any Event of Default hereunder or the occurrence of any event which, if uncured, will become an Event of Default after notice or lapse of time (or both). All of the foregoing notices shall be provided by Borrower to Lender in writing. (c) COMPLIANCE WITH LAWS AND MAINTENANCE OF PERMITS. Borrower shall maintain all governmental consents, franchises, certificates, licenses, authorizations, approvals and permits, the lack of which would have a Material Adverse Effect on Borrower and Borrower shall remain in compliance with all applicable federal, state, local and foreign statutes, orders, regulations, rules and ordinances (including, without limitation, Environmental Laws and statutes, orders, regulations, rules and ordinances relating to taxes, employer and employee contributions and similar items, securities, ERISA or employee health and safety) the failure with which to comply would have a Material Adverse Effect on Borrower. Following any determination by Lender that there is non-compliance, or any condition which requires any action by or on behalf of -29- Borrower in order to avoid non-compliance, with any Environmental Law, at Borrower's expense cause an independent environmental engineer reasonably acceptable to Lender to conduct such tests of the relevant site(s) as are appropriate and prepare and deliver a report setting forth the results of such tests, a proposed plan for remediation and an estimate of the costs thereof. (d) INSPECTION AND AUDITS. Borrower shall permit Lender, or any Persons designated by it, to call at Borrower's places of business at any reasonable times, and, without hindrance or delay, to inspect the Collateral and to inspect, audit, check and make extracts from Borrower's books, records, journals, orders, receipts and any correspondence and other data relating to Borrower's business, the Collateral or any transactions between the parties hereto, and shall have the right to make such verification concerning Borrower's business as Lender may consider reasonable under the circumstances. Borrower shall furnish to Lender such information relevant to Lender's rights under this Agreement and the Other Agreements as Lender shall at any time and from time to time request. Lender, through its officers, employees or agents shall have the right, at any time and from time to time, in Lender's name, to verify the validity, amount or any other matter relating to any of Borrower's Accounts, by mail, telephone, telecopy, electronic mail, or otherwise. Borrower authorizes Lender to discuss the affairs, finances and business of Borrower with any officers, employees or directors of Borrower or with its Parent or any Affiliate or the officers, employees or directors of its Parent or any Affiliate, and to discuss the financial condition of Borrower with Borrower's independent public accountants. Any such discussions shall be without liability to Lender or to Borrower's independent public accountants. Borrower shall pay to Lender all customary fees and all costs and out-of-pocket expenses incurred by Lender in the exercise of its rights hereunder, and all of such fees, costs and expenses shall constitute Liabilities hereunder, shall be payable on demand and, until paid, shall bear interest at the highest rate then applicable to Loans hereunder. The inspection and audit rights of Lender hereunder are subject to the confidentiality obligations set forth in SECTION 24 hereof. (e) INSURANCE. Borrower shall: (i) Keep the Collateral properly housed and insured for the full insurable value thereof against loss or damage by fire, theft, explosion, sprinklers, collision (in the case of motor vehicles) and such other risks as are customarily insured against by Persons engaged in businesses similar to that of Borrower, with such companies, in such amounts, with such deductibles, and under policies in such form, as shall be satisfactory to Lender. Original (or certified) copies of such policies of insurance have been or shall be, within ninety (90) days of the date hereof, delivered to Lender, together with evidence of payment of all premiums therefor, and shall contain an endorsement, in form and substance acceptable to Lender, showing loss under such insurance policies payable to Lender. Such endorsement, or an independent instrument furnished to Lender, shall provide that the insurance company shall give Lender at least -30- thirty (30) days written notice before any such policy of insurance is altered or canceled and that no act, whether willful or negligent, or default of Borrower or any other Person shall affect the right of Lender to recover under such policy of insurance in case of loss or damage. In addition, Borrower shall cause to be executed and delivered to Lender an assignment of proceeds of its business interruption insurance policies. Borrower hereby directs all insurers under all policies of insurance to pay all proceeds payable thereunder directly to Lender. Borrower irrevocably makes, constitutes and appoints Lender (and all officers, employees or agents designated by Lender) as Borrower'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 Borrower on any check, draft, instrument or other item of payment for the proceeds of such policies of insurance and making all determinations and decisions with respect to such policies of insurance; provided, however, that if no Event of Default has occurred, Borrower may make, settle and adjust claims involving less than $100,000 in the aggregate without Lender's consent. (ii) Maintain, at its expense, such public liability and third party property damage insurance as is customary for Persons engaged in businesses similar to that of Borrower with such companies and in such amounts, with such deductibles and under policies in such form as shall be satisfactory to Lender and original (or certified) copies of such policies have been or shall be, within ninety (90) days after the date hereof, delivered to Lender, together with evidence of payment of all premiums therefor; each such policy shall contain an endorsement showing Lender as additional insured thereunder and providing that the insurance company shall give Lender at least thirty (30) days written notice before any such policy shall be altered or canceled. If Borrower at any time or times hereafter shall fail to obtain or maintain any of the policies of insurance required above or to pay any premium relating thereto, then Lender, without waiving or releasing any obligation or default by Borrower hereunder, may (but shall be under no obligation to) obtain and maintain such policies of insurance and pay such premiums and take such other actions with respect thereto as Lender deems advisable. Such insurance, if obtained by Lender, may, but need not, protect Borrower's interests or pay any claim made by or against Borrower with respect to the Collateral. Such insurance may be more expensive than the cost of insurance Borrower may be able to obtain on its own and may be cancelled only upon Borrower providing evidence that it has obtained the insurance as required above. All sums disbursed by Lender in connection with any such actions, including, without limitation, court costs, expenses, other charges relating thereto and reasonable attorneys' fees, shall constitute Loans hereunder, shall be payable on demand by Borrower to Lender and, until paid, shall bear interest at the highest rate then applicable to Loans hereunder. (f) COLLATERAL. Borrower shall keep the Collateral in good condition, repair and order and shall make all necessary repairs to the Equipment and replacements thereof so that the operating efficiency and the value thereof shall at all times be preserved and maintained. -31- Borrower shall permit Lender to examine any of the Collateral at any time and wherever the Collateral may be located and, Borrower shall, promptly upon request therefor by Lender, deliver to Lender any and all evidence of ownership of any of the Equipment including, without limitation, certificates of title and applications of title. Borrower shall, at the request of Lender, indicate on its records concerning the Collateral a notation, in form satisfactory to Lender, of the security interest of Lender hereunder. (g) USE OF PROCEEDS. All monies and other property obtained by Borrower from Lender pursuant to this Agreement shall be used solely for business purposes of Borrower. (h) TAXES. Borrower shall file all required tax returns and pay all of its taxes when due, including, without limitation, taxes imposed by federal, state or municipal agencies, and shall cause any liens for taxes to be promptly released; provided, that Borrower shall have the right to contest the payment of such taxes in good faith by appropriate proceedings so long as (i) the amount so contested is shown on Borrower's financial statements; (ii) the contesting of any such payment does not give rise to a lien for taxes; (iii) Borrower keeps on deposit with Lender (such deposit to be held without interest) an amount of money which, in the sole judgment of Lender, is sufficient to pay such taxes and any interest or penalties that may accrue thereon; and (iv) if Borrower fails to prosecute such contest with reasonable diligence, Lender may apply the money so deposited in payment of such taxes. If Borrower fails to pay any such taxes and in the absence of any such contest by Borrower, Lender may (but shall be under no obligation to) advance and pay any sums required to pay any such taxes and/or to secure the release of any lien therefor, and any sums so advanced by Lender shall constitute Loans hereunder, shall be payable by Borrower to Lender on demand, and, until paid, shall bear interest at the highest rate then applicable to Loans hereunder. (i) INTELLECTUAL PROPERTY. Borrower shall maintain adequate licenses, patents, patent applications, copyrights, service marks, trademarks, trademark applications, tradestyles and trade names to continue its business as heretofore conducted by it or as hereafter conducted by it. (j) CHECKING ACCOUNTS. Borrower shall maintain its general checking/controlled disbursement account with Lender. Normal charges shall be assessed thereon. Although no compensating balance is required, Borrower must keep monthly balances in order to merit earnings credits which will cover Lender's service charge for demand deposit account activities. (k) INTEREST RATE PROTECTION. Within thirty (30) days after the date of the advance of the initial Loans to Borrower, Borrower shall enter into Interest Rate Protection Agreements with respect to not -32- less than Five Million Dollars ($5,000,000) of the Liabilities in a manner satisfactory to Lender, for a period expiring no sooner than the end of the Original Term, and shall keep such Interest Rate Protection Agreements in full force and effect at all times during such period. 13. NEGATIVE COVENANTS. Until payment and satisfaction in full of all Liabilities and termination of this Agreement, unless Borrower obtains Lender's prior written consent waiving or modifying any of Borrower's covenants hereunder in any specific instance, Borrower agrees as follows: (a) GUARANTIES. Borrower shall not assume, guarantee or endorse, or otherwise become liable in connection with, the obligations of any Person, except (i) the guaranty by Borrower of the Tab Canada Liabilities and (ii) by endorsement of instruments for deposit or collection or similar transactions in the ordinary course of business. (b) INDEBTEDNESS. Borrower shall not create, incur, assume or become obligated (directly or indirectly), for any loans or other indebtedness for borrowed money other than the Loans, except that Borrower may (i) borrow money from a Person other than Lender on an unsecured and subordinated basis if a subordination agreement in favor of Lender and in form and substance satisfactory to Lender is executed and delivered to Lender relative thereto; (ii) maintain its present indebtedness listed on SCHEDULE 11(n) hereto; (iii) incur unsecured indebtedness to trade creditors in the ordinary course of business; (iv) incur purchase money indebtedness or capitalized lease obligations in connection with Capital Expenditures permitted pursuant to SUBSECTION 14(c) hereof; (v) incur indebtedness with respect to Interest Rate Protection Agreements with Lender or any of its affiliates in the ordinary course of business (and not for speculative purposes) and (vi) incur operating lease obligations requiring payments not to exceed $3,200,000 in the aggregate during any Fiscal Year of Borrower. (c) LIENS. Borrower shall not grant or permit to exist (voluntarily or involuntarily) any lien, claim, security interest or other encumbrance whatsoever on any of its assets, other than Permitted Liens. (d) MERGERS, SALES, ACQUISITIONS, SUBSIDIARIES AND OTHER TRANSACTIONS OUTSIDE THE ORDINARY COURSE OF BUSINESS. Borrower shall not (i) enter into any merger or consolidation other than the Merger; provided, that Bunt Acquisition Corp. may merge with and into Borrower so long as Borrower is the surviving entity; (ii) change the state of Borrower's organization or enter into any transaction which has the effect of changing Borrower's state of organization; (iii) sell, -33- lease or otherwise dispose of any of its assets other than in the ordinary course of business, provided, that Borrower may sell Equipment for a price and upon terms and conditions reasonably satisfactory to Lender so long as one hundred percent (100%) of the proceeds of such sale are applied to the Liabilities in the manner set forth in this Agreement and the aggregate amount of such Equipment sold shall not exceed $50,000 in any Fiscal Year; (iv) except in connection with the Merger, purchase the stock, other equity interests or all or a material portion of the assets of any Person or division of such Person; or (v) enter into any other transaction outside the ordinary course of Borrower's business, including, without limitation, any purchase, redemption or retirement of any shares of any class of its stock or any other equity interest, and any issuance of any shares of, or warrants or other rights to receive or purchase any shares of, any class of its stock or any other equity interest. Borrower shall not form any Subsidiaries or enter into any joint ventures or partnerships with any other Person. (e) DIVIDENDS AND DISTRIBUTIONS. Borrower shall not declare or pay any dividend or other distribution (whether in cash or in kind) on any class of its stock (if Borrower is a corporation) or on account of any equity interest in Borrower (if Borrower is a partnership, limited liability company or other type of entity), other than in connection with the Merger. (f) INVESTMENTS; LOANS. Borrower shall not purchase or otherwise acquire, or contract to purchase or otherwise acquire, the obligations or stock of any Person, other than direct obligations of the United States; nor shall Borrower lend or otherwise advance funds to any Person except for advances made to employees, officers and directors for travel and other expenses arising in the ordinary course of business. (g) FUNDAMENTAL CHANGES, LINE OF BUSINESS. Borrower shall not amend its organizational documents or change its Fiscal Year where such actions would have an adverse effect on the Borrower's business, property, assets, operations or condition, financial or otherwise, as determined by Lender in its sole discretion, provided that Lender receives ten (10) days prior written notice of such amendment or change, or enter into a new line of business materially different from Borrower's current business. (h) EQUIPMENT. Borrower shall not (i) permit any Equipment to become a Fixture to real property unless such real property is owned by Borrower and is subject to a mortgage in favor of Lender, or if such real property is leased, is subject to a landlord's agreement in favor of Lender on terms acceptable to Lender or (ii) permit any Equipment to become an accession to any other personal property unless such personal property is subject to a first priority lien in favor of Lender. -34- (i) AFFILIATE TRANSACTIONS. Except as set forth on SCHEDULE 11(i) hereto or as permitted pursuant to SUBSECTION 11(c) hereof, Borrower shall not conduct, permit or suffer to be conducted, transactions with Affiliates other than transactions for the purchase or sale of Inventory or services in the ordinary course of business pursuant to terms that are no less favorable to Borrower than the terms upon which such transactions would have been made had they been made to or with a Person that is not an Affiliate. (j) SETTLING OF ACCOUNTS. Borrower shall not settle or adjust any Account identified by Borrower as an Eligible Account or with respect to which the Account Debtor is an Affiliate without the consent of Lender, provided, that following the occurrence of an Event of Default, Borrower shall not settle or adjust any Account without the consent of Lender. (k) MANAGEMENT FEES. Borrower shall not pay any management or consulting fees to any Persons, provided that Borrower may pay management and consulting fees to Morgan Schiff & Co. not to exceed $250,000 in any fiscal year of Borrower so long as no Event of Default has occurred. 14. FINANCIAL COVENANTS. Borrower shall maintain and keep in full force and effect each of the financial covenants set forth below: (a) TANGIBLE NET WORTH. Borrower's and its Subsidiaries' consolidated Tangible Net Worth shall not at any time be less than the Minimum Tangible Net Worth; "MINIMUM TANGIBLE NET WORTH" being defined for purposes of this subsection as (i) negative Two Million Five Hundred Thousand Dollars (-$2,500,000) at all times from the date of the initial advance of Loans hereunder through February 27, 2003, (ii) negative Two Million One Hundred Thousand (-$2,100,000) at all times from February 28, 2003 through May 30, 2003, (iii) negative One Million Seven Hundred Fifty Thousand Dollars (-$1,750,000) at all times from May 31, 2003 through November 29, 2003, (iv) Zero Dollars ($0) at all times from November 30, 2003 through March 30, 2004, (v) Seven Hundred Fifty Thousand Dollars ($750,000) at all times from March 31, 2004 through September 29, 2004 and (vi) thereafter, at all times during each six month period of September 30 through March 30 of the immediately succeeding year, and March 31 through September 29 of each year, the Minimum Tangible Net Worth during the immediately preceding six (6) month period, plus Seven Hundred Fifty Thousand Dollars ($750,000); and "TANGIBLE NET WORTH" being defined for purposes of this subsection as Borrower's and its Subsidiaries' consolidated shareholders' equity (including retained earnings) LESS the book value of all intangible assets as determined solely by Lender on a consistent basis PLUS the amount of any LIFO reserve plus the amount of any debt -35- subordinated to Lender, plus any loss or minus any gain arising from the sale or closure by Borrower of its Turlock, California plant and its Docucon division, all as determined under generally accepted accounting principles applied on a basis consistent with the financial statement dated May 31, 2002 except as set forth herein; (b) FIXED CHARGE COVERAGE. Borrower shall not permit the ratio of (i) EBITDA plus all severance expenses incurred upon consummation of the Merger to the extent accrued and deducted in the calculation of EBITDA to (i) Fixed Charges for each period set forth below to be less than the ratio set forth below for the corresponding period set forth below:
PERIOD RATIO ------ ----- For the 3 month period ending March 31, 2003 1.0:1.0 For the 6 month period ending June 30, 2003 1.0:1.0 For the 9 month period ending September 30, 2003 1.10:1.0 For each 12 month period ending on the last day of each 1.15:1.0 calendar quarter thereafter beginning December 31, 2003
(c) CAPITAL EXPENDITURE LIMITATIONS. Borrower and its Subsidiaries shall not make any Capital Expenditures if, after giving effect to such Capital Expenditure, the aggregate cost of all such fixed assets purchased or otherwise acquired would exceed $1,000,000 during any Fiscal Year. (d) EBITDA. Borrower shall not permit EBITDA, for the period from the date of the Merger to the last day of the second full month following the date of the Merger, to be less than negative Two Million Three Hundred Thousand Dollars (-$2,300,000). 15. DEFAULT. The occurrence of any one or more of the following events shall constitute an "EVENT OF DEFAULT" by Borrower hereunder: (a) PAYMENT. The failure of any Obligor to pay when due, declared due, or demanded by Lender, any of the Liabilities. -36- (b) BREACH OF THIS AGREEMENT AND THE OTHER AGREEMENTS. The failure of any Obligor to perform, keep or observe any of the covenants, conditions, promises, agreements or obligations of such Obligor under this Agreement or any of the Other Agreements; provided, that any such failure by Borrower under subsections 12(b)(i), (iv), (v), (vi), 12(c) and 12(i) of this Agreement shall not constitute an Event of Default until the fifteenth (15th) day following written notice thereof. Lender agrees to endeavor to provide a copy of such notice to Keating, Muething & Klekamp, P.L.L. by mail at the mailing address of 1400 Provident Tower, One East Fourth Street, Cincinnati, Ohio 45202, Attention: Edward E. Steiner, Esq. or by facsimile transmission at (513) 579-6578. Failure of Lender to provide a copy of such written notice of default shall not impair Lender's rights hereunder. (c) BREACHES OF OTHER OBLIGATIONS. The failure of any Obligor to perform, keep or observe any of the covenants, conditions, promises, agreements or obligations of such Obligor under any other agreement with any Person if such failure has had or is reasonably likely to have a Material Adverse Effect on such Obligor. (d) BREACH OF REPRESENTATIONS AND WARRANTIES. The making or furnishing by any Obligor to Lender of any representation, warranty, certificate, schedule, report or other communication within or in connection with this Agreement or the Other Agreements or in connection with any other agreement between such Obligor and Lender, which is untrue or misleading in any material respect as of the date made. (e) LOSS OF COLLATERAL. The loss, theft, damage or destruction (a "Loss") of, or (except as permitted hereby) sale, lease or furnishing under a contract of service of, any of the Collateral; provided, that a Loss of Collateral shall not constitute an Event of Default hereunder if (i) to the extent that such Losses involve Collateral which is insured, such Losses involve Collateral having a value less than One Million Dollars ($1,000,000), so long as coverage for such Loss is not denied or excluded by the insurer and Lender is in receipt of the proceeds thereof (equal to the full insured value thereof, net of any deductible) within ninety (90) days of the occurrence of such Loss, or (ii) to the extent such Losses are uninsured, coverage is denied or excluded by the insurer or Lender does not receive the proceeds thereof within ninety (90) days of the occurrence of such Loss, such Losses involve Collateral having a value less than One Hundred Thousand Dollars ($100,000). (f) LEVY, SEIZURE OR ATTACHMENT. The making or any attempt by any Person to make any levy, seizure or attachment upon any of the Collateral. -37- (g) BANKRUPTCY OR SIMILAR PROCEEDINGS. The commencement of any proceedings in bankruptcy by or against any Obligor or for the liquidation or reorganization of any Obligor, or alleging that such Obligor is insolvent or unable to pay its debts as they mature, or for the readjustment or arrangement of any Obligor's debts, whether under the United States Bankruptcy Code or under any other law, whether state or federal, now or hereafter existing, for the relief of debtors, or the commencement of any analogous statutory or non-statutory proceedings involving any Obligor; provided, however, that if such commencement of proceedings against such Obligor is involuntary, such action shall not constitute an Event of Default unless such proceedings are not dismissed within sixty (60) days after the commencement of such proceedings, though Lender shall have no obligation to make Loans or issue Letters of Credit to Borrower during such sixty (60) day period, or if earlier, until such proceedings are dismissed. (h) APPOINTMENT OF RECEIVER. The appointment of a receiver or trustee for any Obligor, for any of the Collateral or for any substantial part of any Obligor's assets or the institution of any proceedings for the dissolution, or the full or partial liquidation, or the merger or consolidation, of any Obligor which is a corporation, limited liability company or a partnership; provided, however, that if such appointment or commencement of proceedings against such Obligor is involuntary, such action shall not constitute an Event of Default unless such appointment is not revoked or such proceedings are not dismissed within sixty (60) days after the commencement of such proceedings, though Lender shall have no obligation to make Loans or issue Letters of Credit to Borrower during such sixty (60) day period or, if earlier, until such appointment is revoked or such proceedings are dismissed. (i) JUDGMENT. The entry of any judgment or order against any Obligor in excess of Fifty Thousand Dollars ($50,000) which remains unsatisfied or undischarged and in effect for thirty (30) days after such entry without a stay of enforcement or execution. (j) DEATH OR DISSOLUTION OF OBLIGOR. The death of any Obligor who is a natural Person, or of any general partner who is a natural Person of any Obligor which is a partnership, or any member who is a natural Person of any Obligor which is a limited liability company or the dissolution of any Obligor which is a partnership, limited liability company, corporation or other entity. (k) DEFAULT OR REVOCATION OF GUARANTY. The occurrence of an event of default under, or the revocation or termination of, any agreement, instrument or document executed and delivered by any Person to Lender pursuant to which such Person has guaranteed to Lender the payment of all or any of the Liabilities or has granted Lender a security interest in or lien upon some or all of such Person's real and/or personal property to secure the payment of all or any of the Liabilities. -38- (l) CRIMINAL PROCEEDINGS. The institution in any court of a criminal proceeding for which the possibility of forfeiture of assets exists against any Obligor, or the indictment of any Obligor for any crime other than traffic and boating tickets and misdemeanors not punishable by jail terms. (m) CHANGE OF CONTROL. The failure of (i) HS Morgan Limited Partnership and MS TP Limited Partnership to own and have voting control of one hundred percent (100%) of the issued and outstanding voting equity interest of T Acquisition L.P. in the aggregate; (ii) T Acquisition L.P. to own and have voting control of at least one hundred percent (100%) of the issued and outstanding voting equity interest of Borrower; (iii) Borrower to own and have voting control of at least one hundred percent of the issued and outstanding voting equity interest of Tab Canada, Bunt Acquisition Corp. Tab Products (Europa) BV and Tab Sales Corp. or (iv) Tab Canada to own and have voting control of at least one hundred percent (100%) of the issued and outstanding voting equity interests of Tab Products PTY Ltd. and Tab Products Australia PTY, Ltd.. (n) CHANGE OF MANAGEMENT. If Thaddeus Jaroszewicz shall cease to be the Chief Executive Officer of Borrower or John Boustead shall cease to be the Special Assistant to the Chief Executive Officer of Borrower at any time; provided, that if Thaddeus Jaroszewicz or John Boustead cease to hold such positions of Borrower solely as a result of the death or disability of such Person, such event shall not constitute an Event of Default hereunder if a new Person, acceptable to Lender in its reasonable determination is hired to fill such position within sixty (60) days of the occurrence thereof. (O) MATERIAL ADVERSE CHANGE. Any material adverse change in the business, assets, or condition, financial or otherwise of Borrower and its Subsidiaries taken as a whole, shall have occurred. 16. REMEDIES UPON AN EVENT OF DEFAULT. (a) Upon the occurrence of an Event of Default described in SUBSECTION 15(g) hereof, all of the Liabilities shall immediately and automatically become due and payable, without notice of any kind. Upon the occurrence of any other Event of Default, all Liabilities may, at the option of Lender, and without demand, notice or legal process of any kind, be declared, and immediately shall become, due and payable. (b) Upon the occurrence of an Event of Default, Lender may exercise from time to time any rights and remedies available to it under the Uniform Commercial Code and any other applicable law in addition to, and not in lieu of, any rights and remedies expressly granted in this Agreement or in any of the Other Agreements and all of Lender's rights and remedies shall be cumulative and non-exclusive to the extent permitted by law. In particular, -39- but not by way of limitation of the foregoing, Lender may, without notice, demand or legal process of any kind, take possession of any or all of the Collateral (in addition to Collateral of which it already has possession), wherever it may be found, and for that purpose may pursue the same wherever it may be found, and may enter onto any of Borrower's premises where any of the Collateral may be, and search for, take possession of, remove, keep and store any of the Collateral until the same shall be sold or otherwise disposed of, and Lender shall have the right to store the same at any of Borrower's premises without cost to Lender. At Lender's request, Borrower shall, at Borrower's expense, assemble the Collateral and make it available to Lender at one or more places to be designated by Lender and reasonably convenient to Lender and Borrower. Borrower recognizes that if Borrower fails to perform, observe or discharge any of its Liabilities under this Agreement or the Other Agreements, no remedy at law will provide adequate relief to Lender, and agrees that Lender shall be entitled to temporary and permanent injunctive relief in any such case without the necessity of proving actual damages. Any notification of intended disposition of any of the Collateral required by law will be deemed to be a reasonable authenticated notification of disposition if given at least ten (10) days prior to such disposition and such notice shall (i) describe Lender and Borrower, (ii) describe the Collateral that is the subject of the intended disposition, (iii) state the method of the intended disposition, (iv) state that Borrower is entitled to an accounting of the Liabilities and state the charge, if any, for an accounting and (v) state the time and place of any public disposition or the time after which any private sale is to be made. Lender may disclaim any warranties that might arise in connection with the sale, lease or other disposition of the Collateral and has no obligation to provide any warranties at such time. Any Proceeds of any disposition by Lender of any of the Collateral may be applied by Lender to the payment of expenses in connection with the Collateral, including, without limitation, legal expenses and reasonable attorneys' fees, and any balance of such Proceeds may be applied by Lender toward the payment of such of the Liabilities, and in such order of application, as Lender may from time to time elect. 17. CONDITIONS PRECEDENT. The obligation of Lender to fund the Term Loan, to fund the initial Revolving Loan, and to issue or cause to be issued the initial Letter of Credit, is subject to the satisfaction or waiver on or before December 21, 2002 of the following conditions precedent: (a) Lender shall have received each of the agreements, opinions, reports, approvals, consents, certificates and other documents set forth on the closing document list attached hereto as SCHEDULE 17(a) (the "CLOSING DOCUMENT LIST") in each case in form and substance satisfactory to Lender and receipt of all UCC, tax and judgment lien searches and evidence of all UCC financing statement filings and other filings and registrations as required to confirm Lender's first priority liens on and security interests in the Collateral (subject only to Permitted Liens); (b) Since May 31, 2002, no event shall have occurred which has had or could reasonably be expected to have a Material Adverse Effect on Tab and its subsidiaries, taken as a whole, or any Obligor, as determined by Lender in its sole discretion determined in good faith; -40- (c) Lender shall have received payment in full of all fees and expenses payable to it by Borrower or any other Person in connection herewith, on or before disbursement of the initial Loans hereunder; (d) The Merger shall have been consummated in accordance with the terms of the Merger Agreement and applicable law, and not more than 10% of the outstanding stock of Borrower prior to the Merger shall have made demand for appraisal pursuant to Section 262(d)(l) of Delaware Corporate law; (e) Lender shall have determined that immediately after giving effect to (A) the making of the initial Loans, including without limitation the Term Loan and the Revolving Loans, if any, requested to be made on the date hereof, and all loans to Tab Canada by LaSalle Canada (B) the issuance of the initial Letter of Credit, if any, requested to be made on such date and the issuance of any letter of credit on behalf of Tab Canada, (C) the payment of all fees due upon such date including all fees in connection with the Merger and (D) the payment or reimbursement by Borrower and Tab Canada of Lender and LaSalle Canada and any other parties to be paid by Borrower for all closing costs and expenses incurred in connection with the transactions contemplated hereby, Excess Availability shall not be less than Three Million Dollars ($3,000,000); and (f) Borrower shall have received equity and subordinated indebtedness in an amount not less than Ten Million Dollars ($10,000,000) on terms and conditions and subject to a subordination agreement satisfactory to Lender; and (g) Delivery and review by LaSalle of the management prepared financial statement of Tab and its subsidiaries most recently prepared prior to the date of the Merger and any other information requested by Lender to ensure that, among other things, no changes have occurred that would have a Material Adverse Effect on Tab, Borrower and their subsidiaries taken as a whole or would constitute a material adverse change to Borrower's financial projections previously delivered to Lender; (h) No change has occurred in the structure of the Merger or the other transactions to occur in connection therewith which in Lender's sole determination could be materially adverse to Lender; (i) The representations and warranties contained herein shall be true and correct in all material respects both before and after giving effect to the Merger; (j) No Event of Default shall exist hereunder, either before or after giving effect to the Merger and the initial Loans to be made and Letters of Credit to be issued hereunder; and (k) The Obligors shall have executed and delivered to Lender all such other documents, instruments and agreements which Lender determines are reasonably necessary to consummate the transactions contemplated hereby. -41- 18. INDEMNIFICATION. Borrower agrees to defend (with counsel reasonably satisfactory to Lender), protect, indemnify and hold harmless Lender, each affiliate or subsidiary of Lender, and each of their respective officers, directors, employees, attorneys and agents (each an "INDEMNIFIED PARTY") from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and disbursements of any kind or nature (including, without limitation, the disbursements and the reasonable fees of counsel for each Indemnified Party in connection with any investigative, administrative or judicial proceeding, whether or not the Indemnified Party shall be designated a party thereto), which may be imposed on, incurred by, or asserted against, any Indemnified Party (whether direct or indirect and whether based on any federal, state or local laws or regulations, including, without limitation, securities laws and regulations, Environmental Laws and commercial laws and regulations, under common law or in equity, or based on contract or otherwise) in any manner relating to or arising out of this Agreement or any Other Agreement, or any act, event or transaction related or attendant thereto, the making or issuance and the management of the Loans or any Letters of Credit or the use or intended use of the proceeds of the Loans or any Letters of Credit; provided, however, that Borrower shall not have any obligation hereunder to any Indemnified Party with respect to matters caused by or resulting from the willful misconduct or gross negligence of such Indemnified Party. To the extent that the undertaking to indemnify set forth in the preceding sentence may be unenforceable because it is violative of any law or public policy, Borrower shall satisfy such undertaking to the maximum extent permitted by applicable law. Any liability, obligation, loss, damage, penalty, cost or expense covered by this indemnity shall be paid to each Indemnified Party promptly after demand, and, failing prompt payment, shall, together with interest thereon at the highest rate then applicable to Loans hereunder from the date incurred by each Indemnified Party until paid by Borrower, be added to the Liabilities of Borrower and be secured by the Collateral. The provisions of this SECTION 18 shall survive the satisfaction and payment of the other Liabilities and the termination of this Agreement. 19. NOTICE. All written notices and other written communications with respect to this Agreement shall be sent by ordinary, certified or overnight mail, by telecopy or delivered in person, and in the case of Lender shall be sent to it at 135 South LaSalle Street, Chicago, Illinois 60603-4105, attention: Douglas Colletti, facsimile number: (312) 904-6450, and in the case of Borrower shall be sent to it at its principal place of business set forth on EXHIBIT A hereto or as otherwise directed by Borrower in writing with a copy (which shall not constitute notice) to Keating, Muething & Klekamp, PLL, 1400 Provident Tower, One East Fourth Street, Cincinnati, Ohio 45202, Attention: Edward E. Steiner, Esq. All notices shall be deemed received upon actual receipt thereof or refusal of delivery. -42- 20. CHOICE OF GOVERNING LAW; CONSTRUCTION; FORUM SELECTION. This Agreement and the Other Agreements are submitted by Borrower to Lender for Lender's acceptance or rejection at Lender's principal place of business as an offer by Borrower to borrow monies from Lender now and from time to time hereafter, and shall not be binding upon Lender or become effective until accepted by Lender, in writing, at said place of business. If so accepted by Lender, this Agreement and the Other Agreements shall be deemed to have been made at said place of business. THIS AGREEMENT AND THE OTHER AGREEMENTS SHALL BE GOVERNED AND CONTROLLED BY THE INTERNAL LAWS OF THE STATE OF ILLINOIS AS TO INTERPRETATION, ENFORCEMENT, VALIDITY, CONSTRUCTION, EFFECT, AND IN ALL OTHER RESPECTS, INCLUDING, WITHOUT LIMITATION, THE LEGALITY OF THE INTEREST RATE AND OTHER CHARGES, BUT EXCLUDING PERFECTION OF THE SECURITY INTERESTS IN COLLATERAL LOCATED OUTSIDE OF THE STATE OF ILLINOIS, WHICH SHALL BE GOVERNED AND CONTROLLED BY THE LAWS OF THE RELEVANT JURISDICTION IN WHICH SUCH COLLATERAL IS LOCATED. If any provision of this Agreement shall be held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or remaining provisions of this Agreement. To induce Lender to accept this Agreement, Borrower irrevocably agrees that, subject to Lender's sole and absolute election, ALL ACTIONS OR PROCEEDINGS IN ANY WAY, MANNER OR RESPECT, ARISING OUT OF OR FROM OR RELATED TO THIS AGREEMENT, THE OTHER AGREEMENTS OR THE COLLATERAL SHALL BE LITIGATED IN COURTS HAVING SITUS WITHIN THE CITY OF CHICAGO, STATE OF ILLINOIS. BORROWER HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE UPON BORROWER BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO BORROWER AT THE ADDRESS SET FORTH IN THIS AGREEMENT FOR NOTICE AND SERVICE SO MADE SHALL BE COMPLETE TEN (10) DAYS AFTER THE SAME HAS BEEN POSTED. BORROWER HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURTS LOCATED WITHIN SAID CITY AND STATE. BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION BROUGHT AGAINST BORROWER BY LENDER IN ACCORDANCE WITH THIS SECTION. 21. MODIFICATION AND BENEFIT OF AGREEMENT. This Agreement and the Other Agreements may not be modified, altered or amended except by an agreement in writing signed by Borrower or such other Person who is a party to such Other Agreement and Lender. Borrower may not sell, assign or transfer this Agreement, or the Other Agreements or any portion thereof, including, without limitation, -43- Borrower's rights, titles, interest, remedies, powers or duties hereunder and thereunder. Borrower hereby consents to Lender's sale, assignment, transfer or other disposition, at any time and from time to time hereafter, of this Agreement, or the Other Agreements, or of any portion thereof, or participations therein, including, without limitation, Lender's rights, titles, interest, remedies, powers and/or duties and agrees that it shall execute and deliver such documents as Lender may request in connection with any such sale, assignment, transfer or other disposition; provided, however, that, absent the occurrence of an Event of Default, Lender shall not sell, assign, transfer or dispose of this Agreement or the Other Agreements or any interest therein to any competitor of Borrower (provided, that a financial institution which is an affiliate of a competitor of Borrower shall not constitute a competitor of Borrower for this purpose).. 22. HEADINGS OF SUBDIVISIONS. The headings of subdivisions in this Agreement are for convenience of reference only, and shall not govern the interpretation of any of the provisions of this Agreement. 23. POWER OF ATTORNEY. Borrower acknowledges and agrees that its appointment of Lender as its attorney and agent-in-fact for the purposes specified in this Agreement is an appointment coupled with an interest and shall be irrevocable until all of the Liabilities are satisfied and paid in full and this Agreement is terminated. 24. CONFIDENTIALITY. Lender hereby agrees to use commercially reasonable efforts to assure that any and all information relating to Borrower which is (i) furnished by or on behalf of Borrower to Lender (or to any affiliate of Lender); and (ii) non-public, confidential or proprietary in nature, shall be kept confidential by Lender or such affiliate in accordance with applicable law; provided, however, that such information and other credit information relating to Borrower may be distributed by Lender or such affiliate to Lender's or such affiliate's directors, officers, employees, attorneys, affiliates, assignees, participants, auditors, agents and regulators, and upon the order of a court or other governmental agency having jurisdiction over Lender or such affiliate, to any other party. Borrower and Lender further agree that this provision shall survive the termination of this Agreement. Notwithstanding the foregoing, Borrower hereby consents to Lender publishing a tombstone or similar advertising material relating to the financing transaction contemplated by this Agreement. 25. COUNTERPARTS. This Agreement, any of the Other Agreements, and any amendments, waivers, consents or supplements may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which, when so executed and delivered, shall -44- be deemed an original, but all of which counterparts together shall constitute but one agreement. 26. ELECTRONIC SUBMISSIONS. Upon not less than thirty (30) days' prior written notice (the "APPROVED ELECTRONIC FORM NOTICE"), Lender may permit or require that any of the documents, certificates, forms, deliveries or other communications, authorized, required or contemplated by this Agreement or the Other Agreements, be submitted to Lender in "APPROVED ELECTRONIC FORM" (as hereafter defined), subject to any reasonable terms, conditions and requirements in the applicable Approved Electronic Forms Notice. For purposes hereof "ELECTRONIC FORM" means e-mail, e-mail attachments, data submitted on web-based forms or any other communication method that delivers machine readable data or information to Lender, and "APPROVED ELECTRONIC FORM" means an Electronic Form that has been approved in writing by Lender (which approval has not been revoked or modified by Lender) and sent to Borrower in an Approved Electronic Form Notice. Except as otherwise specifically provided in the applicable Approved Electronic Form Notice, any submissions made in an applicable Approved Electronic Form shall have the same force and effect that the same submissions would have had if they had been submitted in any other applicable form authorized, required or contemplated by this Agreement or the Other Agreements. 27. WAIVER OF JURY TRIAL; OTHER WAIVERS. (a) BORROWER AND LENDER EACH HEREBY WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING WHICH PERTAINS DIRECTLY OR INDIRECTLY TO THIS AGREEMENT, ANY OF THE OTHER AGREEMENTS, THE LIABILITIES, THE COLLATERAL, ANY ALLEGED TORTIOUS CONDUCT BY BORROWER OR LENDER OR WHICH, IN ANY WAY, DIRECTLY OR INDIRECTLY, ARISES OUT OF OR RELATES TO THE RELATIONSHIP BETWEEN BORROWER AND LENDER. IN NO EVENT SHALL EITHER LENDER OR BORROWER BE LIABLE TO THE OTHER FOR LOST PROFITS OR OTHER SPECIAL OR CONSEQUENTIAL DAMAGES OTHER THAN ANY LOST PROFIT COMPONENT OF ANY BREAKAGE OBLIGATIONS ARISING IN CONNECTION WITH ANY INTEREST RATE PROTECTION AGREEMENT. (b) Borrower hereby waives demand, presentment, protest and notice of nonpayment, and further waives the benefit of all valuation, appraisal and exemption laws. (c) Borrower hereby waives the benefit of any law that would otherwise restrict or limit Lender or any affiliate of Lender in the exercise of its right, which is hereby acknowledged and agreed to, to set-off against the Liabilities, without notice at any time hereafter, any indebtedness, matured or unmatured, owing by Lender or such affiliate of Lender to Borrower, including, without limitation any deposit account at Lender or such affiliate. -45- (d) BORROWER HEREBY WAIVES ALL RIGHTS TO NOTICE AND HEARING OF ANY KIND PRIOR TO THE EXERCISE BY LENDER OF ITS RIGHTS TO REPOSSESS THE COLLATERAL OF BORROWER WITHOUT JUDICIAL PROCESS OR TO REPLEVY, ATTACH OR LEVY UPON SUCH COLLATERAL. (e) Lender's failure, at any time or times hereafter, to require strict performance by Borrower of any provision of this Agreement or any of the Other Agreements shall not waive, affect or diminish any right of Lender thereafter to demand strict compliance and performance therewith. Any suspension or waiver by Lender of an Event of Default under this Agreement or any default under any of the Other Agreements shall not suspend, waive or affect any other Event of Default under this Agreement or any other default under any of the Other Agreements, whether the same is prior or subsequent thereto and whether of the same or of a different kind or character. No delay on the part of Lender in the exercise of any right or remedy under this Agreement or any Other Agreement shall preclude other or further exercise thereof or the exercise of any right or remedy. None of the undertakings, agreements, warranties, covenants and representations of Borrower contained in this Agreement or any of the Other Agreements and no Event of Default under this Agreement or default under any of the Other Agreements shall be deemed to have been suspended or waived by Lender unless such suspension or waiver is in writing, signed by a duly authorized officer of Lender and directed to Borrower specifying such suspension or waiver. -46- IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first written above. T ACQUISITION CO. LASALLE BANK NATIONAL ASSOCIATION By By ------------------------------------- --------------------------------- Title Title ---------------------------------- ------------------------------ -47- EX-2 4 l96187aexv2.txt EXHIBIT 2 EXHIBIT 2 EXECUTION VERSION ----------------- NOTE AND WARRANT PURCHASE AGREEMENT BY AND AMONG HS MORGAN LIMITED PARTNERSHIP WORKSTREAM INC. HAMILTON SORTER CO., INC. NEW MAVERICK DESK, INC. AND BANC ONE MEZZANINE CORPORATION DATED AS OF SEPTEMBER 17, 2002 1. Definitions and Related Matters.........................................................................1 1.1 Definitions....................................................................................1 1.2 Accounting Principles.........................................................................17 1.3 Other Interpretive Matters....................................................................17 2. Authorization and Closing..............................................................................17 2.1 Authorization of the Securities...............................................................17 2.2 Purchase and Sale of the Securities...........................................................18 2.3 The Closing...................................................................................18 3. Conditions of the Purchaser's Obligation at the Closing................................................18 3.1 Representations, Warranties and Covenants; No Event of Default................................18 3.2 Closing Documents.............................................................................18 3.3 Certificate of Incorporation..................................................................19 3.4 Stockholders Agreement........................................................................19 3.5 Registration Agreement........................................................................19 3.6 Security Agreement............................................................................19 3.7 Loan Party Guaranty...........................................................................20 3.8 Pledge Agreement..............................................................................20 3.9 Intercreditor Agreements......................................................................20 3.10 Solvency Certificate..........................................................................20 3.11 Opinion of the Company's Counsel..............................................................20 3.12 Consolidated Balance Sheet and Projections....................................................20 3.13 Senior Loan Agreements........................................................................20 3.14 Investments...................................................................................20 3.15 Tab Merger Agreement..........................................................................20 3.16 Tab Merger Opinions...........................................................................21 3.17 Key-Man Life Insurance........................................................................21 3.18 Closing Fees and Expenses.....................................................................21 3.19 Sale of Securities to the Purchaser...........................................................21 3.20 Securities Law Compliance.....................................................................21 3.21 Existing Indebtedness.........................................................................21 3.22 Proceedings...................................................................................21 3.23 Due Diligence.................................................................................22 3.24 No Material Adverse Change....................................................................22
i 3.25 Compliance with Applicable Laws...............................................................22 3.26 Lien Searches.................................................................................23 3.27 Waiver........................................................................................23 4. Representations and Warranties of the WSI Parties......................................................23 4.1 Organization, Power and Licenses..............................................................23 4.2 Capitalization and Related Matters............................................................23 4.3 Authorization; No Breach......................................................................24 4.4 Financial Statements..........................................................................25 4.5 Financial Statements and Projections..........................................................26 4.6 Absence of Undisclosed Liabilities............................................................26 4.7 No Material Adverse Change....................................................................27 4.8 Absence of Certain Developments...............................................................27 4.9 Assets........................................................................................28 4.10 Tax Matters...................................................................................28 4.11 Contracts and Commitments.....................................................................29 4.12 Intellectual Property Rights..................................................................31 4.13 Litigation, etc...............................................................................32 4.14 Product Warranty..............................................................................32 4.15 Brokerage.....................................................................................32 4.16 Governmental Consent, etc.....................................................................33 4.17 Insurance.....................................................................................33 4.18 Employees.....................................................................................33 4.19 ERISA.........................................................................................33 4.20 Compliance with Laws..........................................................................34 4.21 Environmental and Safety Matters..............................................................34 4.22 Affiliated Transactions.......................................................................35 4.23 Solvency, etc.................................................................................36 4.24 Investment Company............................................................................36 4.25 Margin Regulations............................................................................36 4.26 Public Utility Holding Company Act............................................................36 4.27 Tab Merger Documents and Senior Loan Documents Representations; Holding Company Status........36 4.28 Disclosure....................................................................................37
ii 4.29 Closing Date..................................................................................37 5. Affirmative Covenants..................................................................................37 5.1 Financial Statements and Other Information....................................................37 5.2 Inspection of Property........................................................................41 5.3 Attendance at Board Meetings..................................................................41 5.4 Conduct of Business...........................................................................42 5.5 Maintenance of Property and Existence.........................................................42 5.6 Taxes.........................................................................................42 5.7 Contracts and Agreements......................................................................42 5.8 Compliance with Laws..........................................................................42 5.9 Environmental and Safety Requirements.........................................................42 5.10 Insurance.....................................................................................43 5.11 Key-Man Policy................................................................................43 5.12 Books and Records.............................................................................43 5.13 Compliance with Agreements....................................................................43 5.14 Senior Loan Documents.........................................................................43 5.15 HSM Note......................................................................................43 5.16 Intellectual Property Rights..................................................................43 5.17 Rank; Most Favored Covenant Status............................................................43 5.18 Formation of Subsidiaries.....................................................................44 5.19 Guaranty of Put Arrangement...................................................................44 5.20 Dessy Put.....................................................................................44 5.21 Further Assurances............................................................................45 6. Negative Covenants.....................................................................................45 6.1 Restricted Junior Payments....................................................................45 6.2 Issuance of Notes, etc........................................................................45 6.3 Loans, Advances, Guarantees and Investments...................................................46 6.4 Mergers.......................................................................................46 6.5 Dispositions..................................................................................46 6.6 Liquidations, etc.............................................................................46 6.7 Acquisitions..................................................................................46 6.8 Business......................................................................................46 6.9 Restrictive Agreements........................................................................46
iii 6.10 Affiliate Transactions........................................................................47 6.11 Subsidiaries..................................................................................47 6.12 Indebtedness; Liens...........................................................................47 6.13 Operating Leases..............................................................................47 6.14 Fiscal Year...................................................................................47 6.15 Prepayments, etc..............................................................................47 6.16 Option Plans..................................................................................47 6.17 Capital Stock.................................................................................47 6.18 Use of Proceeds...............................................................................47 6.19 Organizational Documents......................................................................47 6.20 Financial Covenants...........................................................................47 6.21 Margin Regulations............................................................................49 6.22 Amendment of Other Agreements.................................................................49 6.23 Senior Loan Documents.........................................................................49 6.24 Intellectual Property Rights..................................................................50 6.25 Employee Benefit Plans........................................................................50 6.26 Contracts.....................................................................................50 6.27 Cancellation of Claims........................................................................50 6.28 Disclosure....................................................................................50 7. Transfer of Restricted Securities......................................................................50 7.1 General Provisions............................................................................50 7.2 Information Requests..........................................................................50 7.3 Legend Removal................................................................................50 8. BHC Regulatory Matters.................................................................................50 8.1 Generally.....................................................................................50 8.2 Exchange of Stock.............................................................................51 8.3 Other Holders.................................................................................51 9. Preemptive Rights......................................................................................51 9.1 Generally.....................................................................................51 9.2 Exercise of Rights............................................................................52 9.3 Expiration of Periods.........................................................................52 10. Events of Default......................................................................................52 10.1 Definition of Event of Default................................................................52
iv 10.2 Consequences of Events of Default.............................................................56 11. Miscellaneous..........................................................................................56 11.1 Expenses......................................................................................56 11.2 Remedies......................................................................................57 11.3 Purchaser's Investment Representations........................................................57 11.4 Amendments and Waivers........................................................................58 11.5 Survival of Agreement.........................................................................58 11.6 No Setoffs, etc...............................................................................59 11.7 Successors and Assigns........................................................................59 11.8 Severability..................................................................................59 11.9 Counterparts..................................................................................59 11.10 Descriptive Headings; Interpretation..........................................................59 11.11 Governing Law.................................................................................59 11.12 Notices.......................................................................................60 11.13 Consideration for Warrant; Treatment of Fees..................................................61 11.14 Construction..................................................................................61 11.15 Complete Agreement............................................................................62 11.16 Indemnification...............................................................................62 11.17 Payment Set Aside.............................................................................62 11.18 Jurisdiction and Venue........................................................................63 11.19 Waiver of Right to Jury Trial.................................................................63 11.20 Certain Waivers...............................................................................63 11.21 Nature of Obligations.........................................................................64 11.22 Confidentiality...............................................................................64 List of Exhibits List of Disclosure Schedules
v HS MORGAN LIMITED PARTNERSHIP WORKSTREAM INC. HAMILTON SORTER CO., INC. NEW MAVERICK DESK, INC. NOTE AND WARRANT PURCHASE AGREEMENT ----------------------------------- THIS NOTE AND WARRANT PURCHASE AGREEMENT (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, this "AGREEMENT") is made as of September 17, 2002, by and among HS MORGAN LIMITED PARTNERSHIP, a Delaware limited partnership (herein, together with its successors and assigns, "HSM"), WORKSTREAM INC., a Delaware corporation and Wholly Owned Subsidiary of HSM (herein, together with its successors and assigns, the "COMPANY"), HAMILTON SORTER CO., INC., an Ohio corporation and Wholly Owned Subsidiary of the Company (herein, together with its successors and assigns, "HAMILTON"), NEW MAVERICK DESK, INC., a Delaware corporation and Wholly Owned Subsidiary of the Company (herein, together with its successors and assigns, "MAVERICK"), and BANC ONE MEZZANINE CORPORATION, a Delaware corporation ("BOMC"), and each of the other holders of Securities (as such term is defined herein) who becomes a party hereto in accordance with the terms hereof (BOMC and such other holders are collectively referred to herein as the "PURCHASERS" and individually as a "PURCHASER"). The parties hereto agree as follows: 1. DEFINITIONS AND RELATED MATTERS. 1.1 DEFINITIONS. For the purposes of this Agreement, the following terms have the meanings set forth below (such meanings to be applicable to both the singular and plural forms of the terms defined): "AFFILIATE" of any particular Person means any other Person directly or indirectly controlling, controlled by or under common control with such particular Person. The term "CONTROL" means the possession, directly or indirectly, of the power to direct the management and policies of a Person whether through the ownership of voting securities, by contract or otherwise. "AFFILIATED GROUP" means any affiliated group as defined in Code ss.1504 that has filed a consolidated return for federal income tax purposes (or any similar group under state, local or foreign law) for a period during which any of the Company or any of its Subsidiaries was a member. "AGREEMENT" has the meaning provided in the preamble hereof. "BHC HOLDERS" means BOMC and any other holder of the Note or Warrant or Underlying Common Stock which is subject to the Bank Holding Company Act and any related regulations. "BOARD" means the Board of Directors of the Company. "BOMC" has the meaning provided in the preamble hereof. "BORROWER" means each of the Company, Hamilton and Maverick, and "Borrowers" means the Company, Hamilton and Maverick, collectively. "BUSINESS DAY" means any day other than a Saturday, Sunday or public holiday under the laws of the State of Illinois or other day on which banking institutions are authorized or obligated to close in Chicago, Illinois. "CAPITAL EXPENDITURES" means, with respect to any Person, all expenditures which, in accordance with GAAP, would be required to be capitalized and shown on the consolidated balance sheet of such Person, but excluding expenditures made in connection with the replacement, substitution or restoration of assets to the extent financed (a) from insurance proceeds (or other similar recoveries) paid on account of the loss of or damage to the assets being replaced or restored or (b) with awards of compensation arising from the taking by eminent domain or condemnation (or consideration from a purchase in lieu of condemnation) of the assets being replaced. "CAPITALIZED LEASE" means, with respect to any Person, any lease of (or other agreement conveying the right to use) any real or personal property by such Person that, in conformity with GAAP, would be required to be accounted for as a capital lease on the balance sheet of such Person. "CAPITALIZED LEASE OBLIGATIONS" means the amount of the liability reflecting the aggregate discounted amount of future payments under all Capitalized Leases calculated in accordance with GAAP consistently applied and Statement of Financial Accounting Standards No. 13. "CAPITAL STOCK" means any and all shares, interests, participations, rights or other equivalents, however designated, of any class of stock or equity securities, including, without limitation, capital stock, limited liability company interests, general or limited partnership interests or any rights or participations therein. "CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended. "CERTIFICATE OF INCORPORATION" means the certificate of incorporation of the Company. "CHANGE IN CONTROL" means (a) HS Morgan Corp. shall cease to be the general partner of HSM or HS Morgan Corp. shall cease to be the general partner of MSTP, (b) HSM shall cease to, directly or indirectly, own and control at least (i) 51% of the outstanding capital stock of the Company or (ii) that percentage of the outstanding voting capital stock of the Company necessary at all times to elect a majority of the Board of the Company, (c) any Person or "group" (within the meaning of Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934 as in effect on the Closing Date) other than HSM shall have acquired a greater beneficial 2 ownership in the Company's voting capital stock than that held by HSM, (d) the Company shall cease to directly own and control 100% of each class of the outstanding capital stock of each of Hamilton and Maverick (other than, with the prior written consent of BOMC, pursuant to a merger of Hamilton and/or Maverick with the Company or consolidation of Hamilton and/or Maverick and the Company), (e) any sale of all or substantially all of the assets of the Company, Hamilton or Maverick (other than, with the prior written consent of BOMC, in the case of Hamilton or Maverick only, to another Wholly Owned Subsidiary of the Company or to the Company), (f) Tab shall cease to be a Wholly Owned Subsidiary of TALP (g) HSM and MSTP shall fail to own, in the aggregate, at least ninety percent 90% of the limited partnership interests of TALP, or (h) HSM shall fail to own at least seventy percent (70%) of the partnership interests of TALP, or (i) if Thaddeus S. Jaroszewicz shall cease to be both the chief executive officer of the Company and a member of the Board with full voting power (other than by reason of death or disability of Mr. Jaroszewicz, provided that a replacement chief executive officer and Board member reasonably acceptable to BOMC takes office within sixty (60) days of the date of death or disability). "CLASS A COMMON STOCK" means the Company's Class A Common Stock, par value $1.00 per share, as defined in the Certificate of Incorporation. "CLASS B COMMON STOCK" means the Company's Class B Common Stock, par value $1.00 per share, as defined in the Certificate of Incorporation. "CLOSING" means the closing of the purchase and sale of the Securities contemplated by this Agreement. "CLOSING DATE" means the date on which the Closing occurs. "CODE" means the Internal Revenue Code of 1986, as amended, and any reference to any particular Code section shall be interpreted to include any revision of or successor to that section regardless of how numbered or classified. "COLLATERAL ASSIGNMENT OF INSURANCE" means a collateral assignment of insurance policies by the Company, and acknowledged by the insurer, in favor of the Purchaser with respect to the Key-Man Policy in the form of EXHIBIT I hereto, as the same may be amended, restated, amended and restated, supplemented or otherwise modified from time to time. "COMMON STOCK" means, collectively, the Class A Common Stock, the Class B Common Stock and any capital stock of any class or series of the Company hereafter authorized that is not limited to a fixed sum or percentage of par or stated value in respect of the rights of the holders thereof to participate in dividends or distributions or in the distribution of assets upon any liquidation, dissolution or winding up of the Company. "COMPANY" has the meaning provided in the preamble hereof. "COMPANY BALANCE SHEET" means the consolidated balance sheet of the Company and its Subsidiaries after giving effect to the transactions contemplated hereby and each of the other Transaction Documents, attached hereto as EXHIBIT J. 3 "COMPANY PROJECTIONS" means the projections of the consolidated income, balance sheet and cash flows of the Company and its Subsidiaries for the six fiscal years ending through March 31, 2008, attached hereto as EXHIBIT L. "COMPANY PLEDGE AGREEMENT" means a pledge agreement by the Company in favor of the Purchaser in the form of EXHIBIT F-1 hereto, as the same may be amended, restated, amended and restated, supplemented or otherwise modified from time to time in accordance with the terms hereof and thereof. "COMPUTATION PERIOD" means each period of four consecutive fiscal quarters ending on the last day of a fiscal quarter. "CONSOLIDATED INTEREST EXPENSE" means, for any period, the aggregate of all interest paid or accrued by the Company and its Subsidiaries on a consolidated basis during such period, including all interest, fees and costs payable with respect to the Indebtedness of the Company and its Subsidiaries (other than fees and costs that may be capitalized as transaction costs in accordance with GAAP) and the interest portion of Capitalized Lease Obligations, all as determined on a consolidated basis in accordance with GAAP consistently applied. "CONSOLIDATED NET INCOME" means, for any period, the consolidated net after-tax income (or loss) of the Company and its Subsidiaries for such period determined in accordance with GAAP; provided that in determining Consolidated Net Income hereunder, the following items shall be excluded: (i) gains (and losses) from the sale or disposition of assets outside of the ordinary course of business and extraordinary items (determined in accordance with GAAP consistently applied), and (ii) income (and losses) of any Person (other than Wholly Owned Subsidiaries of the Company) in which the Company or any of its Subsidiaries has an ownership interest unless received by the Company or one of its Subsidiaries in a cash distribution. "CONSOLIDATED TOTAL ASSETS" means, on any date, the amount of all assets of the Company and its Subsidiaries on that date, determined on a consolidated basis, which, in accordance with GAAP, should be classified on the Company's consolidated balance sheet as assets. "DESSY" means Mark Dessy, an individual. "DESSY INTERCREDITOR AGREEMENT" means an Intercreditor and Subordination Agreement by and among Dessy, Maverick, the Company and the Purchaser substantially in form of EXHIBIT G-2 attached hereto, as the same may be amended, restated, amended and restated, supplemented or otherwise modified from time to time in accordance with the terms hereof and thereof. "DESSY SUBDEBT" means the Indebtedness of Maverick to Mr. Mark Dessy in the original principal amount of $2,000,000, pursuant to that certain 7.5% Junior Subordinated Note Due January 6, 2005. "DISTRIBUTION" means any distribution by any WSI Party with respect to its respective capital stock, whether in cash, securities or other property. 4 "EBITDA" means, for any period, Consolidated Net Income for such period plus, to the extent deducted in determining such Consolidated Net Income, Consolidated Interest Expense, income tax expense, depreciation, amortization (including impairment charges against goodwill) and Workstream Administrative Expenses to the extent permitted to be paid hereunder; provided, that for each fiscal month set forth below, EBITDA shall be deemed to be the amount set forth below for such fiscal month: --------------------------------- --------------------------- FISCAL MONTH EBITDA --------------------------------- --------------------------- January 2002 $131,000 --------------------------------- --------------------------- February 2002 $252,000 --------------------------------- --------------------------- March 2002 $541,000 --------------------------------- --------------------------- April 2002 $58,000 --------------------------------- --------------------------- May 2002 $173,000 --------------------------------- --------------------------- June 2002 $276,000 --------------------------------- --------------------------- July 2002 $110,000 --------------------------------- --------------------------- August 2002 $200,000 --------------------------------- --------------------------- "ENVIRONMENTAL AND SAFETY REQUIREMENTS" means all federal, state, local and foreign statutes, regulations, ordinances and similar provisions having the force or effect of law, all judicial and administrative orders and determinations, all contractual obligations and all common law, in each case concerning public health and safety, worker health and safety and pollution or protection of the environment (including, without limitation, all those relating to the presence, use, production, generation, handling, transportation, treatment, storage, disposal, distribution, labeling, testing, processing, discharge, release, threatened release, control or cleanup of any Hazardous Substance), each as amended and as now or hereafter in effect. "ERISA" means the Employee Retirement Income Security Act of 1974 (or any successor legislation thereto) and any regulations promulgated thereunder, all as amended from time to time. "ERISA AFFILIATE" means, with respect to any Person, any trade or business (whether or not incorporated) under common control with such Person and which, together with such Person, are treated as a single employer within the meaning of Section 414 of the Code. Unless otherwise provided herein, "ERISA Affiliate" refers to an ERISA Affiliate of any WSI Party. "ERISA EVENT" means, as to any WSI Party or any ERISA Affiliate (i) a Reportable Event as defined in Section 4043 of ERISA and the regulations issued thereunder 5 (other than a Reportable Event for which notice has been waived by regulation), (ii) the withdrawal of any WSI Party or any ERISA Affiliate from a Pension Plan in which it was a "substantial employer" as defined in Section 4001(a)(2) of ERISA or was deemed under Section 4062(e) of ERISA, (iii) the termination of a Pension Plan, the filing of notice of intent to terminate a Pension Plan or the treatment of a Pension Plan amendment as a termination under Section 4041 of ERISA, (iv) the institution of proceedings to terminate a Pension Plan by the PBGC, (v) the partial or complete withdrawal of any WSI Party or any ERISA Affiliate from a Multiemployer Plan, (vi) the imposition of a lien on any WSI Party or any ERISA Affiliate pursuant to Section 412 of the Code or Section 302 of ERISA, (vii) any event or condition which results in the reorganization or insolvency of a Multiemployer Plan to which any WSI Party or any ERISA Affiliate has any liability under Section 4241 or Section 4245 of ERISA, respectively, and (viii) any event or condition which results in the termination of a Multiemployer Plan, or the institution by the PBGC of proceedings to terminate a Multiemployer Plan to which any WSI Party or any ERISA Affiliate has any liability under Section 4041A of ERISA or Section 4042 of ERISA, respectively. "EVENT OF DEFAULT" has the meaning provided in SECTION 10.1 hereof. "FEDERAL BANKRUPTCY CODE" means Title 11 of the United States Code. "FINANCING DOCUMENTS" means this Agreement, the Note, the Warrant, the Stockholders Agreement, the Security Agreement, the Registration Agreement, the Loan Party Guaranty, the Intercreditor Agreements, the Pledge Agreements, the Collateral Assignment of Insurance, the Mortgage, the Solvency Certificate, the Certificate of Incorporation and each of the other agreements, documents and instruments executed in connection herewith and therewith (other than the Senior Loan Documents and the Tab Merger Documents). "FIXED CHARGE COVERAGE RATIO" means, for any Computation Period, the ratio of (a) the total for such period of EBITDA minus the sum of (i) all income taxes and tax distributions described in SECTION 6.1(ii) paid by the Company and its Subsidiaries during such period, (ii) all Workstream Administrative Expenses paid by the Company and its Subsidiaries during such period, and (iii) all Capital Expenditures of the Company and its Subsidiaries on a consolidated basis during such period TO (b) the sum for such period of (i) Consolidated Interest Expense paid in cash plus (ii) scheduled payments of principal of Total Debt; provided, however, that for purposes of calculating the Fixed Charge Coverage Ratio for the first four (4) Computation Periods following the Closing Date, (i) the Consolidated Interest Expense paid in cash shall be deemed to be the scheduled interest payments due and owing under the Note during the first year following the Closing Date plus all interest paid after the Closing Date other than interest on the Note and (ii) scheduled payments of principal on the Total Debt shall be deemed to be the scheduled principal payments due and owing under the Note during the first year following the Closing Date plus any other schedule principal payments made in respect of the Total Debt after the Closing Date. "GAAP" means generally accepted accounting principles as promulgated by the Financial Accounting Standards Board, as in effect from time to time (subject to the provisions of SECTION 1.2 hereof). 6 "GUARANTEE" means any guarantee of the payment or performance of any Indebtedness or other obligation and any other arrangement whereby credit is extended (or continued) to one obligor on the basis of any promise of another Person, whether that promise is expressed in terms of an obligation to (i) pay the Indebtedness or other liabilities of such obligor, (ii) purchase an obligation owed by such obligor, (iii) purchase goods and services from such obligor pursuant to a take-or-pay contract, (iv) maintain the capital, working capital, solvency or general financial condition of such obligor or invest in the obligor, or (v) otherwise assure any creditor of such obligor against loss (including by way of an agreement to repurchase or reimburse), whether by direct or indirect agreement, contingent or otherwise, and whether or not any such arrangement is listed on the balance sheet of such other Person or referred to in a footnote thereto, but shall not include endorsements of items for collection in the ordinary course of business. The amount of any Guarantee shall be equal to the amount of the obligation so guaranteed or otherwise supported or, if not a fixed or determined amount, the maximum amount guaranteed or supported. "GUARANTOR" means each Person party to the Loan Party Guaranty from time to time. "HAMILTON" has the meaning provided in the preamble hereof. "HAZARDOUS SUBSTANCE" means anything that is a "hazardous substance" pursuant to CERCLA, anything that is a "solid waste" or "hazardous waste" pursuant to the federal Resource Conversation and Recovery Act, anything that is a "pollutant" pursuant to the Federal Water Pollution Control Act, anything that is a "hazardous chemical" pursuant to the federal Occupational Safety and Health Act, anything that is a "pesticide" pursuant to the Federal Insecticide, Fungicide, and Rodenticide Act, any petroleum product or byproduct, asbestos, polychlorinated biphenyl, noise or radiation. "HEDGING OBLIGATION" means, with respect to any Person, any liability of such Person under any interest rate, currency or commodity swap agreement, cap agreement or collar agreement, and any other agreement or arrangement designed to protect a Person against fluctuations in interest rates, currency exchange rates or commodity prices. "HSM" has the meaning provided in the preamble hereof. "HSM BALANCE SHEET" means the balance sheet of HSM after giving effect to the transactions contemplated hereby and each of the other Transaction Documents, attached hereto as EXHIBIT K. "HSM NOTE" means that certain promissory note by HSM in favor of WSI dated as of the Closing Date in the original principal amount of $3,500,000. "HSM PLEDGE AGREEMENT" means a pledge agreement by HSM in favor of the Purchaser in the form of EXHIBIT F-2 hereto, as the same may be amended, restated, amended and restated, supplemented or otherwise modified from time to time in accordance with the terms hereof and thereof. 7 "HSM PROJECTIONS" means the projections of the income, balance sheet and cash flows of HSM for the six fiscal years ending through March 31, 2008, attached hereto as EXHIBIT M. "INDEBTEDNESS" means at a particular time, without duplication, (i) any indebtedness for borrowed money or issued in substitution for or exchange of indebtedness for borrowed money, (ii) any indebtedness evidenced by any note, bond, debenture or other debt instrument, (iii) any indebtedness for the deferred purchase price of property or services with respect to which a Person is liable, contingently or otherwise, as obligor or otherwise (other than trade payables and other current liabilities incurred in the ordinary course of business), (iv) any commitment by which a Person assures a creditor against loss (including contingent reimbursement obligations with respect to letters of credit, surety bonds and other similar instruments), (v) any obligations for which a Person is obligated pursuant to a Guarantee, (vi) any Capitalized Lease Obligations with respect to which a Person is liable, contingently or otherwise, as obligor, guarantor or otherwise, or with respect to which obligations a Person assures a creditor against loss, (vii) any indebtedness secured by a Lien on such Person's assets whether or not such indebtedness shall have been assumed by such Person, (viii) obligations in respect of any unfunded pension plans and any unsatisfied obligation for Withdrawal Liability to a Multiemployer Plan (ix) all obligations, contingent or otherwise, with respect to the face amount of all letters of credit (whether or not drawn) and banker's acceptances issued for the account of such Person, (x) all Hedging Obligations of such Person, (xi) all Indebtedness of any partnership of which such Person is a general partner, (xii) all obligations of such Person under any synthetic lease transaction, where such obligations are considered borrowed money indebtedness for tax purposes but the transaction is classified as an operating lease in accordance with GAAP, (xiii) all equity securities (or debt convertible into equity securities) that are mandatorily redeemable or redeemable at the option of the holder thereof, and (xiv) in the case of the Company and its Subsidiaries, the obligation of the Company to redeem the Warrant or Underlying Common Stock on the Exercise Date, but only to the extent the holder thereof has a present right to require such redemption. "INDEMNITEES" has the meaning provided in SECTION 11.16 hereof. "INTELLECTUAL PROPERTY RIGHTS" means all (i) patents, patent applications, patent disclosures and inventions, (ii) trademarks, service marks, trade dress, trade names, logos and business names and registrations and applications for registration thereof, together with all of the goodwill associated therewith, (iii) copyrights (registered or unregistered) and copyrightable works and registrations and applications for registration thereof, (iv) mask works and registrations and applications for registration thereof, (v) computer software, data, data bases and documentation thereof, (vi) trade secrets and other confidential information (including, without limitation, ideas, formulas, compositions, inventions (whether patentable or unpatentable and whether or not reduced to practice), know-how, manufacturing and production processes and techniques, research and development information, drawings, specifications, designs, plans, proposals, technical data, copyrightable works, financial and marketing plans and customer and supplier lists and information), (vii) domain and similar names, (viii) other intellectual property rights and (ix) copies and tangible embodiments thereof (in whatever form or medium). 8 "INTERCREDITOR AGREEMENTS" means the Senior Intercreditor Agreement and the Dessy Intercreditor Agreement, collectively. "INVESTMENT" as applied to any Person means (i) any direct or indirect purchase or other acquisition by such Person of any notes, obligations, instruments, stock, securities or ownership interest (including partnership interests, membership interests and joint venture interests) of any other Person and (ii) any capital contribution by such Person to any other Person. "IRS" means the United States Internal Revenue Service. "KEY-MAN POLICY" has the meaning provided in SECTION 3.17 hereof. "KNOWLEDGE" or "AWARE" means and includes the actual knowledge or awareness, after reasonably diligent inquiry, of Thaddeus S. Jaroszewicz, Michael Webster, Mark Dessy or John Bousted, or of their successors in their respective capacities. "LATEST BALANCE SHEETS" has the meaning provided in SECTION 4.4(b) hereof. "LIABILITIES" has the meaning provided in SECTION 11.16 hereof. "LIENS" means any mortgage, pledge, security interest, encumbrance, lien, charge or other restriction of any kind whatsoever (including any conditional sale or other title retention agreement or lease in the nature thereof), any sale of receivables of any Person with recourse against such Person, its Subsidiaries or Affiliates, or any filing or agreement to file a financing statement as debtor under the Uniform Commercial Code or any similar statute other than to reflect ownership by a third party of property leased to any Person or any of its Subsidiaries under a lease which is not in the nature of a conditional sale or title retention agreement. "LOAN PARTY GUARANTY" means a loan party guaranty by HSM and any other Guarantor that becomes a party thereto in the form of EXHIBIT D hereto as the same may be amended, restated, amended and restated, supplemented or otherwise modified from time to time in accordance with the terms hereof and thereof. "MATERIAL ADVERSE EFFECT" means a material adverse effect on (a) the financial condition, operating results, assets, liabilities, operations, condition (financial or otherwise), business or prospects of the WSI Parties, taken as a whole, (b) the ability of the Borrowers to repay the Note or (c) the ability of any WSI Party to perform any of its obligations under the Securities or any of the Transaction Documents; provided, however, that in determining whether there has been a Material Adverse Effect, any adverse effect attributable to either of the following shall be disregarded: (i) the effects of the declaration of a banking moratorium or any suspension of payments in respect of banks in the United States or any material disruption in commercial banking services; and (ii) the commencement of a war or police action by the United States. "MATERIAL INDEBTEDNESS" means any Indebtedness under any indenture, loan agreement, note or other instrument which evidences Indebtedness in excess of $200,000 in 9 principal amount which has been or hereafter may be issued or outstanding, and, in the case of Maverick and Hamilton, includes the Senior Debt. "MAVERICK" has the meaning provided in the preamble hereof. "MERGER PARTIES" means Tab, TALP and TAC. "MORTGAGE" means a mortgage by Hamilton in favor of the Purchaser encumbering the real property located at Fairfield, Ohio, as the same may be amended, restated, amended and restated, supplemented or otherwise modified from time to time in accordance with the terms hereof and thereof. "MSTP" means MS TP Limited Partnership, a Delaware limited partnership. "MSTP PLEDGE AGREEMENT" means a pledge agreement by MSTP in favor of the Purchaser with respect to its limited partnership interests in TALP and its ownership interests in the general partner of TALP in the form of EXHIBIT F-3 hereto as the same may be amended, restated, amended and restated, supplemented or otherwise modified from time to time in accordance with the terms hereof and thereof. "MULTIEMPLOYER PLAN" means a "MULTIEMPLOYER PLAN" as defined in Section 4001(a)(3) of ERISA and to which any Person is making, is obligated to make, has made or been obligated to make contributions on behalf of participants who are or were employed by any of them or to which such person has any current or potential liability. "NOTE" means the 14% Senior Subordinated Note of the Borrowers in favor of the Purchaser in an original aggregate principal amount of $7,000,000, in form and substance as set forth in EXHIBIT A attached hereto, as the same may be amended, restated, amended and restated, supplemented or otherwise modified from time to time in accordance with the terms hereof and thereof, and any replacement or replacements therefor. "OFFICER'S CERTIFICATE" means, with respect to any Person, a certificate (as to which there shall be no personal, as opposed to corporate, liability) signed by such Person's chief executive officer, president or chief financial officer on behalf of such Person, stating that (i) the officer signing such certificate has made or has caused to be made reasonable investigations to verify the accuracy of the information set forth in such certificate and (ii) based on such investigations, to that officer's knowledge, such certificate does not misstate any material fact and does not omit to state any fact necessary to make the certificate not misleading. "OPERATING LEASE" means for any Person any lease of property which would not be classified as a Capitalized Lease under GAAP consistently applied, other than a lease under which such Person is the lessor. "PBGC" means the Pension Benefit Guaranty Corporation or any successor thereto. "PENSION PLAN" means a "pension plan," as such term is defined in Section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a multiemployer plan as defined in 10 Section 4001(a)(3) of ERISA), and to which any WSI Party or ERISA Affiliate may have liability, including any liability by reason of having been a substantial employer within the meaning of Section 4063 of ERISA at any time during the preceding five years, or by reason of being deemed to be a contributing sponsor under Section 4069 of ERISA. "PERMITTED INDEBTEDNESS" means (i) with respect to Hamilton and Maverick, the Senior Debt, (ii) any Indebtedness incurred pursuant to the terms of this Agreement and the Transaction Documents, (iii) Indebtedness of any Borrower owed to any other Borrower, (iv) Indebtedness of the Company and its Subsidiaries under Capitalized Leases and purchase money Indebtedness of the Company and its Subsidiaries secured by Permitted Liens not in excess of $300,000 in the aggregate at any time outstanding, and (v) the Permitted Subordinated Indebtedness. "PERMITTED LIENS" means: (i) tax liens for taxes not yet due and payable or which are being contested in good faith by appropriate proceedings and for which adequate reserves have been established in accordance with GAAP consistently applied; (ii) deposits or pledges made in connection with, or to secure payment of, utilities or similar services, workers' compensation, unemployment insurance, old age pensions or other social security obligations and statutory liens relating to employee wages; (iii) (A) Liens arising in connection with Capitalized Leases of the Company and its Subsidiaries (and attaching only to the property being leased) and (B) purchase money security interests in any property acquired by the Company or any of its Subsidiaries, in each case securing Permitted Indebtedness not to exceed $300,000 in the aggregate at any time outstanding; (iv) mechanics', materialmen's or contractors' liens or encumbrances or any similar lien or restriction for amounts not yet due and payable arising in the ordinary course of business by operation of law; (v) easements, rights-of-way, restrictions and other similar charges and encumbrances not materially interfering with the ordinary conduct of the business of the Company and its Subsidiaries or materially detracting from the value of the assets of the Company and its Subsidiaries; and (vi) Liens on the assets of the Company and its Subsidiaries outstanding on the date hereof which secure Permitted Indebtedness and which are described on the LIENS SCHEDULE. "PERMITTED SUBORDINATED INDEBTEDNESS" means the Dessy Subdebt, provided that such Indebtedness is subordinated to the obligations of the Company and its Subsidiaries hereunder and under the Note in a manner acceptable to the Purchaser in its sole discretion. 11 "PERSON" means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, a governmental entity or any department, agency or political subdivision thereof and any other entity. "PLAN" means, with respect to any Person or any ERISA Affiliate, as required by the context at any time, an employee benefit plan, as defined in Section 3(3) of ERISA, which any Person or any ERISA Affiliate maintains, contributes to or has an obligation to contribute to on behalf of participants who are or were employed by any of them. "PLEDGE AGREEMENTS" means the Company Pledge Agreement, the HSM Pledge Agreement, and the MSTP Pledge Agreement, collectively. "POTENTIAL EVENT OF DEFAULT" means any event or occurrence which with the mere passage of time or the giving of notice or both would constitute an Event of Default. "PURCHASER" has the meaning provided in the preamble hereof. "PURCHASER REPRESENTATIVE" means a representative of the Purchasers, in the case of there being more than one Purchaser, which initially shall be BOMC. "QUALIFIED PLAN" means an employee pension benefit plan, as defined in Section 3(2) of ERISA, which is intended to be tax-qualified under Section 401(a) of the Code, and which any WSI Party or any ERISA Affiliate maintains, contributes to or has an obligation to contribute to on behalf of participants who are or were employed by any of them. "QUALIFIED PUBLIC OFFERING" means the consummation of an underwritten public offering pursuant to an effective registration statement filed by the Company (or any successor entity to the Company) with the Securities and Exchange Commission under the Securities Act with respect to common equity of the Company (or any successor entity) with gross proceeds (less underwriting commission, fees and discounts) to the Company of at least $15,000,000. "REGISTRATION AGREEMENT" means a registration rights agreement by and between the Company and the Purchaser in the form of EXHIBIT C attached hereto, as the same may be amended, restated, amended and restated, supplemented or otherwise modified from time to time in accordance with the terms hereof and thereof. "REGULATORY PROBLEM" means any transaction, circumstance or situation whereby (i) a Person and such Person's Affiliates would own, control or have power over a quantity of securities of any kind issued by the Company or any other entity greater than is permitted under any requirement of any governmental authority, or (ii) it has been asserted by any governmental regulatory agency (or such Person reasonably believes, after consultation with legal counsel, that there is a risk of such assertion) that such Person and its Affiliates are not entitled to hold, or exercise any significant right with respect to, the Warrants or Underlying Common Stock held by such Person. "RELEASE" has the meaning set forth in CERCLA. 12 "REPORTABLE EVENT" means any of the events listed in Section 4043(c)(1), (2), (3), (5), (6), (8) or (9) of ERISA. "RESTRICTED JUNIOR PAYMENTS" means (a) any Distribution or Stock Purchase, (b) any dividend, distribution, or other payment made, any liability incurred, or any other consideration given for the purchase, conversion, exchange, acquisition, redemption, or retirement of any class of capital stock of any WSI Party, upon exercise of any stock or capital appreciation rights or as a dividend, distribution, return of capital, redemption of options, or other distribution of any kind on any class of capital stock of any WSI Party outstanding at any time, (c) any payment or prepayment of principal of, premium, if any, or interest on, or any redemption, conversion, exchange, retirement, defeasance, sinking fund, or similar payment, purchase or other acquisition for value, direct or indirect (i) of any Indebtedness other than the Senior Debt (in accordance with the Senior Intercreditor Agreement) and the Note or (ii) on any class of capital stock of any WSI Party now or hereafter outstanding, or the issuance of a notice of an intention to do any of the foregoing, (d) any payment made to retire, or to obtain the surrender of, any outstanding warrants, options, or other rights to acquire shares of any class of capital stock of the Company or any of its Subsidiaries now or hereafter outstanding and (e) any payment by any WSI Party of (i) any management fees and other management charges, fees and reimbursement for expenses, consulting fees or any similar fees, whether pursuant to a management agreement or otherwise and whether to an Affiliate or otherwise, or (ii) any expenses, salary and benefits and other items included in the Workstream Administrative Expenses. "RESTRICTED SECURITIES" means (i) the Securities issued hereunder, (ii) the Underlying Common Stock, (iii) any securities issued upon conversion or exchange of the securities referred to in clauses (i) and (ii) above, and (iv) any securities issued with respect to the securities referred to in clauses (i), (ii) or (iii) above by way of a distribution or split or in connection with a combination of securities, recapitalization, merger, consolidation or other reorganization. As to any particular Restricted Securities, such securities shall cease to be Restricted Securities when they have (a) been effectively registered under the Securities Act and disposed of in accordance with the registration statement covering them, (b) become eligible for sale pursuant to Rule 144(k) (or any similar provision then in force) under the Securities Act or (c) been otherwise transferred and new certificates for them not bearing the Securities Act legend set forth in SECTION 11.3 have been delivered by the Company in accordance with SECTION 7. Whenever any particular securities cease to be Restricted Securities, the holder thereof shall be entitled to receive from the Company or the applicable Borrower, as the case may be, without expense, new securities of like tenor not bearing a Securities Act legend of the character set forth in SECTION 11.3. "SECURITIES" means the Note and the Warrant issued and sold to the Purchaser hereunder, and also means and includes the Underlying Common Stock. "SECURITIES ACT" means the Securities Act of 1933, as amended, or any similar federal law then in force. "SECURITIES AND EXCHANGE COMMISSION" includes any governmental body or agency succeeding to the functions thereof. 13 "SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, or any similar federal law then in force. "SECURITY AGREEMENT" means a security agreement by the Borrowers in favor of the Purchaser in the form of EXHIBIT E hereto as the same may be amended, restated, amended and restated, supplemented or otherwise modified from time to time in accordance with the terms hereof and thereof. "SENIOR DEBT" shall mean the aggregate "Liabilities," as such term is defined in each of the Senior Loan Agreements, together with (a) to the extent constituting a Permitted Refinancing (as such term is defined in the Senior Intercreditor Agreement), all complete or partial refinancings of the Liabilities, (b) to the extent constituting a Permitted Refinancing, any amendments, modifications, renewals or extensions thereof and (c) any interest, fees, costs or expenses accruing thereon or incurred with respect thereto after the commencement of an Insolvency or Liquidation Proceeding (as such term is defined in the Senior Intercreditor Agreement), without regard to whether or not such interest, fee, cost or expense is an allowed claim; PROVIDED, HOWEVER, that in no event shall the principal amount of the Senior Debt exceed the sum of $1,000,000, reduced by the amount of any permanent commitment reductions under the Senior Loan Agreements to the extent that such reductions may not be reborrowed; PROVIDED FURTHER, that no refinancing or replacement of the Senior Debt shall amend, modify, extend or renew any of the Senior Loan Documents except in compliance with the provisions of the Senior Intercreditor Agreement. "SENIOR INTERCREDITOR AGREEMENT" means a subordination and intercreditor agreement by and among the Borrowers, the Senior Lender and the Purchaser in form and substance as set forth in EXHIBIT G-1 attached hereto, as the same may be amended, restated, amended and restated, supplemented or otherwise modified in accordance with the terms hereof and thereof. "SENIOR LENDER" means LaSalle Bank National Association. "SENIOR LOAN AGREEMENTS" means that certain Loan and Security Agreement dated as of March 28, 1997, as amended through the date hereof, by and between Hamilton and the Senior Lender, and that certain Loan and Security Agreement dated as of January 5, 1998, as amended through the date hereof, by and between Maverick and the Senior Lender, and any amendment or modification thereto from time to time in accordance with the provisions of this Agreement and the Senior Intercreditor Agreement, provided, however, that any Indebtedness under the Senior Loan Agreements shall be considered "Senior Debt" hereunder only to the extent that such Indebtedness is incurred under a formula-based revolving credit facility (which may include a term component). "SENIOR LOAN DOCUMENTS" means the Senior Loan Agreements, including all notes issued thereunder and all other agreements and instruments (including collateral documents) entered into in connection therewith, all as originally executed and as amended, modified, extended, renewed, refinanced or replaced from time to time in accordance with the provisions of the Senior Intercreditor Agreement. 14 "SOLVENCY CERTIFICATE" means a solvency certificate (as to which there shall be no personal, as opposed to corporate, liability) from the chief executive officer of the Borrowers, in the form of EXHIBIT H attached hereto, addressed to the Purchaser and dated the Closing Date. "STOCKHOLDERS AGREEMENT" means a Stockholder Agreement by and among HSM, the Company and the Purchaser in form and substance satisfactory to the Purchaser. "STOCK PURCHASE" means any redemption, acquisition, purchase or other retirement of any capital stock of any WSI Party (including preferred stock) or of any warrants, rights or other options to purchase such capital stock, other than upon any conversion thereof into or exchange thereof for other shares or other equity interests of the same class or tenor of such Person's capital stock. "SUBSIDIARY" means, with respect to any Person, any corporation, limited liability company, partnership, association or other business entity of which (i) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof 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, or (ii) if a limited liability company, partnership, association or other business entity, a majority of the partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by any Person or one or more Subsidiaries of that Person or a combination thereof. For purposes hereof, a Person or Persons shall be deemed to have a majority ownership interest in a limited liability company, partnership, association or other business entity if such Person or Persons shall be allocated a majority of limited liability company, partnership, association or other business entity gains or losses or shall be or control (or have the power to be or control) a managing director, manager or general partner of such limited liability company, partnership, association or other business entity. "TAB" means Tab Products Co., a Delaware corporation, both before and after giving effect to the Tab Merger. "TAB MERGER" means the merger of TAC with and into Tab pursuant to the Tab Merger Agreement, with Tab being the survivor of such merger. "TAB MERGER AGREEMENT" means that certain Merger Agreement dated as of July 29, 2002 by and among the Tab Merger Parties. "TAB MERGER DOCUMENTS" means the Tab Merger Agreement and all other agreements and instruments entered into in connection therewith, other than the Financing Documents and the Senior Loan Documents. "TAC" means T Acquisition Co., a Delaware corporation, and Wholly Owned Subsidiary of TALP. "TALP" means T Acquisition L.P., a Delaware limited partnership. 15 "TAX" or "TAXES" means any federal, state, county, local, foreign or other income, gross receipts, ad valorem, franchise, profits, sales or use, transfer, registration, excise, utility, environmental, communications, real or personal property, capital stock, membership interest, license, payroll, wage or other withholding, employment, social security, severance, stamp, occupation, alternative or add-on minimum, estimated and other taxes of any kind whatsoever (including deficiencies, penalties, additions to tax, and interest attributable thereto) whether disputed or not. "TAX RETURN" means any return, information report or filing with respect to Taxes, including any schedules attached thereto and including any amendment thereof. "TITLE IV PLAN" means a Pension Plan which is covered by Title IV of ERISA. "TOTAL DEBT" means all Indebtedness together with all accrued and unpaid interest thereon of the Company and its Subsidiaries, determined on a consolidated basis. "TOTAL DEBT TO EBITDA RATIO" means for any Computation Period, the ratio of (a) Total Debt less cash and cash equivalents of the Company and its Subsidiaries as of the last day of the Computation Period minus the Dessy Subdebt to (b) EBITDA for such Computation Period; provided that notwithstanding anything in GAAP to the contrary, for purposes of calculating the Total Debt to EBITDA Ratio, the amount of Total Debt shall be the face amount of such Total Debt. "TRANSACTION DOCUMENTS" means the Financing Documents, the Senior Loan Documents, the Tab Merger Documents and each of the other agreements, documents and instruments expressly contemplated hereby and thereby. "TRANSACTION PARTY" means each of HSM, MSTP, the Company, Hamilton, Maverick and the Merger Parties. "UNDERLYING COMMON STOCK" means (i) the Common Stock issued or issuable upon exercise of the Warrants, (ii) any Common Stock issued or issuable upon conversion or exchange of the securities referred to in clause(i) above, (iii) any other Common Stock purchased or otherwise acquired by any Purchaser or other holder of Securities and (iv) any Common Stock issued or issuable with respect to the securities referred to in clauses (i), (ii) and (iii) above by way of stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization. As to any particular shares of Underlying Common Stock, such shares will cease to be Underlying Common Stock when they have been (a) effectively registered under the Securities Act and disposed of in accordance with the registration statement covering them, (b) distributed to the public through a broker, dealer or market maker pursuant to Rule 144 under the Securities Act (or any similar provision then in force) or (c) repurchased by the Company or any of its Subsidiaries. "WARRANT" means a stock purchase warrant of the Company in favor of the Purchaser in the form of EXHIBIT B hereto as the same may be amended, restated, amended and restated, supplemented or otherwise modified from time to time in accordance with the terms hereof and thereto. 16 "WHOLLY OWNED SUBSIDIARY" means, with respect to any Person, a Subsidiary of which all of the outstanding capital stock or other ownership interests are owned by such Person or another Wholly Owned Subsidiary of such Person. "WITHDRAWAL LIABILITY" means, at any time, the aggregate amount of the liabilities, if any, pursuant to Section 4201 of ERISA, and any increase in contributions pursuant to Section 4243 of ERISA with respect to all Multiemployer Plans. "WORKSTREAM ADMINISTRATIVE EXPENSES" means the salary, benefits and expenses of Thaddeus S. Jaroszewicz and John Bousted and other administrative items that are charged and have historically been charged to the Company's "Workstream Administrative Department;" provided that for each of the fiscal months of September 2001 through and including August 2002, Workstream Administrative Expenses shall be deemed to have been $16,667 per such fiscal month. "WSI PARTIES" means, collectively, HSM, the Company and each of its Subsidiaries. 1.2 ACCOUNTING PRINCIPLES. The classification, character and amount of all assets, liabilities, capital accounts and reserves and of all items of income and expense to be determined, and any consolidation or other accounting computation to be made, and the interpretation of any definition containing any financial term, pursuant to this Agreement shall be determined and made in accordance with GAAP; provided that if because of a change in GAAP after the date of this Agreement any WSI Party would be required to alter a previously utilized accounting principle, method or policy in order to remain in compliance with GAAP, such determination shall be made in accordance with GAAP, and, for the purposes of this Agreement and all computations hereunder, continue to be made in accordance with the such WSI Party's previous accounting principles, methods and policies. 1.3 OTHER INTERPRETIVE MATTERS. In this Agreement, the Note and each other Financing Document to which the Purchaser or any WSI Party is a party, unless a clear contrary intention appears: (i) the singular number includes the plural number and vice versa; (ii) reference to any Person includes such Person's successors and assigns but, if applicable, only if such successors and assigns are permitted by this Agreement or such other Financing Document, and reference to a Person in a particular capacity excludes such Person in any other capacity or individually; (iii) reference to any gender includes each other gender; (iv) reference to any agreement (including this Agreement and the Schedules hereto), document or instrument means such agreement, document or instrument as amended or modified and in effect from time to time in accordance with the terms thereof and, if applicable, the terms hereof (and without giving effect to any amendment or modification that would not be permitted in accordance with the terms hereof); (v) reference to any applicable law means such applicable law as amended, modified, codified or reenacted, in whole or in part, and in effect from time to time, including rules and regulations promulgated thereunder and reference to any particular provision of any applicable law shall be interpreted to include any revision of or successor to that provision regardless of how numbered or classified; (vi) reference to any Article, Section or Exhibit means such Article or Section hereof or such Exhibit hereto; (vii) "hereunder," "hereof," "hereto" and words of similar import shall be deemed references to this Agreement as a whole and not to any particular Section or 17 other provision hereof; (viii) "including" (and with correlative meaning "include") means including without limiting the generality of any description preceding such term; (ix) relative to the determining of any period of time, "from" means "from and including" and "to" and "through" mean "to and including"; (x) "or", "either" and "any" are not exclusive; and (xi) references to any Subsidiary of a Person shall be given effect only at such times as such Person has one or more Subsidiaries. 2. Authorization and Closing. 2.1 AUTHORIZATION OF THE SECURITIES. The Borrowers have authorized the issuance and sale to the Purchaser of the Note. The Company has authorized the issuance and sale to the Purchaser of the Warrant, which represents 26.00% of the aggregate capital stock of the Company on a fully diluted basis at the time of exercise. 2.2 PURCHASE AND SALE OF THE SECURITIES. At the Closing, the Borrowers shall sell to the Purchaser and, subject to the terms and conditions set forth herein, the Purchaser shall purchase from the Borrowers, the Note in the aggregate principal amount of $7,000,000 for a purchase price equal to $6,000,000. At the Closing, the Company shall sell to the Purchaser and, subject to the terms and conditions set forth herein, the Purchaser shall purchase from the Company the Warrant representing 26.00% of the outstanding aggregate capital stock of the Company on a fully diluted basis at the time of exercise for a purchase price equal to $1,000,000. 2.3 THE CLOSING. The Closing shall take place at the offices of Jones, Day, Reavis & Pogue, Cleveland, Ohio on the "Closing Date" under the Tab Merger Agreement (of which date Borrowers shall give Purchaser not less than five (5) Business Days prior written notice), but in no event later than November 30, 2002, or at such other place or on such other date as may be mutually agreeable to the Company and the Purchaser. At the Closing, the Company and the Borrowers shall deliver to the Purchaser instruments evidencing the Securities to be purchased by the Purchaser, issued in the name of the Purchaser or its nominee(s), upon payment of the purchase price thereof by wire transfer of immediately available funds, to an account designated by the Company at least three (3) Business Days prior to the Closing, in the aggregate amount of $7,000,000 (net of fees and pursuant to SECTION 3.18). 3. CONDITIONS OF THE PURCHASER'S OBLIGATION AT THE CLOSING. The obligation of the Purchaser to purchase and pay for the Securities to be issued at the Closing is subject to the fulfillment as of the Closing Date, but in no event later than November 30, 2002, of the following conditions to the Purchaser's satisfaction in its sole discretion: 3.1 REPRESENTATIONS, WARRANTIES AND COVENANTS; NO EVENT OF DEFAULT. The representations and warranties contained in SECTION 4 hereof shall be true and correct at and as of the Closing Date (both immediately prior to and immediately after giving effect to the transactions contemplated by the Transaction Documents) as though then made, and each of the Transaction Parties shall have performed all of the covenants required to be performed by them hereunder and under the other documents, agreements and instruments executed in connection herewith that are to be complied with or performed by such Transaction Party on or prior to the Closing Date, and there shall not exist any Event of Default or Potential Event of Default. 18 3.2 CLOSING DOCUMENTS. The Transaction Parties shall have delivered to the Purchaser all of the following documents: (i) the Note, duly completed and executed by the Borrowers; (ii) the Warrant, duly completed and executed by the Company; (iii) an Officer's Certificate of the WSI Parties, dated the Closing Date, stating that the conditions specified in SECTION 2 and SECTION 3 have been satisfied; (iv) certified copies of the resolutions duly adopted by each Transaction Party authorizing the execution, delivery and performance of each of the Transaction Documents to which it is a party, the issuance and sale of the Securities, the reservation for issuance upon exercise of the Warrant of the number of shares of the Class B Common Stock issuable upon exercise of the Warrant and the number of shares of Class A Common Stock issuable upon conversion of the Class B Common Stock, and the consummation of all other transactions contemplated by this Agreement; (v) certificates of the secretaries of each Transaction Party certifying the names and the signatures of the officers of each such Transaction Party authorized to sign the Transaction Documents and each of the other agreements, documents and instruments contemplated hereby; (vi) certified copies of each Transaction Party's certificate or articles of incorporation and by laws or regulations, or other organizational documents, each as in effect on the Closing Date, and in each case in form and substance acceptable to the Purchaser; (vii) certificates of good standing (or the local law equivalent) of each Transaction Party, dated not more than ten days prior to the Closing Date, issued by the Secretary of State of the state of incorporation, formation or organization of such Person and such other jurisdictions where such Person owns property or conducts business; (viii) certified copies of the Tab Merger Documents, the Senior Loan Documents and each other Transaction Document, each as in effect on the Closing Date; (ix) copies of all third party and governmental consents, approvals and filings required in connection with the consummation of the transactions hereunder (including all blue sky law filings and waivers of all preemptive rights and rights of first refusal); (x) a list after giving effect to the transactions contemplated by this Agreement of (x) the name of each Person serving as a director on the board of directors of each WSI Party, (y) the name and title of each WSI Party's officers and (z) the name of each stockholder of each WSI Party setting forth the number and class of shares held by each such stockholder; and (xi) such other documents relating to the transactions contemplated by this Agreement as the Purchaser or its special counsel may reasonably request. 19 3.3 CERTIFICATE OF INCORPORATION. The Certificate of Incorporation shall be in form and substance satisfactory to the Purchaser and shall be in full force and effect under the laws of the State of Delaware as of the Closing Date. 3.4 STOCKHOLDERS AGREEMENT. HSM, the Company and the Purchaser shall have entered into the Stockholders Agreement, and such agreement shall be in full force and effect as of the Closing Date. 3.5 REGISTRATION AGREEMENT. The Company and the Purchaser shall have entered into the Registration Agreement, and such agreement shall be in full force and effect as of the Closing Date. 3.6 SECURITY AGREEMENT. The Borrowers shall have duly authorized, executed and delivered the Security Agreement, the Security Agreement shall be in full force and effect as of the Closing Date, the Purchaser shall have a valid perfected security interest in the collateral described therein, and proper financing statements in respect thereof shall have been recorded in each applicable filing office. 3.7 LOAN PARTY GUARANTY. HSM shall have duly authorized, executed and delivered the Loan Party Guaranty, and the Loan Party Guaranty shall be in full force and effect as of the Closing Date. 3.8 PLEDGE AGREEMENT. Each of the Company, HSM and MSTP shall have duly authorized, executed and delivered the Pledge Agreement to which it is a party, together with all certificates representing the capital stock pledged thereunder, and each such Pledge Agreement shall be in full force and effect as of the Closing Date. 3.9 INTERCREDITOR AGREEMENTS. The Borrowers, the Senior Lender and the Purchaser shall have entered into the Senior Intercreditor Agreement, and the Senior Intercreditor Agreement shall be in full force and effect as of the Closing Date. Dessy, Maverick, the Company and the Purchaser shall have entered into the Dessy Intercreditor Agreement, and the Dessy Intercreditor Agreement shall be in full force and effect as of the Closing Date. 3.10 SOLVENCY CERTIFICATE. The Purchaser shall have received the Solvency Certificate from the chief executive officer of the Borrowers dated the Closing Date. 3.11 OPINION OF THE COMPANY'S COUNSEL. The Purchaser shall have received from Keating, Muething & Klekamp, PLL, counsel for the WSI Parties, an opinion addressed to the Purchaser, dated the Closing Date, in form and substance satisfactory to the Purchaser. 3.12 CONSOLIDATED BALANCE SHEET AND PROJECTIONS. The Purchaser shall have received the Company Balance Sheet, the Company Projections, the HSM Balance Sheet and the HSM Projections. 3.13 SENIOR LOAN AGREEMENTS. The Company and the Senior Lender shall have entered into the Senior Loan Agreements providing for revolving loans to Hamilton and Maverick of up to $1,000,000 in the aggregate in form and substance satisfactory to the Purchaser, and the Senior Loan Agreements shall be in full force and effect as of the Closing 20 Date and shall not have been amended or modified. No revolving loans shall be outstanding on the Closing Date to Hamilton or Maverick, and Hamilton and Maverick, collectively, shall have unused availability on the Closing Date under the Senior Loan Agreements of at least $975,000. 3.14 INVESTMENTS. The Company shall have repaid to HSM that certain Promissory Note in the amount of $3,500,000 dated as of March 28, 1997 by the Company in favor of HSM, HSM shall have issued the HSM Note to the Company, and HSM and MSTP shall have made investments in TALP in the amounts of $7,000,000 and $3,000,000, respectively, and all such notes and investments shall be in form and substance acceptable to the Purchaser. 3.15 TAB MERGER AGREEMENT. The Tab Merger Agreement shall be in form and substance satisfactory to the Purchaser, shall be in full force and effect as of the Closing Date, and shall not have been amended or modified. The conditions set forth in the Tab Merger Agreement shall have been satisfied in full (without reliance on any waiver by HSM, MSTP, TALP or TAC), and the Tab Merger shall have been consummated in accordance with the terms of the Tab Merger Agreement and all applicable laws. 3.16 TAB MERGER OPINIONS. The Purchaser shall have received copies of all opinions delivered in connection with the Tab Merger, together with reliance letters with respect to such original opinions. 3.17 KEY-MAN LIFE INSURANCE. The Company shall have obtained a key-man life insurance policy on the life of Thaddeus S. Jaroszewicz in the face amount of $3,500,000 (the "KEY-MAN POLICY"), which policy shall be in full force and effect as of the Closing Date. Such insurance policy shall name the Company and the Purchaser as beneficiaries and shall provide that such insurance policies may not be canceled unless the insurance carrier gives at least 30 days prior written notice of such cancellation to the Purchaser. The Company shall have entered into, and the insurance company shall have acknowledged, the Collateral Assignment of Insurance with respect to the face amount of the Key-Man Policy, and the Collateral Assignment of Insurance shall be in full force and effect as of the Closing Date. 3.18 CLOSING FEES AND EXPENSES. The Company and the Borrowers shall have (i) paid to the Purchaser a commitment fee in the aggregate amount of $140,000 in connection with the sale and purchase of the Securities and (ii) reimbursed the Purchaser for the fees and expenses as provided in SECTION 11.1 hereof. 3.19 SALE OF SECURITIES TO THE PURCHASER. Each of the Company and the Borrowers shall have sold to the Purchaser the Securities to be purchased by the Purchaser hereunder at the Closing Date. 3.20 SECURITIES LAW COMPLIANCE. Each of the Company and the Borrowers shall have made all filings under all applicable federal and state securities laws that, assuming the truth and correctness of Purchaser's representations and warranties in SECTION 11.3 hereof, are necessary to consummate the issuance of the Securities pursuant to this Agreement and the issuance of the Underlying Common Stock upon exercise of the Warrant and the conversion of Class B Common Stock into Class A Common Stock in compliance with such laws. 21 3.21 EXISTING INDEBTEDNESS. The outstanding amount of the Indebtedness of the Borrowers described on the attached "USE OF PROCEEDS SCHEDULE" shall have been paid in full as of the Closing Date, including, without limitation, the existing Indebtedness of the Company in the original principal amount of $3,500,000 to HSM pursuant to the promissory note dated March 28, 1997 and the Indebtedness of Hamilton and Maverick to LaSalle (other than the revolver component of the Senior Debt, which in any event shall be undrawn at closing and other than the outstanding letters of credit in the amount of $15,000 and $10,000 issued by the Senior Lender), and the Borrowers shall have received appropriate payoff letters, lien releases and other documents satisfactory in form and substance to the Purchaser. On the Closing Date, no Borrower shall have any Indebtedness outstanding other than Permitted Indebtedness. 3.22 PROCEEDINGS. All proceedings taken or required to be taken by the Transaction Parties in connection with the transactions contemplated hereby to be consummated on or prior to the Closing Date and all documents incident thereto shall be satisfactory in form and substance to the Purchaser and its special counsel. 3.23 DUE DILIGENCE. The Purchaser shall be satisfied in its sole discretion with the results of its legal, environmental, insurance, tax and accounting due diligence regarding the Transaction Parties. 3.24 NO MATERIAL ADVERSE CHANGE. Since March 31, 2002, there shall have been no material adverse change in the operating results, assets, liabilities, operations, condition (financial or otherwise), business prospects, employee relations or customer or supplier relations of the Transaction Parties; PROVIDED, HOWEVER, that in determining whether there has been a material adverse change, any adverse change attributable to either of the following shall be disregarded: (i) the declaration of a banking moratorium or any suspension of payments in respect of banks in the United States or any material disruption in commercial banking services; and (ii) the commencement of a war or police action by the United States; and PROVIDED, FURTHER, that a material adverse change shall be deemed to have occurred if EBITDA measured on a cumulative basis for the current fiscal year of the Borrowers fails for the periods set forth below to be greater than the amount set forth below: --------------------------------- ---------------------------- Fiscal Year to Date through the Cumulative EBITDA month ended: --------------------------------- ---------------------------- June $431,100 --------------------------------- ---------------------------- July $613,200 --------------------------------- ---------------------------- August $813,200 --------------------------------- ---------------------------- September $1,063,200 --------------------------------- ---------------------------- October $1,288,200 --------------------------------- ---------------------------- 22 --------------------------------- ---------------------------- November $1,513,200 --------------------------------- ---------------------------- December $1,794,500 --------------------------------- ---------------------------- 3.25 COMPLIANCE WITH APPLICABLE LAWS. The purchase of the Securities by the Purchaser hereunder shall not be prohibited by any applicable law or governmental rule or regulation and shall not subject the Purchaser to any penalty, liability or, in the Purchaser's sole judgment, other onerous condition under or pursuant to any applicable law or governmental rule or regulation, and the purchase of the Securities by the Purchaser hereunder shall be permitted by laws, rules and regulations of the jurisdictions and governmental authorities and agencies to which the Purchaser is subject. 3.26 MORTGAGE. Hamilton shall have duly authorized, executed and delivered the Mortgage, in form and substance acceptable to the Purchaser, and the Mortgage shall be in full force and effect as of the Closing Date. 3.27 LIEN SEARCHES. The Purchaser shall have received appropriate lien searches of recent date on each Transaction Party in each relevant jurisdiction, such lien searches to be in form and substance acceptable to the Purchaser. 3.28 WAIVER. Any condition specified in this SECTION 3 may be waived if consented to by the Purchaser; provided that no such waiver shall be effective against the Purchaser unless it is set forth in a writing specifically referring to this Agreement and executed by the Purchaser. 4. REPRESENTATIONS AND WARRANTIES OF THE WSI PARTIES. As a material inducement to the Purchaser to enter into this Agreement and purchase the Securities hereunder, each of the WSI Parties hereby represents and warrants to the Purchaser that each of the following statements are true, complete and correct as of the date of this Agreement and will be true, complete and correct as of the Closing both before and after giving effect to the Tab Merger and the other transactions contemplated by the Transaction Documents to occur on the Closing Date: 4.1 ORGANIZATION, POWER AND LICENSES. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware and is qualified to do business in every jurisdiction in which its ownership of property or conduct of business requires it to qualify. Hamilton is a corporation duly incorporated, validly existing and in good standing under the laws of Ohio and is qualified to do business in every jurisdiction in which its ownership of property or conduct of business requires it to qualify except where the failure to be so qualified would not have a Material Adverse Effect. Maverick is a corporation duly incorporated, validly existing and in good standing under the laws of Delaware and is 23 qualified to do business in every jurisdiction in which its ownership of property or conduct of business requires it to qualify except where the failure to be so qualified would not have a Material Adverse Effect. HSM is a limited partnership duly formed, validly existing and in good standing under the laws of Delaware and is qualified to do business in every jurisdiction in which its ownership of property or conduct of business requires it to qualify. MSTP is a is a limited partnership duly formed, validly existing and in good standing under the laws of Delaware and is qualified to do business in every jurisdiction in which its ownership of property or conduct of business requires it to qualify. Each Transaction Party possesses all requisite power and authority and all material licenses, permits and authorizations necessary to own and operate its properties, to carry on its businesses as now conducted and presently proposed to be conducted and to carry out the transactions contemplated by this Agreement after giving effect to the transactions contemplated by the Transaction Documents. The copies of each Transaction Party's certificate or articles of incorporation and regulations or bylaws or other organizational documents which have been furnished to the Purchaser's special counsel reflect all amendments made thereto at any time prior to the date of this Agreement and are true, correct and complete. 4.2 CAPITALIZATION AND RELATED MATTERS. (i) The attached CAPITALIZATION SCHEDULE accurately sets forth the following information with respect to the capitalization of the WSI Parties and MSTP as of the Closing and immediately thereafter: (1) the authorized number of shares (or other units) of each class of capital stock, (2) the number of shares (or other units) of each class of capital stock issued and outstanding, (3) the number of shares (or other units) of each class of capital stock reserved for issuance upon exercise of options, warrants or convertible securities, (4) the name of each holder of capital stock and the number of shares (or other units) and percentage interest owned by each such holder (or in the case of a partnership, the name of each general and limited partner and the percentage of partnership interests owned by each such partner) and (5) with respect to all outstanding options and rights to acquire capital stock: the holder, the number and class of shares (or other units) covered, the exercise price and the expiration date. As of the Closing Date, none of MSTP or any WSI Party shall have outstanding any capital stock or securities convertible or exchangeable for any of its capital stock or containing any profit participation features, nor shall it have outstanding any rights or options to subscribe for or to purchase its capital stock or any securities convertible into or exchangeable for any capital stock or any equity appreciation rights or phantom equity plans or registration rights for its capital stock, except as set forth on the CAPITALIZATION SCHEDULE. As of the Closing Date, none of MSTP or any WSI Party shall be subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any of its capital stock or any warrants, options or other rights to acquire its capital stock, except as set forth on the CAPITALIZATION SCHEDULE. As of the Closing, all of the capital stock of each WSI Party shall be validly issued, fully paid and nonassessable and all such shares (or other units) of capital stock are owned free and clear of all Liens other than Liens in favor of the Purchaser created pursuant to the Financing Documents. The Common Stock issuable upon the exercise of the Warrant will, when issued, be duly authorized and validly issued, fully paid and nonassessable. (ii) There are no statutory or contractual preemptive rights or rights of refusal with respect to the issuance of the Securities hereunder or the issuance of the Common Stock upon exercise of the Warrant. Assuming the truth and correctness of Purchaser's warranties and representations in Section 11.3 hereof, no WSI Party has violated any applicable federal or state securities laws in connection with the offer, sale or issuance of any of its capital stock, and the offer, sale and issuance of the Securities hereunder and the issuance of the Common Stock upon exercise of the Warrant do not require 24 registration under the Securities Act or any applicable state securities laws. There are no agreements among the Company's shareholders with respect to the voting or transfer of the Company's capital stock or with respect to any other aspect of the Company's affairs, except for the Stockholders Agreement. Other than the Agreement of Limited Partnership of HSM, as amended through the date hereof, there are no agreements between HSM's partners with respect to the voting or transfer of HSM's capital stock or with respect to any other aspect of HSM's affairs. 4.3 AUTHORIZATION; NO BREACH. The execution, delivery and performance of each of the Transaction Documents to which any Transaction Party is a party have been duly authorized by each such Transaction Party. Each of the Transaction Documents to which any Transaction Party is a party each constitutes a valid and binding obligation of such Transaction Party, enforceable in accordance with its terms, except to the extent that the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws generally affecting creditors' rights and by equitable principles (whether enforcement is sought in equity or at law). The execution and delivery by each Transaction Party of each of the Transaction Documents to which any Transaction Party is a party, the offering, sale and issuance of the Securities hereunder, the issuance of the Common Stock upon exercise of the Warrant, the issuance of Class A Common Stock upon conversion of the Class B Common Stock, the issuance of nonvoting securities in exchange for voting securities pursuant to SECTION 8 or otherwise in accordance with the Transaction Documents, and the fulfillment of and compliance with the respective terms hereof and thereof by the Transaction Parties, do not and shall not (i) conflict with or result in a breach of the terms, conditions or provisions of, (ii) constitute a default under, (iii) result in the creation of any Lien upon any Transaction Party's capital stock or assets pursuant to, (iv) give any third party the right to modify, terminate or accelerate any obligation under, (v) result in a violation of, or (vi) require any authorization, consent, approval, exemption or other action by or notice or declaration to, or filing with, any third party, court or administrative or governmental body or agency pursuant to, the articles or certificate of incorporation, regulations or bylaws or other charter or organizational documents of any Transaction Party, or any law, statute, rule or regulation to which any Transaction Party is subject (including any usury laws applicable to the Note), or any material agreement, instrument, order, judgment or decree to which any Transaction Party is subject. Except as set forth on the RESTRICTIONS SCHEDULE, no Subsidiary of the Company is subject to any restrictions upon making loans or advances or paying Distributions to, transferring property to, or repaying any Indebtedness owed to any WSI Party. HSM is not subject to any restrictions upon making loans or advances or paying Distributions to, transferring property to, or repaying any Indebtedness owed to the Company. 4.4 FINANCIAL STATEMENTS. (i) Attached hereto as the FINANCIAL STATEMENTS SCHEDULE are the following financial statements: (a) the audited balance sheets of HSM and the audited consolidated balance sheets of the Company and its Subsidiaries, in each case as of March 31, 2001 and March 31, 2002, and the related statements of income and cash flows (or the equivalent) for the respective twelve-month periods then ended; 25 (b) the unaudited balance sheet of HSM and the unaudited consolidated balance sheet of the Company and its Subsidiaries, in each case as of June 29, 2002 (collectively, the "LATEST BALANCE SHEETS"), and the related statements of income and cash flows (or the equivalent) for the period then ended. (ii) Each of the foregoing financial statements (including in all cases the notes thereto, if any) (a) is accurate and complete, is consistent with the books and records of the WSI Parties (which, in turn, are accurate and complete), (b) has been prepared in accordance with GAAP consistently applied and (c) presents fairly in all material respects the consolidated financial condition, results of operations and cash flows of the WSI Parties to which it relates in accordance with GAAP consistently applied as of the dates and for the periods set forth therein. (iii) Except as set forth on the FINANCIAL STATEMENTS SCHEDULE, the accounts receivable shown on the Latest Balance Sheets and all accounts receivable reflected on each WSI Party's books and records that have arisen subsequent to the date of the Latest Balance Sheets have been collected or, to each WSI Party's knowledge, are collectible at the amount shown on such Latest Balance Sheets or such books and records (less the allowance in the aggregate for doubtful accounts shown thereon or in such books and records) and such accounts receivable are not subject to any known offsets or defenses (whether or not meritorious). Except as set forth in the Financial Statements Schedule, the inventories shown on the Latest Balance Sheets represent quantities on hand as of the date thereof, are of a quality and quantity usable and saleable in the ordinary course of business, and are valued on the FIFO basis consistent with that at the end of prior periods. 4.5 FINANCIAL STATEMENTS AND PROJECTIONS. (i) The Company Balance Sheet as of March 31, 2002 is complete and correct and presents fairly in all material respects the consolidated financial condition of the Company and its Subsidiaries as of such date as if the transactions contemplated by this Agreement and the other Transaction Documents had occurred immediately prior to such date. (ii) The HSM Balance Sheet as of March 31, 2002 is complete and correct and presents fairly in all material respects the financial condition of HSM as of such date as if the transactions contemplated by this Agreement and the other Transaction Documents had occurred immediately prior to such date. (iii) The Company Projections are a true, correct and complete copy of the latest projections of the consolidated income, balance sheet and cash flows of the Company and its Subsidiaries for the six fiscal years ending through March 31, 2008. The Company Projections are based on, and have been prepared on the basis of, the assumptions of the Company and its Subsidiaries set forth therein, which assumptions are fair and reasonable in light of the historical financial performance of the Company and its Subsidiaries and of current and reasonably foreseeable business conditions and reflect the reasonable estimate of the Company and its Subsidiaries of the results of operations and other information projected therein. The Company and its Subsidiaries are not aware of any facts or conditions which would cause them to believe that the financial results set forth in the projections will not be achievable. 26 (iv) The HSM Projections are a true, correct and complete copy of the latest projections of the income, balance sheet and cash flows of HSM for the six fiscal years ending through March 31, 2008. The HSM Projections are based on, and have been prepared on the basis of, the assumptions of HSM set forth therein, which assumptions are fair and reasonable in light of the historical financial performance of HSM and of current and reasonably foreseeable business conditions and reflect the reasonable estimate of HSM of the results of operations and other information projected therein. HSM is not aware of any facts or conditions which would cause it to believe that the financial results set forth in the projections will not be achievable. 4.6 ABSENCE OF UNDISCLOSED LIABILITIES. No WSI Party has any obligation or liability (whether accrued, absolute, contingent, unliquidated or otherwise, whether or not known to any WSI Party, whether due or to become due and regardless of when asserted) arising out of transactions entered into at or prior to the Closing, or any action or inaction at or prior to the Closing, or any state of facts existing at or prior to the Closing other than: (i) liabilities set forth on the Latest Balance Sheets (including any notes thereto), (ii) liabilities and obligations which have arisen after the date of the Latest Balance Sheets in the ordinary course of business (none of which is a liability resulting from breach of contract, breach of warranty, tort, infringement, claim or lawsuit) and (iii) other liabilities and obligations expressly disclosed on the attached LIABILITIES SCHEDULE. 4.7 NO MATERIAL ADVERSE CHANGE. Since the date of the Latest Balance Sheets, there has been no material adverse change in the operating results, assets, liabilities, operations, business, condition (financial or otherwise), prospects, employee relations or customer or supplier relations of the WSI Parties, taken as a whole; provided, however, that in determining whether there has been any material adverse change, any adverse change attributable to either of the following shall be disregarded: (i) the declaration of a banking moratorium or any suspension of payments in respect of banks in the United States or any material disruption in commercial banking services; and (ii) the commencement of a war or police action by the United States. 4.8 ABSENCE OF CERTAIN DEVELOPMENTS. Except as expressly contemplated by this Agreement or as set forth on the attached DEVELOPMENTS SCHEDULE, since the date of the Latest Balance Sheets, no WSI Party has: (a) issued any notes, bonds or other debt securities or any capital stock or other equity securities or any securities convertible, exchangeable or exercisable into any capital stock or other equity securities; (b) borrowed any amount or incurred or become subject to any liabilities, except current liabilities incurred in the ordinary course of business and liabilities under contracts entered into in the ordinary course of business; (c) discharged or satisfied any Lien or paid any obligation or liability, other than current liabilities paid in the ordinary course of business; (d) declared or made any payment or distribution of cash or other property to its shareholders, partners or other equityholders with respect to its capital stock or other equity securities or purchased or redeemed any of its capital stock or other 27 equity securities (including any warrants, options or other rights to acquire its capital stock or other equity securities); (e) mortgaged or pledged any of its properties or assets or subjected them to any Lien, except Permitted Liens; (f) sold, assigned or transferred any of its tangible assets, except in the ordinary course of business, or canceled any debts or claims; (g) sold, assigned or transferred any Intellectual Property Rights or other intangible assets, or disclosed any proprietary confidential information to any Person; (h) suffered any extraordinary losses or waived any rights of value, whether or not in the ordinary course of business or consistent with past practice; (i) made Capital Expenditures or commitments therefor that aggregate in excess of $130,000; (j) made any loans or advances to, guarantees for the benefit of, or any Investments in, any Persons in excess of $5,000 in the aggregate; (k) suffered any damage, destruction or casualty loss exceeding in the aggregate $25,000, whether or not covered by insurance; (l) made any Investment in or taken steps to incorporate any Subsidiary; (m) entered into any other material transaction, whether or not in the ordinary course of business; or (n) agreed to do any of the foregoing. 4.9 ASSETS. Except as set forth on the attached ASSETS SCHEDULE, each WSI Party has good and marketable title to, or a valid leasehold interest in, the properties and assets used by it, located on its premises or shown on the Latest Balance Sheets or acquired thereafter, free and clear of all Liens, except for Permitted Liens and except for properties and assets disposed of in the ordinary course of business since the date of the Latest Balance Sheets. Except as described on the ASSETS SCHEDULE, each WSI Party's buildings, equipment and other tangible assets, taken as a whole, are in good operating condition (ordinary wear and tear excepted) and are fit for use in the ordinary course of business. Each WSI Party owns, or has a valid leasehold interest in, all assets necessary for the conduct of its business as presently conducted and as presently proposed to be conducted and as conducted by such WSI Party for the past twelve (12) months. 4.10 TAX MATTERS. Except as set forth on the attached TAXES SCHEDULE: (i) the WSI Parties have filed all Tax Returns which they are required to file under applicable laws and regulations; all such Tax Returns are true, correct and 28 complete in all material respects and have been prepared in compliance with all applicable laws and regulations in all material respects; the WSI Parties have paid all Taxes due and owing by them (whether or not such Taxes are required to be shown on a Tax Return) and have withheld and paid over to the appropriate taxing authority all Taxes which they are required to withhold from amounts paid or owing to any employee, members, creditor or other third party; no WSI Party has waived any statute of limitations with respect to any Taxes or agreed to any extension of time with respect to any Tax assessment or deficiency; the accrual for Taxes on the applicable Latest Balance Sheets would be adequate to pay all Tax liabilities of the WSI Parties if their current tax year were treated as ending on the date of such Latest Balance Sheets (excluding any amount recorded which is attributable solely to timing differences between book and Tax income); since the date of the applicable Latest Balance Sheets, the WSI Parties have not incurred any liability for Taxes other than in the ordinary course of business; the assessment of any additional Taxes for periods for which Tax Returns have been filed by the WSI Parties shall not exceed the recorded liability therefor on the applicable Latest Balance Sheets (excluding any amount recorded which is attributable solely to timing differences between book and Tax income); with respect to each taxable period of the WSI Parties ending on or before March 31, 1997, either such taxable period has been audited by the relevant taxing authority or the time for assessing or collecting income Tax with respect to each such taxable period has closed and such taxable period is not subject to review by any relevant taxing authority; no foreign, federal, state or local tax audits or administrative or judicial proceedings are pending or being conducted with respect to any WSI Party, no information related to Tax matters has been requested by any foreign, federal, state or local taxing authority and no written notice indicating an intent to open an audit or other review has been received by any WSI Party from any foreign, federal, state or local taxing authority; and there are no material unresolved questions or claims concerning any WSI Party's or Tab's Tax liability. (ii) No WSI Party has made an election under ss.341(f) of the Code. No WSI Party is liable for the Taxes of another Person that is not a Subsidiary of such WSI Party (a) under Treas. Reg. ss.1.1502-6 (or comparable provisions of state, local or foreign law), (b) as a transferee or successor, (c) by contract or indemnity or (d) otherwise. No WSI Party is a party to any tax sharing agreement. The WSI Parties have disclosed on their federal income Tax Returns any position taken for which substantial authority (within the meaning of Code ss.6662(d)(2)(B)(i)) did not exist at the time the return was filed. No WSI Party has made any payments, is obligated to make payments or is a party to an agreement that could obligate it to make any payments that would not be deductible under Code ss.280G. (iii) No WSI Party has been a member of an Affiliated Group other than the one of which the Company was the common parent, or filed or been included in a combined, consolidated or unitary income Tax Return, other than one filed by the Company. (iv) On the date of its incorporation or formation, as the case may be, and at all times thereafter, each of the Company and each of its Subsidiaries has been classified as a corporation, and HSM has been classified as a partnership for (a) federal income tax 29 purposes and (b) for state and local income tax purposes in each state and locality in which it is or has been required to file income tax returns. 4.11 CONTRACTS AND COMMITMENTS. (i) Except as expressly contemplated by this Agreement or as set forth on the attached CONTRACTS SCHEDULE or the attached EMPLOYEE BENEFITS SCHEDULE, no WSI Party is a party to or bound by any written or oral: (a) pension, profit sharing, option, employee stock purchase or other plan or arrangement providing for deferred or other compensation to employees or any other employee benefit plan or arrangement, or any collective bargaining agreement or any other contract with any labor union, or severance agreements, programs, policies or arrangements; (b) contract for the employment of any officer, individual employee or other Person on a full-time, part-time, consulting or other basis providing annual compensation in excess of $50,000 or contract relating to loans to officers, directors or Affiliates; (c) contract under which it has advanced or loaned any other Person amounts in the aggregate exceeding $25,000; (d) agreement or indenture relating to borrowed money or other Indebtedness or the mortgaging, pledging or otherwise placing a Lien on any material asset or material group of assets; (e) agreement or instrument which might restrict its ability to make Distributions to the Company or any Borrower, or that would have the effect of limiting the Company or any of its Subsidiaries from performing any of its obligations under this Agreement, the Note, or any other Transaction Document. (f) Guarantee of any obligation in excess of $25,000; (g) lease or agreement under which it is lessee or lessor of any property, real or personal, except for any lease of real or personal property under which the aggregate annual rental payments do not exceed $25,000; (h) assignment, license, indemnification or agreement with respect to any intangible property (including any Intellectual Property Rights); (i) warranty agreement with respect to its services rendered or its products sold or leased; (j) agreement under which it has granted any Person any registration rights (including demand and piggyback registration rights); 30 (k) sales, distribution, franchise, business opportunity, relationship or similar agreement; (l) agreement with a term of more than six months which is not terminable by it upon less than 30 days notice without penalty; or (m) contract or agreement prohibiting it from freely engaging in any business or competing anywhere in the world. (ii) All of the contracts, agreements and instruments set forth on the CONTRACTS SCHEDULE are valid, binding and enforceable in accordance with their respective terms. The WSI Parties have performed all obligations required to be performed by them and are not in default under or in breach of nor in receipt of any claim of default or breach under any contract, agreement or instrument to which it is subject; no event has occurred which with the passage of time or the giving of notice or both would result in a default, breach or event of noncompliance by any WSI Party under any contract, agreement or instrument to which any WSI Party is subject; no WSI Party has any present expectation or intention of not fully performing all such obligations; no WSI Party has knowledge of any breach or anticipated breach by the other parties to any contract, agreement, instrument or commitment to which it is a party; no WSI Party has delivered or received notice of, or has knowledge that any other party intends to deliver any notice of, termination or non-renewal of term under any material contract, agreement or instrument to which it is subject; and no WSI Party is a party to any contract requiring it to purchase or sell goods or services or lease property above or below (as the case may be) prevailing market prices and rates or any other materially adverse contract or commitment. (iii) Purchaser's special counsel has been supplied with a true and correct copy of each of the written instruments, plans, contracts and agreements and an accurate description of each of the oral arrangements, contracts and agreements which are referred to on the CONTRACTS SCHEDULE, together with all amendments, waivers or other changes thereto. 4.12 INTELLECTUAL PROPERTY RIGHTS. (i) The attached INTELLECTUAL PROPERTY SCHEDULE contains a complete and accurate list of all (a) patented or registered Intellectual Property Rights owned or used by any WSI Party, (b) pending patent applications and applications for registrations of other Intellectual Property Rights filed by any WSI Party, (c) unregistered trade names and business names owned or used by any WSI Party and (d) unregistered material trademarks, service marks, copyrights, mask works and computer software owned or used by any WSI Party. The INTELLECTUAL PROPERTY SCHEDULE also contains a complete and accurate list of all material licenses and other rights granted by any WSI Party to any third party with respect to any Intellectual Property Rights and all licenses and other rights granted by any third party to any WSI Party with respect to any material Intellectual Property Rights, in each case identifying the subject Intellectual Property Rights. Each WSI Party owns all right (subject to the use rights of others under federal copyright law and under federal or state trademark law), title and interest to, or has the 31 right to use pursuant to a valid license, all Intellectual Property Rights necessary for the operation of its business as presently conducted and as presently proposed to be conducted, free and clear of all Liens. The loss or expiration of any Intellectual Property Right or related group of Intellectual Property Rights owned or used by the WSI Parties has not had and would not reasonably be expected to have a Material Adverse Effect, and no such loss or expiration is threatened, pending or reasonably foreseeable. The WSI Parties have taken all necessary and desirable actions to maintain and protect the material Intellectual Property Rights which they own. To the best of each WSI Party's knowledge, the owners of any Intellectual Property Rights licensed to such WSI Party have taken all necessary actions to maintain and protect the Intellectual Property Rights which are subject to such licenses. (ii) (a) the WSI Parties own all right (subject to the use rights of others under federal copyright law and under federal or state trademark law), title and interest in and to all of the owned Intellectual Property Rights listed on such schedule, free and clear of all Liens other than Permitted Liens, (b) there have been no claims made against any WSI Party asserting the invalidity, misuse or unenforceability of any of such owned Intellectual Property Rights, and there are no valid grounds for the same, (c) no WSI Party has received any notices of, and is not aware of any facts which indicate a likelihood of, any infringement or misappropriation by, or conflict with, any third party with respect to such owned Intellectual Property Rights (including any demand or request that any WSI Party license any rights from a third party), (d) the conduct of each WSI Party's business has not infringed, misappropriated or conflicted with and does not infringe, misappropriate or conflict with any Intellectual Property Rights of other Persons, nor would any future conduct as presently contemplated infringe, misappropriate or conflict with any Intellectual Property Rights of other Persons and (e) to the best of each WSI Party's knowledge, the Intellectual Property Rights owned by or licensed to it have not been infringed, misappropriated or conflicted by other Persons. The transactions contemplated by this Agreement shall have no Material Adverse Effect on any WSI Party's right, title and interest in and to the Intellectual Property Rights listed on the INTELLECTUAL PROPERTY SCHEDULE. 4.13 LITIGATION, ETC. Except as set forth on the attached LITIGATION SCHEDULE, there are no actions, suits, proceedings, orders, investigations or claims pending or, to the best of each WSI Party's knowledge, threatened against or affecting it or any of its assets (or to the best of each WSI Party's knowledge, pending or threatened against or affecting any of the officers, directors, managers, or employees of it with respect to its businesses or proposed business activities), or pending or threatened by any WSI Party against any third party, at law or in equity, or before or by any governmental department, commission, board, bureau, agency or instrumentality (including any actions, suit, proceedings or investigations with respect to the transactions contemplated by this Agreement); nor has there been any such actions, suits, proceedings, orders, investigations or claims pending against or affecting any WSI Party during the past five years; no WSI Party was or is subject to any arbitration proceedings under collective bargaining agreements or otherwise or, to the best of each WSI Party's knowledge, any governmental investigations or inquiries (including inquiries as to the qualification to hold or receive any license or permit); and, to the best of each WSI Party's knowledge, there is no basis for any of the foregoing. No WSI Party is subject to any judgment, order or decree of any court 32 or other governmental agency, and no WSI Party has received any opinion or memorandum or legal advice from legal counsel to the effect that it is exposed, from a legal standpoint, to any liability or disadvantage which may be material to its business. None of the litigation set forth on the LITIGATION SCHEDULE has had or will have a Material Adverse Effect, and all such litigation is fully covered by insurance (subject to customary deductibles). 4.14 PRODUCT WARRANTY. All products manufactured by the WSI Parties have been manufactured in conformity with all applicable contractual commitments and all express or implied warranties, and in conformity in all material respects with all laws, rules and regulations promulgated by any federal, state or local government or agency or division thereof having jurisdiction over them and regulating their products. No such products are defective or would subject any WSI party to any valid claim for product liability. 4.15 BROKERAGE. Except as set forth on the attached BROKERAGE SCHEDULE, there are no claims for brokerage commissions, finders' fees or similar compensation in connection with the transactions contemplated by this Agreement and the other Transaction Documents based on any arrangement or agreement binding upon any Transaction Party. The WSI Parties shall pay, and hold the Purchasers harmless against, any liability, loss or expense (including attorneys' fees and out-of-pocket expenses) arising in connection with any such claim. 4.16 GOVERNMENTAL CONSENT, ETC. Assuming the truth and correctness of the Purchaser's representations and warranties in SECTION 11.3 hereof, no permit, consent, approval or authorization of, or declaration to or filing with, any governmental authority is required in connection with the execution, delivery and performance by the WSI Parties of this Agreement, by the Transaction Parties of the other Transaction Documents or the other agreements contemplated hereby or thereby to which either of them is a party, or the consummation by the Transaction Parties of any other transactions contemplated hereby or thereby, except as set forth on the attached CONSENTS SCHEDULE. 4.17 INSURANCE. No WSI Party is in default with respect to its obligations under any insurance policy maintained by it, and no WSI Party has been denied insurance coverage. The insurance coverage of each WSI Party is customary for prudent corporations of similar size engaged in similar lines of business. Except as set forth on the INSURANCE SCHEDULE, no WSI Party has any self-insurance or co-insurance programs, and the reserves set forth on the applicable Latest Balance Sheets are adequate to cover all anticipated liabilities with respect to any such self-insurance or co-insurance programs. 4.18 EMPLOYEES. No WSI Party is aware that any executive or key employee of it or any group of employees of it has any plans to terminate employment with it. Each WSI Party has complied in all material respects with all laws relating to the employment of labor (including provisions thereof relating to wages, hours, equal opportunity, collective bargaining and the payment of social security and other taxes), and no WSI Party is aware that it has any material labor relations problems (including any union organization activities, threatened or actual strikes or work stoppages or material grievances). No WSI Party, and to the best knowledge of each WSI Party, any of its employees is subject to any noncompete, nondisclosure, confidentiality, employment, consulting or similar agreements affecting in any material respect or in conflict in any material respect with the present or proposed business activities of the WSI Parties. 33 4.19 ERISA. Except as set forth on the attached EMPLOYEE BENEFITS SCHEDULE: (i) MULTIEMPLOYER PLANS. No WSI Party has any obligation to contribute to (or any other liability, including current or potential withdrawal liability, with respect to) any Multiemployer Plan. (ii) RETIREE WELFARE PLANS. No WSI Party maintains or has any obligation to contribute to (or any other liability with respect to) any plan or arrangement whether or not terminated, which provides medical, health, life insurance or other welfare-type benefits for current or future retired or terminated employees (except for limited continued medical benefit coverage required to be provided under Section 4980B of the Code or as required under applicable state law). (iii) DEFINED BENEFIT PLANS. No WSI Party maintains, contributes to or has any liability under (or with respect to) any employee plan which is a tax-qualified "defined benefit plan" (as defined in Section 3(35) of ERISA), whether or not terminated. (iv) DEFINED CONTRIBUTION PLANS. No WSI Party maintains, contributes to or has any liability under (or with respect to) any employee plan which is a tax-qualified "defined contribution plan" (as defined in Section 3(34) of ERISA), whether or not terminated. (v) OTHER PLANS. No WSI Party maintains, contributes to or has any liability under (or with respect to) any plan or arrangement providing benefits to current or former employees, including any bonus plan, plan for deferred compensation, employee health or other welfare benefit plan or other arrangement, whether or not terminated and whether or not subject to ERISA. (vi) UNFUNDED LIABILITY. No Plan maintained by any WSI Party or to which any WSI Party has an obligation to contribute, or with respect to which any WSI Party has any other liability, has any material unfunded liability. (vii) PLAN QUALIFICATION AND COMPLIANCE. Each employee benefit plan set forth on the EMPLOYEE BENEFITS SCHEDULE that is intended to be qualified under Section 401(a) of the Code has received a favorable determination letter from the IRS as to the qualification of such plan and, to the best knowledge of each WSI Party after due inquiry, nothing has occurred since the date of such determination letter that could reasonably be expected to adversely affect the qualification of such plan. Each employee benefit plan set forth on the EMPLOYEE BENEFITS SCHEDULE and all related trusts, insurance contracts and funds have been maintained, funded and administered in compliance in all material respects with their respective terms and with all applicable Laws. (viii) THE COMPANY. For purposes of this SECTION 4.19, the term "WSI Party" also includes all organizations under common control with any WSI Party, or treated, together with any WSI Party, as a single employer pursuant to Section 414(b), (c), (m) or (o) of the Code. 34 4.20 COMPLIANCE WITH LAWS. No WSI Party has violated any law or any governmental rule or regulation or requirement, and no WSI Party has received notice of any such violation. 4.21 ENVIRONMENTAL AND SAFETY MATTERS. (i) Each WSI Party has complied and is in compliance in all material respects with all Environmental and Safety Requirements. (ii) Without limiting the generality of the foregoing, each WSI Party has obtained and complied with, and is in compliance with, in all material respects, all permits, licenses and other authorizations that may be required pursuant to Environmental and Safety Requirements for the occupation of its facilities and the operation of its business; a list of all such permits, licenses and other authorizations is set forth on the ENVIRONMENTAL AND SAFETY MATTERS SCHEDULE. (iii) No WSI Party has received any written or oral notice, report or other information regarding any actual or alleged material violation of Environmental and Safety Requirements, or any material liabilities or potential material liabilities (whether accrued, absolute, contingent, unliquidated or otherwise), including any investigatory, remedial or corrective obligations, relating to it or its facilities arising under Environmental and Safety Requirements. (iv) Except as set forth in the ENVIRONMENTAL AND SAFETY MATTERS SCHEDULE, none of the following exists at any property or facility owned or operated by any WSI Party: (1) underground storage tanks; (2) asbestos-containing material in any form or condition; (3) materials or equipment containing polychlorinated biphenyls; or (4) landfills, surface impoundments, or disposal areas. (v) No WSI Party has treated, stored, disposed of, arranged for or permitted the disposal of, transported, handled, or released any substance, including any Hazardous Substance, or owned or operated any property or facility (and no such property or facility is contaminated by any such substance) in a manner that has given or could give rise to material liabilities to such WSI Party, including any material liability for response costs, corrective action costs, personal injury, property damage, natural resources damages or attorney fees, pursuant to CERCLA or the Solid Waste Disposal Act, as amended or any other Environmental and Safety Requirements. (vi) No facts, events or conditions relating to the past or present facilities, properties or operations of any WSI Party will prevent, hinder or limit continued compliance with Environmental and Safety Requirements, give rise to any investigatory, remedial or corrective obligations pursuant to Environmental and Safety Requirements, or give rise to any other liabilities (whether accrued, absolute, contingent, unliquidated or otherwise) pursuant to Environmental and Safety Requirements, including any relating to onsite or offsite releases or threatened releases of any Hazardous Substance, personal injury, property damage or natural resources damage. (vii) Neither this Agreement nor the consummation of the transaction that is the subject of this Agreement will result in any obligations for site investigation or cleanup, 35 or notification to or consent of government agencies or third parties, pursuant to any of the so-called "transaction-triggered" or "responsible property transfer" Environmental and Safety Requirements. (viii) No WSI Party has, either expressly or by operation of law, assumed or undertaken any liability, including any obligation for corrective or remedial action, of any other person relating to Environmental and Safety Requirements. 4.22 AFFILIATED TRANSACTIONS. Except as set forth on the attached AFFILIATED TRANSACTIONS SCHEDULE, no officer, director, manager, member, employee, stockholder, partner or Affiliate of any WSI Party or any individual related by blood, marriage or adoption to any such individual or any entity in which any such Person or individual owns any beneficial interest, is a party to any agreement, contract, commitment, transaction or arrangement with any WSI Party or has any material interest in any material property used by any WSI Party. 4.23 SOLVENCY, ETC. Each WSI Party is solvent on a going concern basis as of the date of this Agreement and shall not become insolvent as a result of the consummation of the transactions contemplated by this Agreement and the other Transaction Documents. Each WSI Party is, and after giving effect to the transactions contemplated by this Agreement and the other Transaction Documents shall be, able to pay its debts as they become due, and each WSI Party's property now has, and after giving effect to the transactions contemplated hereby shall have, a fair salable value greater than the amounts required to pay its debts (including a reasonable estimate of the amount of all contingent liabilities). Each WSI Party has adequate capital to carry on its business, and after giving effect to the transactions contemplated by this Agreement and the other Transaction Documents, each WSI Party shall have adequate capital to conduct its business. No transfer of property is being made and no obligation is being incurred in connection with the transactions contemplated by this Agreement with the intent to hinder, delay or defraud either present or future creditors of any WSI Party. 4.24 INVESTMENT COMPANY. No WSI Party is an "investment company" or an "affiliated person" of, or "promoter" or "principal underwriter" for, an "investment company," as such terms are defined in the Investment Company Act of 1940, as amended, nor is any WSI Party, directly or indirectly, controlled by or acting on behalf of any Person which is an "investment company" within the meaning of such act. The purchase of the Securities, the application of the proceeds and repayment thereof by the WSI Parties and the consummation of the transactions contemplated by this Agreement will not violate any provision of such act or any rule, regulation or order issued by the Securities and Exchange Commission thereunder. 4.25 MARGIN REGULATIONS. No WSI Party owns any "margin security," as the term is defined in Regulation U of the Federal Reserve Board, and the proceeds of the Securities will be used only for the purposes contemplated hereunder. None of the proceeds of the Securities will be used, directly or indirectly, for the purpose of purchasing or carrying any margin security, for the purpose of reducing or retiring any indebtedness which was originally incurred to purchase or carry any margin security or for any other purpose which might cause any of the securities purchased under this Agreement to be considered "purpose credit" within the meaning of Regulations T, U or X of the Federal Reserve Board. The purchase of the Securities will not constitute a violation of such Regulations T, U or X. 36 4.26 PUBLIC UTILITY HOLDING COMPANY ACT. Neither the Company nor any of its Subsidiaries is a "holding company," or a "subsidiary company" of a "holding company," or an "affiliate" of a "holding company," or an "affiliate" of a "subsidiary company" of a "holding company," within the meaning of the Public Utility Holding Company Act of 1935, as amended. 4.27 TAB MERGER DOCUMENTS AND SENIOR LOAN DOCUMENTS REPRESENTATIONS; HOLDING COMPANY STATUS. Each of the representations and warranties in the Tab Merger Documents and the Senior Loan Documents are true and correct in all respects, in each case regardless of any limitation on survival set forth therein, and are hereby incorporated herein by reference. On and at all times prior to the Closing Date, HSM has not engaged in any business activity, or incurred any Indebtedness or, except as set forth on the CAPITALIZATION SCHEDULE, other obligations of any type, other than the transactions contemplated by this Agreement and the ownership of the capital stock of the Company and ownership interests in TALP. At all times following the Closing Date, HSM shall not own or lease, directly or indirectly, any real, personal, intangible or tangible property of any nature, other than the capital stock of the Company and ownership interests in TALP and HSM shall not conduct, transact or otherwise engage in any material business or operations other than those incidental to the ownership of the capital stock of the Company and ownership interests in TALP. On and at all times prior to the Closing Date, the Company has not engaged in any business activity, or incurred any Indebtedness or, except as set forth on the CAPITALIZATION SCHEDULE, other obligations of any type, other than the transactions contemplated by this Agreement and the ownership of the capital stock of Hamilton and Maverick. At all times following the Closing Date, the Company shall not own or lease, directly or indirectly, any real, personal, intangible or tangible property of any nature, other than the capital stock of Hamilton and Maverick and the Company shall not conduct, transact or otherwise engage in any material business or operations other than those incidental to the ownership of the capital stock of Hamilton and Maverick. 4.28 DISCLOSURE. Neither this Agreement nor any of the exhibits, schedules, attachments, written statements, documents, certificates or other items prepared or supplied to any Purchaser (including any items incorporated by reference) by or on behalf of any Transaction Party with respect to the transactions contemplated hereby contain any untrue statement of a material fact or omit a material fact necessary to make each statement contained herein or therein, in light of the circumstances under which such statement was made, not misleading. There is no fact which any Transaction Party has not disclosed to the Purchaser in writing and of which any of its officers, directors, managers or executive employees is aware (other than general economic conditions) and which has had or would reasonably be expected to have a Material Adverse Effect. 4.29 CLOSING DATE. The representations and warranties of the WSI Parties contained in this SECTION 4 and elsewhere in this Agreement and all information contained in any exhibit, schedule or attachment hereto or in any certificate or other writing (including any items incorporated by reference) delivered by, or on behalf of, any Transaction Party to any Purchaser shall be true and correct in all material respects on the Closing Date as though then made, both immediately prior to and immediately after giving effect to the transactions contemplated by this Agreement and the other Transaction Documents. 37 5. AFFIRMATIVE COVENANTS. So long as the Note or Warrant remains outstanding, the WSI Parties shall: 5.1 FINANCIAL STATEMENTS AND OTHER INFORMATION. Deliver to each Purchaser: (i) as soon as available but in any event within 30 days after the end of each monthly accounting period in each fiscal year, (a) unaudited consolidating and consolidated statements of income and cash flows of the Company and its Subsidiaries for such monthly period and for the period from the beginning of the fiscal year to the end of such month, and unaudited consolidating and consolidated balance sheets of the Company and its Subsidiaries as of the end of such monthly period, setting forth in each case comparisons to the Company's and its Subsidiaries' monthly budget and to the corresponding period in the preceding fiscal year, and all such statements shall be prepared in accordance with GAAP consistently applied, subject to the absence of footnote disclosures and to normal year-end adjustments for recurring accruals, and shall be certified by the Company's president, chief executive officer or chief financial officer; (as to which certificate there shall be no personal, as opposed to corporate, liability); and (b) unaudited statements of income and cash flows of HSM for such monthly period and for the period from the beginning of the fiscal year to the end of such month, and unaudited balance sheets of HSM as of the end of such monthly period, setting forth in each case comparisons to HSM's monthly budget and to the corresponding period in the preceding fiscal year, and all such statements shall be prepared in accordance with GAAP consistently applied, subject to the absence of footnote disclosures and to normal year-end adjustments for recurring accruals, and shall be certified by HSM's president, chief executive officer or chief financial officer (as to which certificate there shall be no personal, as opposed to corporate, liability); (ii) accompanying the financial statements referred to in SUBSECTION (iii) and (iv) below, an Officer's Certificate of the WSI Parties (a) stating that there is no Event of Default or Potential Event of Default in existence and that no WSI Party is in default under any Transaction Document or any of its other material agreements or, if any Event of Default or Potential Event of Default or any such default exists, specifying the nature and period of existence thereof and what actions the WSI Parties have taken and propose to take with respect thereto, (b) setting forth in sufficient detail the information and computations required to establish whether or not the Company and its Subsidiaries are in compliance with the covenants set forth in SECTION 6.20 during the applicable period and (c) a management report, in reasonable detail, signed by the president, chief executive officer or chief financial officer of HSM and the Company in his or her capacity as such, describing the operations and financial condition of HSM, the Company and its Subsidiaries for the month and the portion of the fiscal year then ended (or for the fiscal year then ended in the case of annual financial statements); (iii) within 90 days after the end of each fiscal year, (a) consolidating and consolidated statements of income and cash flows of the Company and its Subsidiaries for such fiscal year, and consolidating and consolidated balance sheets of the Company and its Subsidiaries as of the end of such fiscal year, and (b) statements of income and cash flows of HSM for such fiscal year, and balance sheets of HSM as of the end of such 38 fiscal year; in each case, setting forth comparisons to the preceding fiscal year, prepared in accordance with GAAP consistently applied, and accompanied by (x) with respect to the consolidated portions of such statements, an opinion containing no exceptions or qualifications of an independent accounting firm of recognized national standing (acceptable to the holders of a majority of the outstanding principal amount of the Note or, if the Note is not outstanding, the holders of a majority of the outstanding Underlying Common Stock or Warrant), (y) a certificate from such accounting firm, addressed to the Board in the case of the Company, and HSM's partners in the case of HSM, stating that in the course of its examination nothing came to its attention that caused it to believe that there was an Event of Default or Potential Event of Default in existence or that there was any other default by the WSI Parties in the fulfillment of or compliance with any of the terms, covenants, provisions or conditions of any other material agreement to which such WSI Parties are a party or, if such accountants have reason to believe any Event of Default or Potential Event of Default or other default by the WSI Parties exists, a certificate specifying the nature and period of existence thereof and (z) promptly upon receipt, a copy of such firm's annual management letter to the Board in the case of the Company, and to HSM's partners in the case of HSM; (iv) as soon as available, but not later than 30 days after the end of each fiscal quarter of each year, (a) unaudited consolidating and consolidated statements of income and cash flows of the Company and its Subsidiaries for such quarterly period and for the period from the beginning of the fiscal year to the end of such quarter, and unaudited consolidating and consolidated balance sheets of the Company and its Subsidiaries as of the end of such quarterly period, setting forth in each case comparisons to the Company's and its Subsidiaries' quarterly budget and to the corresponding period in the preceding fiscal year, and all such statements shall be prepared in accordance with GAAP consistently applied, subject to the absence of footnote disclosures and to normal year-end adjustments for recurring accruals, and shall be certified by the Company's president, chief executive officer or chief financial officer (as to which certificate there shall be no personal, as opposed to corporate, liability), and (b) unaudited statements of income and cash flows of HSM for such quarterly period and for the period from the beginning of the fiscal year to the end of such quarter, and unaudited balance sheets of HSM as of the end of such quarterly period, setting forth in each case comparisons to HSM's quarterly budget and to the corresponding period in the preceding fiscal year, and all such statements shall be prepared in accordance with GAAP consistently applied, subject to the absence of footnote disclosures and to normal year-end adjustments for recurring accruals, and shall be certified by HSM's president, chief executive officer or chief financial officer (as to which certificate there shall be no personal, as opposed to corporate, liability); (v) promptly upon receipt thereof, any additional reports, management letters or other detailed information concerning significant aspects of the Company's and its Subsidiaries' operations or financial affairs given to the Company or any of its Subsidiaries by its independent accountants (and not otherwise contained in other materials provided hereunder); 39 (vi) promptly (but in any event within two Business Days) after the discovery or receipt of notice of any Event of Default or Potential Event of Default, any default under any Transaction Document or any other material agreement to which it is a party, any investigation, notice, proceeding or adverse determination from any governmental or regulatory authority or agency, any condition or event that has resulted in or could result in any material liability under any Environmental and Safety Requirements or any other material adverse change, event or circumstance affecting any WSI Party (including the filing of any litigation against any WSI Party that could result in any material liability to any WSI Party or the existence of any dispute with any Person which involves a reasonable likelihood of such litigation being commenced), an Officer's Certificate of the applicable WSI Party specifying the nature and period of existence thereof and what actions such WSI Party has taken and proposes to take with respect thereto; provided, however, that in determining whether there has been a material adverse change, any adverse change attributable to either of the following shall be disregarded: (i) the declaration of a banking moratorium or any suspension of payments in respect of banks in the United States or any material disruption in commercial banking services or any limit or the extension of credit generally by banks or other financial institutions; and (ii) the commencement of a war or police action by the United States; (vii) at least 30 days but not more than 90 days prior to the beginning of each fiscal year, copies of the business plan for the Company and its Subsidiaries (including management's intentions with regard to anticipated significant business developments or objectives of the Company and its Subsidiaries) for each of the next three succeeding fiscal years and projections (prepared on a monthly basis for the first succeeding year and on an annual basis for the second and third succeeding years) of (a) the consolidating and consolidated balance sheets at the end of each such fiscal year, (b) statements of income and expense and shareholder's equity for each of such fiscal years and (c) statements of cash flow for each such fiscal year, all of the foregoing to be in reasonable detail and certified by the Company's president, chief executive or chief financial officer (as to which certificate there shall be no personal, as opposed to corporate, liability) as having been prepared in good faith and in the exercise of management's business judgment and promptly upon any revisions thereof, copies of such revisions; (viii) within two days after transmission thereof, copies of all financial statements, proxy statements, reports and any other general written communications which the Company or any of its Subsidiaries sends to its shareholders and copies of all registration statements and all regular, special or periodic reports which it files, or any of its officers, managers, directors or members of the Board file with respect to the Company or any of its Subsidiaries, with the Securities and Exchange Commission or with any securities exchange on which any of its securities are then listed, and copies of all press releases and other statements made available generally by the Company or any of its Subsidiaries to the public concerning material developments in the Company's and its Subsidiaries' businesses; (ix) copies of any "Borrowing Base Certificate", as defined in the Senior Loan Agreements and delivered pursuant to the Senior Loan Agreements when delivered to the Senior Lender and, at the request of any Purchaser, copies of any statements, reports, 40 certificates and any other information delivered to the Senior Lender or the Company's or any of its Subsidiary's shareholders; (x) promptly (but in any event within two Business Days) after the receipt of notice of the occurrence of any of the following, written notice thereof which describes the same and the intended course of action of such WSI Party with respect thereto: (i) the occurrence or expected occurrence of any ERISA Event; (ii) the occurrence of any non-exempt prohibited transaction within the meaning of Section 406 of ERISA or Section 4975 of the Code; (iii) the filing of any funding waiver request with the IRS with respect to any Pension Plan or the failure to make a required contribution to any Pension Plan if such failure is sufficient to give rise to a lien under Section 302 of ERISA; (iv) the occurrence of any material increase in the benefits provided under any existing Plan or the establishment of any new Plan or the commencement of contributions to any Plan to which any WSI Party or ERISA Affiliate was not previously contributing; or (v) the occurrence of any other event with respect to any Plan which could result in the incurrence by any WSI Party or ERISA Affiliate of any material liability, fine or penalty; (xi) promptly (but in any event within two Business days) any notice of any cancellation or material change in any insurance coverage required to be maintained hereunder; (xii) immediately upon the earlier of becoming aware of or the receipt of notice (oral or written) of the acceleration of any Indebtedness or waiver or cure of any default under any Indebtedness; (xiii) within two Business Days of a breach or violation or a default or event of default as defined in and under any Tab Merger Document and within two Business Days of any material inaccuracy in any representation and warranty made in any Tab Merger Document, a written notice setting forth the details of such item; (xiv) within two Business Days of any WSI Party's knowledge thereof, written notice of any of (a) the occurrence of a Trigger Event (as such term is defined in the Warrant) or (b) the execution of a letter of intent or term sheet with respect to a Change in Control; and (xv) with reasonable promptness, such other information and financial data as any Purchaser may reasonably request. Each of the financial statements referred to in SUBSECTIONS (i), (iii), and (iv) shall be true and correct and shall fairly present in all material respects as of the dates and for the periods stated therein the financial condition of the Company and its Subsidiaries, subject in the case of the unaudited financial statements to changes resulting from normal year-end adjustments for recurring accruals (none of which would, alone or in the aggregate, have a Material Adverse Effect). 5.2 INSPECTION OF PROPERTY. Permit any representatives designated by any Purchaser, upon reasonable notice and during normal business hours and at such other times as any such holder may reasonably request, to (i) visit and inspect any of the properties of the WSI Parties, 41 (ii) examine the financial records and books of accounts of the WSI Parties and make copies thereof or extracts therefrom and (iii) discuss the affairs, finances and accounts of any such entities with the Board, board of directors or managers, officers, key employees and independent accountants of the WSI Parties. The presentation of an executed copy of this Agreement by any Purchaser to the independent accountants of any WSI Party shall constitute its permission to its independent accountants to participate in discussions with such Persons. The WSI Parties shall grant consent to and permission to, and obtain the consents of and permission of, any third parties necessary to effectuate the rights of the Purchasers under this SECTION 5.2. 5.3 ATTENDANCE AT BOARD MEETINGS. Give the Purchaser Representative written notice of each meeting of each of the board of directors of the Company and its Subsidiaries (each of which shall be held at least quarterly) and each committee thereof at the same time and in the same manner as notice is given to the board of directors or committee thereof (which notice the Company shall promptly confirm in writing to the Purchaser Representative), and each of the Company and its Subsidiaries shall permit the Purchaser Representative to attend as an observer at all such meetings. The Purchaser Representative shall be entitled to receive all written materials and other information (including copies of meeting minutes) provided in connection with such meetings at the same time such materials and information are given to the board of directors or any committee thereof, as the case may be. If the Company or any of its Subsidiaries proposes to take any action by written consent in lieu of a meeting of its board of directors, the Company and its Subsidiaries shall give written notice thereof to the Purchaser Representative prior to the effective date of such consent describing in reasonable detail the nature and substance of such action. The Company and its Subsidiaries shall pay the reasonable out-of-pocket expenses of the Purchaser Representative incurred in connection with attending all such meetings. 5.4 CONDUCT OF BUSINESS. Cause to be done all things necessary to maintain, preserve and renew their existence, rights, franchises, privileges and qualifications and all material licenses, authorizations and permits necessary to the conduct of their businesses. 5.5 MAINTENANCE OF PROPERTY AND EXISTENCE. (i) Maintain and keep their properties in good repair, working order and condition (ordinary wear and tear excepted), and from time to time make all necessary or desirable repairs, renewals and replacements, so that their businesses may be properly and advantageously conducted in all material respects at all times, and (ii) maintain and preserve (x) their existence and good standing in the jurisdiction of their organization and (y) their qualification to do business and good standing (or the local law equivalent) in each jurisdiction where the nature of their business makes such qualification necessary, other than any such jurisdiction where the failure to be qualified or in good standing could not reasonably be expected to have a Material Adverse Effect. 5.6 TAXES. Pay and discharge when payable all Taxes, assessments and governmental charges imposed upon their properties or upon them or their income or profits (in each case before the same becomes delinquent and before penalties accrue thereon) and all claims for labor, materials or supplies which if unpaid would by law become a Lien upon any of their property, unless and to the extent that the same are being contested in good faith, diligently and by appropriate proceedings and adequate reserves (as determined in accordance with GAAP 42 consistently applied) have been established on their books with respect thereto and such contest operates to suspend collections of the same. 5.7 CONTRACTS AND AGREEMENTS. Except as provided in Section 5.14, comply with all obligations incurred by them pursuant to any contract or agreement, whether oral or written, express or implied, as such obligations become due, unless and to the extent that the same are being contested in good faith, diligently and by appropriate proceedings and adequate reserves (as determined in accordance with GAAP consistently applied) have been established on their books with respect thereto. 5.8 COMPLIANCE WITH LAWS. Comply with all applicable laws, rules and regulations of all governmental authorities. 5.9 ENVIRONMENTAL AND SAFETY REQUIREMENTS. Comply in all material respects with all Environmental and Safety Requirements and all permits, licenses or other authorizations issued thereunder; respond promptly to any Release or threatened Release of any Hazardous Substance in a manner which complies in all material respects with all Environmental and Safety Requirements and reasonably mitigates any risk to human health or the environment; and provide such documents or information, or conduct at its own cost such studies or assessments, relating to matters arising under the Environmental and Safety Requirements as any Purchaser may reasonably request. 5.10 INSURANCE. Apply for and continue in force with good and responsible insurance companies adequate insurance covering risks of such types and covering casualties, risks and contingencies of such types and in such amounts as are customary for prudent companies of similar size engaged in similar lines of business (but in no event less than such amounts that were maintained as of the Closing) and, upon payment of any proceeds under such policy, pay such proceeds as provided in the Note. 5.11 KEY-MAN POLICY. Maintain in effect at all times the Key-Man Policy in form and substance acceptable to the Purchaser, and, within 30 days after the Closing Date and thereafter within five (5) Business Days of the date on which premiums under such policy are due, deliver to the Purchaser an Officer's Certificate of the Company certifying that all premiums due and owing have been paid with respect to the Key-Man Policy, together with evidence of such payment, and that the Key-Man Policy is in full force and effect. 5.12 BOOKS AND RECORDS. Maintain proper books of record and account which present fairly in all material respects their financial condition and results of operations and make provisions on their financial statements for all such proper reserves as in each case are required in accordance with GAAP consistently applied. 5.13 COMPLIANCE WITH AGREEMENTS. Perform and observe all of their obligations (i) to each holder of (A) the Note, as set forth in this Agreement and the Note, and (B) the Warrant and Underlying Common Stock, as set forth in this Agreement, the Warrant and the Stockholders Agreement, and (ii) under each of the other Transaction Documents. 5.14 SENIOR LOAN DOCUMENTS. Comply with all covenants and agreements contained in the Senior Loan Documents, and take no actions prohibited thereby, in accordance with the terms 43 thereof (it being understood that any failure to perform or observe any obligations under the Senior Loan Documents that does not otherwise constitute an Event of Default hereunder shall not by operation of this Section 5.14 result in an Event of Default hereunder). 5.15 HSM NOTE. With respect to HSM, shall make all payments due and owing to the Company with respect to the HSM Note, the provisions of which shall not be amended, waived or modified without the prior written consent of the Purchasers. 5.16 INTELLECTUAL PROPERTY RIGHTS. Possess and maintain all material Intellectual Property Rights necessary to the conduct of their respective businesses and own all right, title and interest in and to, or have a valid license for, all such material Intellectual Property Rights. 5.17 RANK; MOST FAVORED COVENANT STATUS. Cause the Indebtedness of the Company and its Subsidiaries incurred to the Purchasers pursuant to this Agreement and the Financing Documents to at all times be senior to any other Indebtedness of the Company and its Subsidiaries, other than the Senior Debt. Except as may be permitted by the terms of the Intercreditor Agreement, no indenture, guaranty or other similar instrument evidencing Indebtedness entered into after the date hereof shall include any affirmative or negative business or financial covenants (or any events of default or other type of restriction which would have the practical effect of any affirmative or negative business or financial covenant, including, without limitation, any `put' or mandatory prepayment of such Indebtedness upon the occurrence of a `change of control') applicable to the Company or any of its Subsidiaries which are more restrictive than those set forth herein or in any of the other Financing Documents. Except as may be permitted by the Intercreditor Agreement, to the extent any amendment, extension, renewal or refinancing of any Indebtedness which amendment is entered into after the date hereof (whether or not such Indebtedness is outstanding on the date hereof) includes affirmative or negative business or financial covenants (or any events of default or other type of restriction which would have the practical effect of any affirmative or negative business or financial covenant, including, without limitation, any `put' or mandatory prepayment of such Indebtedness upon the occurrence of a `change of control') applicable to the Company or any of its Subsidiaries which are more restrictive than those set forth herein or in any of the other Financing Documents, the Company shall promptly so notify the Purchasers and, if the Purchasers shall so request by written notice to the WSI Parties, the WSI Parties shall promptly amend this Agreement to incorporate some or all of such provisions, in the discretion of the Purchasers, into this Agreement and, to the extent necessary and reasonably desirable to the Purchasers, into any of the other Financing Documents, all at the election of the Purchasers. 5.18 FORMATION OF SUBSIDIARIES. At the time of the formation of any direct or indirect Wholly Owned Subsidiary of the Company or the acquisition of any direct or indirect Wholly Owned Subsidiary of the Company after the Closing Date notwithstanding SECTIONS 6.7 and 6.11 to the contrary, or if any direct or indirect Wholly Owned Subsidiary shall at any time not be a party to a loan party guaranty in form and substance reasonably satisfactory to the Purchasers, (a) cause such Subsidiary to provide to the Purchasers a Loan Party Guaranty in form and substance reasonably satisfactory to the Purchasers which shall be subordinated to the Senior Debt pursuant to the terms of the Senior Intercreditor Agreement, and (b) provide to the Purchasers all other documentation, including one or more opinions of counsel reasonably satisfactory to the Purchasers, which in their reasonable opinion is appropriate with respect to such formation and 44 the execution and delivery of the applicable documentation referred to above. Any documentation, agreement or instrument executed or issued pursuant to this SECTION 5.18 shall be a "Financing Document" and "Transaction Document" for purposes of this Agreement. This SECTION 5.18 shall not be construed to authorize any transaction prohibited by this Agreement, including without limitation, SECTIONS 6.7 and 6.11. 5.19 GUARANTY OF PUT ARRANGEMENT. Each of Hamilton and Maverick and each other Subsidiary of the Company hereby unconditionally guarantees, as primary obligor and not merely as a surety, the full and prompt payment to each holder of the Warrant or Underlying Warrant Stock (as such term is defined in the Warrant) and the performance, when due and at all times thereafter, of any of the obligations of the Company in respect of each Put (as such term is defined in the Warrant), including, without limitation, the payment of the Put Price (as such term is defined in the Warrant) in respect of each share of Underlying Warrant Stock (as such term is defined in the Warrant). 5.20 DESSY PUT. In the event that Dessy has not exercised his option to purchase membership interests of HSM, as contemplated by that certain Option and Exchange Agreement dated as of January 6, 1998 by and between Dessy and HSM (the "OPTION AGREEMENT") prior to September 30, 2004, then HSM shall promptly after October 1, 2004, and in any event no later than October 10, 2004, exercise its right to "put" HSM partnership interests to Dessy in full satisfaction of the Dessy Subdebt. 5.21 FURTHER ASSURANCES. At any time and from time to time, upon the reasonable request of any Purchaser, execute, deliver and acknowledge or cause to be executed, delivered and acknowledged, such further documents and instruments and do such other acts and things as so requested in order to fully effect the purpose of this Agreement, the other Financing Documents and any other agreements, instruments and documents delivered pursuant hereto and thereto or in connection with the Securities. In addition, if reasonably requested by any Purchaser, the WSI Parties shall obtain and promptly furnish to the Purchasers evidence of all governmental approvals as may be required to enable the WSI Parties to comply with their respective obligations under the Financing Documents and to continue in business as conducted on the date hereof without material interruption or interference. 6. NEGATIVE COVENANTS. So long as the Note or Warrant remains outstanding, no WSI Party shall: 6.1 RESTRICTED JUNIOR PAYMENTS. Directly or indirectly declare, pay or make any Restricted Junior Payments, except: (i) so long as no Potential Event of Default, Event of Default or event of default under the Senior Loan Documents has occurred and is continuing or would be caused by making such payment, the Company may pay Workstream Administrative Expenses in an amount not to exceed $16,667 during any month, provided that the amount shall be reduced to $8,333 for such month if a Potential Event of Default, Event of Default or event of default under the Senior Loan Documents has occurred and is continuing or would be caused by making such payment; 45 (ii) the Subsidiaries of the Company may make Restricted Junior Payments to the Company to the extent required by the Company to pay federal and state taxes then owing, and franchise taxes and similar licensing expenses incurred in the ordinary course of business; PROVIDED THAT the aggregate contribution to taxes by the Subsidiaries of the Company as a result of filing a consolidated return by the Company may not be materially greater, nor the aggregate receipt of tax benefits materially less, than they would have had if Subsidiaries of the Company had not filed a consolidated return with the Company; (iii) provided that no Potential Event of Default, Event of Default or Event of default under the Senior Loan Documents has occurred and is continuing or would be caused by making such payment, Maverick may make regularly scheduled interest payments on the Dessy Subdebt; and (iv) HSM may make Restricted Junior Payments in cash to the Company with respect to the HSM Note. 6.2 ISSUANCE OF NOTES, ETC. Authorize, issue or enter into any agreement providing for the issuance (contingent or otherwise) of any notes or debt securities containing equity features (including any notes or debt securities convertible into or exchangeable for capital stock or other equity securities issued in connection with the issuance of capital stock or other equity securities or containing profit participation features). 6.3 LOANS, ADVANCES, GUARANTEES AND INVESTMENTS. Make any loans or advances to, Guarantees for the benefit of, or Investments in, any Person, except that the Company and its Subsidiaries may (a) pay reasonable travel and business expense advances to employees up to $5,000 per employee and $20,000 in the aggregate in the ordinary course of business consistent with past practices and (b) make Investments having a stated maturity no greater than one year from the date the Company or any of its Subsidiaries makes such Investment in (1) obligations of the United States government or any agency thereof or obligations guaranteed by the United States government, (2) certificates of deposit of commercial banks having combined capital and surplus of at least $50,000,000 or (3) commercial paper with a rating of at least "Prime-1" by Moody's Investors Service, Inc. 6.4 MERGERS. Merge or consolidate with any Person (other than a merger or consolidation between or among Wholly Owned Subsidiaries of the Company or a merger or consolidation of a Wholly Owned Subsidiary into the Company). 6.5 DISPOSITIONS. Sell, lease or otherwise dispose of any of its assets (other than dispositions of used, worn-out or obsolete equipment in the ordinary course of business and sales of inventory in the ordinary course of business) or sell or permanently dispose of any of its Intellectual Property Rights, provided that the Company and its Subsidiaries may otherwise sell, lease or otherwise dispose of up to 5% of the Consolidated Total Assets of the Company and its Subsidiaries in any twelve month period. 6.6 LIQUIDATIONS, ETC. Except as permitted under SECTION 6.4, liquidate, dissolve or effect a recapitalization or reorganization in any form of transaction (including any 46 reorganization into a limited liability company, a partnership or any other non-corporate entity and any reorganization after which the Company becomes a Subsidiary of any other Person other than HSM) or otherwise alter its legal status. 6.7 ACQUISITIONS. Acquire any interest in any company or business (whether by a purchase of assets, purchase of stock, merger or otherwise), or enter into any joint venture. 6.8 BUSINESS. In the case of (i) the Subsidiaries of the Company, enter into the ownership, active management or operation of any business other than the business engaged in on the Closing Date and businesses reasonably related thereto, (ii) HSM, engage in any business other than the ownership of the capital stock of the Company and being a limited partner of TALP, and (iii) the Company, engage in any business other than the ownership of the capital stock of Hamilton and Maverick. 6.9 RESTRICTIVE AGREEMENTS. Enter into, become subject to, amend, modify or waive any agreement or instrument which by its terms would (under any circumstances) restrict or otherwise limit or condition (a) the right of any of the Subsidiaries of the Company to make loans or advances or pay Distributions to, transfer property to, or repay any Indebtedness owed to, the Company or its Subsidiaries or (b) any WSI Party's right to perform any of the provisions of any of the Transaction Documents (including provisions relating to the payment of principal and interest on the Note and the payment of the redemption price upon exercise of the Warrant), except for entering into the Senior Loan Agreements and amending such agreement in accordance with the terms of the Senior Intercreditor Agreement. 6.10 AFFILIATE TRANSACTIONS. Enter into, amend, modify or supplement any agreement, transaction, commitment or arrangement with any of its officers, directors, managers, members, employees, stockholders or Affiliates or with any individual related by blood, marriage or adoption to any such individual or with any entity in which any such Person or individual owns a beneficial interest, except for customary employment arrangements and benefit programs on reasonable terms and at prices no less favorable to it than the terms and prices available from an independent third party in an arm's length transaction and except as otherwise expressly contemplated by this Agreement. 6.11 SUBSIDIARIES. Establish or acquire any Subsidiaries. 6.12 INDEBTEDNESS; LIENS. Create, incur, assume or suffer to exist any Indebtedness other than Permitted Indebtedness or any Liens other than Permitted Liens. 6.13 OPERATING LEASES. Enter into any Operating Leases under which the amount of the aggregate lease payments for all such agreements exceeds $25,000 on a consolidated basis for any twelve- month period. 6.14 FISCAL YEAR. Change its fiscal year without the prior written consent of the Purchasers. 6.15 PREPAYMENTS, ETC. Prepay, redeem, purchase, defease or otherwise satisfy in any manner any principal or interest on any Indebtedness other than Indebtedness under the Senior 47 Loan Agreements and the Note, and with respect to HSM, other than the Indebtedness under the HSM Note. 6.16 OPTION PLANS. Amend or modify any option plan or employee equity ownership plan as in existence as of the Closing, adopt any new option plan or employee equity ownership plan or issue any capital stock to its employees. 6.17 CAPITAL STOCK. Issue or sell any shares of the capital stock , or rights to acquire shares of the capital stock, to any Person other than the Company or a Wholly Owned Subsidiary of the Company. 6.18 USE OF PROCEEDS. Use the proceeds from the sale of the Securities other than as set forth on the USE OF PROCEEDS SCHEDULE. 6.19 ORGANIZATIONAL DOCUMENTS. Make any amendment to its articles or certificate of incorporation or by laws or partnership agreement or other organizational documents (as applicable), or file any resolution of its board of directors or shareholders or partners with the applicable Secretary of State or other applicable filing office containing any provisions which would adversely affect or otherwise impair in any respect any rights or remedies of any Purchaser or the rights or relative priority of the holders of the Warrant or Underlying Common Stock under this Agreement or any Transaction Document. 6.20 FINANCIAL COVENANTS. (i) FIXED CHARGE COVERAGE RATIO. Permit the Fixed Charge Coverage Ratio for any Computation Period to be less than the applicable ratio set forth below for such Computation Period:
------------------------------------------------------- ---------------------------------------------------- Computation Fixed Charge Period Ending Coverage Ratio ------------- -------------- ------------------------------------------------------- ---------------------------------------------------- December 2002 1.00 to 1.00 ------------------------------------------------------- ---------------------------------------------------- March 2003 1.00 to 1.00 ------------------------------------------------------- ---------------------------------------------------- June 2003 1.00 to 1.00 ------------------------------------------------------- ---------------------------------------------------- September 2003 1.10 to 1.00 ------------------------------------------------------- ---------------------------------------------------- December 2003 1.10 to 1.00 ------------------------------------------------------- ---------------------------------------------------- March 2004 1.10 to 1.00 ------------------------------------------------------- ---------------------------------------------------- June 2004 and each fiscal quarter thereafter 1.20 to 1.00 ------------------------------------------------------- ----------------------------------------------------
(ii) TOTAL DEBT TO EBITDA RATIO. 48 Permit the Total Debt to EBITDA Ratio as of the last day of any Computation Period to exceed the applicable ratio set forth below for such Computation Period:
------------------------------------------------------- ---------------------------------------------------- Computation Total Debt to Period Ending EBITDA Ratio ------------- ------------ ------------------------------------------------------- ---------------------------------------------------- December 2002 3.50 to 1.00 ------------------------------------------------------- ---------------------------------------------------- March 2003 3.50 to 1.00 ------------------------------------------------------- ---------------------------------------------------- June 2003 3.50 to 1.00 ------------------------------------------------------- ---------------------------------------------------- September 2003 3.00 to 1.00 ------------------------------------------------------- ---------------------------------------------------- December 2003 3.00 to 1.00 ------------------------------------------------------- ---------------------------------------------------- March 2004 3.00 to 1.00 ------------------------------------------------------- ---------------------------------------------------- June 2004 and each fiscal quarter thereafter 2.50 to 1.00 ------------------------------------------------------- ----------------------------------------------------
(iii) EBITDA. Permit EBITDA for any Computation Period to be less than the applicable amount set forth below for such Computation Period:
------------------------------------------------------- ---------------------------------------------------- Computation Period Ending EBITDA ------------- ------ ------------------------------------------------------- ---------------------------------------------------- December 2002 $2,000,000 ------------------------------------------------------- ---------------------------------------------------- March 2003 $2,000,000 ------------------------------------------------------- ---------------------------------------------------- June 2003 $2,000,000 ------------------------------------------------------- ---------------------------------------------------- September 2003 $2,500,000 ------------------------------------------------------- ---------------------------------------------------- December 2003 $2,500,000 ------------------------------------------------------- ---------------------------------------------------- March 2004 $2,500,000 ------------------------------------------------------- ---------------------------------------------------- June 2004 and each fiscal quarter thereafter $2,800,000 ------------------------------------------------------- ----------------------------------------------------
(iv) CAPITAL EXPENDITURES. Permit the aggregate amount of all Capital Expenditures made by the Company and its Subsidiaries during any fiscal year to exceed: (i) $505,000 for the fiscal year ending March 2003, (ii) $505,000 for the fiscal year ending March 2004, and (iii) $600,000 for any fiscal year thereafter. For purposes of this section only, "Capital Expenditures" shall exclude Capital Expenditures made in such fiscal year in connection with the replacement or substitution of assets to the extent financed through the disposition of assets, provided that the replacement and substitution occurs within 180 49 days, is not in excess of $50,000 for all such dispositions in the aggregate, and the replacement or substituted assets perform the same or similar function as the assets so replaced or substituted. In addition to the foregoing, HSM shall make no Capital Expenditures. Notwithstanding the foregoing, the WSI Parties shall not be required to comply with the provisions of this SECTION 6.20 if no portion of the principal amount of the Note is at the time outstanding. 6.21 MARGIN REGULATIONS. Use any proceeds from the sale of the Note hereunder, directly or indirectly, for the purposes of purchasing or carrying any "margin securities" within the meaning of Regulation T, U or X promulgated by the Board of Governors of the Federal Reserve Board or for the purpose of arranging for the extension of credit secured, directly or indirectly, in whole or in part by collateral that includes any "margin securities." 6.22 AMENDMENT OF OTHER AGREEMENTS. Amend, modify or waive any provision of the Transaction Documents (other than the Senior Loan Agreements in accordance with the terms of this Agreement and the Senior Intercreditor Agreement) without the prior written consent of the Purchaser Representative. 6.23 SENIOR LOAN DOCUMENTS. Amend, modify or waive any provision of the Senior Loan Documents except to the extent permitted by the Senior Intercreditor Agreement. 6.24 INTELLECTUAL PROPERTY RIGHTS. Take any action, or fail to take any action, which would result in the invalidity, abandonment, misuse or unenforceability of any material Intellectual Property Rights or which would infringe upon in any material respect or misappropriate any rights of other Persons. 6.25 EMPLOYEE BENEFIT PLANS. Permit to exist any condition in connection with any Pension Plan which might constitute grounds for the PBGC to institute proceedings to have such Pension Plan terminated or a trustee appointed to administer such Pension Plan; and no WSI Party shall engage in, or permit to exist or occur, or permit any ERISA Affiliate to engage in, or permit to exist or occur, any other condition, event or transaction with respect to any Pension Plan or Multiemployer Plan which could result in the incurrence of any material liability, fine or penalty. 6.26 CONTRACTS. Enter into or be a party to any contract for the purchase of materials, supplies or other property or services, if such contract requires it to make payments regardless of whether such materials, supplies or other property or services are ever delivered. 6.27 CANCELLATION OF CLAIMS. Cancel any claim or debt owing to it, except in the ordinary course of business and not to exceed $10,000 in any fiscal year. 6.28 DISCLOSURE. Disclose the names of any Purchaser in any press release or in any prospectus, proxy statement or other materials with a governmental entity relating to a public offering of its securities unless such Purchaser has approved the content of such disclosure in its discretion (which approval shall not be unreasonably withheld, delayed or conditioned). 50 7. TRANSFER OF RESTRICTED SECURITIES. 7.1 GENERAL PROVISIONS. Restricted Securities are transferable only pursuant to (i) public offerings registered under the Securities Act, (ii) Rule 144 or Rule 144A of the Securities and Exchange Commission (or any similar rule or rules then in force) if such rule is available and (iii) subject to compliance with applicable security laws, any other legally available means of transfer. In the absence of an Event of Default, no Purchaser and no other holder of Securities shall transfer or assign any of the Securities to any competitor of Hamilton or Maverick. 7.2 INFORMATION REQUESTS. Upon the request of any Purchaser, each of the Company and the other Borrowers shall promptly supply to such Purchaser or its prospective transferees all information regarding the Company and its Subsidiaries required to be delivered in connection with a transfer hereof. 7.3 LEGEND REMOVAL. If any Restricted Securities become eligible for sale pursuant to Rule 144(k), each of the Company and the other Borrowers shall, upon the request of the holder of such Restricted Securities, remove the legend set forth in SECTION 11.3 from the certificates for such Restricted Securities. 8. BHC REGULATORY MATTERS 8.1 GENERALLY. Before the Company redeems, purchases or otherwise acquires, directly or indirectly, or converts or takes any action with respect to the voting rights of, any shares of any class of its common stock or any securities convertible into or exchangeable for any shares of any class of its common stock (other than an exercise of the Warrants) and before the Company becomes a party to any merger, consolidation, or recapitalization otherwise permitted hereunder, the Company shall give written notice of such pending action to all BHC Holders. Upon the written request of any BHC Holder made within 10 days after its receipt of any such notice stating that after giving effect to such action the BHC Holder would have a Regulatory Problem, the Company shall defer taking such action for such period (not to extend beyond 45 days after the BHC Holder's receipt of the Company's original notice) as the BHC Holder requests to permit it and its Affiliates to reduce the quantity of the Company's securities they own in order to avoid the Regulatory Problem. 8.2 EXCHANGE OF STOCK. At any BHC Holder's request at any time (whether in connection with any action by the Company referred to in SECTION 8.1 above or otherwise), the Company shall exchange with the BHC Holder for such number of shares of Class B Common Stock then held by the BHC Holder as it designates a like number of shares of Class A Common Stock, and the Company shall at all times reserve and keep available out of its authorized but unissued Class A Common Stock, solely for issue upon such exchanges, the number of such shares deemed sufficient by the Company for such purposes. In the event of any such exchange of Class B Common Stock for Class A Common Stock, (a) the holders of such Class A Common Stock shall be entitled to all the rights which such holders had pursuant to this Agreement, the Certificate of Incorporation, the Stockholders Agreement and the Registration Agreement as holders of Class B Common Stock (including the right to have such shares treated as "Underlying Common Stock" and "Registrable Securities" pursuant to this Agreement, the Certificate of Incorporation, the Equityholders Agreement and the Registration Agreement) and 51 (b) if such Class B Common Stock were "Restricted Securities" hereunder, such Class A Common Stock shall also be deemed to be "Restricted Securities" hereunder. In addition, if a BHC Holder has a Regulatory Problem, the Company will cooperate and assist the BHC Holder by taking such actions as may be necessary or (in the opinion of the BHC Holder) desirable as requested by the BHC Holder to resolve such Regulatory Problem, including any actions reasonably requested by the BHC Holder to effectuate and facilitate any transfer by such BHC Holder of any securities of the Company then held by such BHC Holder to any Person designated by such BHC Holder. 8.3 OTHER HOLDERS. The Company shall grant to any subsequent holder of Restricted Securities that is a BHC Holder, upon such holder's request, the same rights granted to the BHC Holders pursuant to this SECTION 8. 9. PREEMPTIVE RIGHTS. 9.1 GENERALLY. Except for issuances of Common Stock or other equity securities (a) upon the exercise of the Warrant, (b) upon the exchange of any voting stock for nonvoting stock pursuant to SECTION 8, or (c) pursuant to a Qualified Public Offering, if the Company authorizes the issuance or sale of any shares of Common Stock or other equity securities or any securities containing options or rights to acquire any shares of Common Stock or containing any phantom or other equity participation features (other than as a dividend on the outstanding Common Stock), the Company shall first offer to sell to each holder of Underlying Common Stock a portion of such Stock or securities equal to the quotient determined by dividing (1) the number of shares of Underlying Common Stock held by such holder by (2) the sum of (x) the total number of shares of Underlying Common Stock and (y) the number of shares of Common Stock outstanding which are not Underlying Common Stock. If the Company authorizes the issuance or sale of any notes or debt securities that are subordinate and junior to the prior payment in full of all Senior Debt, the Company shall first offer to sell to each holder of the Note a portion of such notes or debt securities equal to the quotient determined by dividing (1) the aggregate principal amount of the Note held by such holder by (2) the sum of the aggregate principal amount of the Note held by all holders of the Note. Each holder of Underlying Common Stock or the Note (as applicable) shall be entitled to purchase such Common Stock or securities at the most favorable price and on the most favorable terms as such securities are to be offered to any other Person; PROVIDED that, at the request of any holder of the Warrant or Underlying Common Stock, the Company shall offer to such holder common stock or securities which have no voting rights (other than required by applicable law) and which are convertible into voting securities on the same terms as the Class B Common Stock are convertible into Class A Common Stock but which are otherwise identical to the common stock or securities being offered. The purchase price for all securities offered to the holders of Warrant, the Underlying Common Stock and the Note shall be payable in cash. 9.2 EXERCISE OF RIGHTS. In order to exercise its purchase rights hereunder, a holder of the Note or Underlying Common Stock, as applicable, must within 15 days after receipt of written notice from the Company describing in reasonable detail the common stock or securities being offered, the purchase price thereof, the payment terms and such holder's percentage allotment deliver a written notice to the Company describing its election hereunder. If all of the securities offered to the holders of Underlying Common Stock or the Note, as applicable, is not 52 fully subscribed by such holders, the remaining securities shall be reoffered by the Company to the holders purchasing their full allotment upon the terms set forth in this SECTION 9, except that such holders must exercise their purchase rights within five days after receipt of such reoffer. 9.3 EXPIRATION OF PERIODS. Upon the expiration of the offering periods described above, the Company shall be entitled to sell such securities which the holders of Underlying Common Stock or the Note, as applicable, have not elected to purchase during the 60 days following such expiration on terms and conditions no more favorable to the purchasers thereof than those offered to such holders. Any securities offered or sold by the Company after such 60-day period must first be reoffered to the holders of Underlying Common Stock or the Note, as applicable, pursuant to the terms of this SECTION 9. 10. EVENTS OF DEFAULT. 10.1 DEFINITION OF EVENT OF DEFAULT. An Event of Default shall be deemed to have occurred if: (i) (x) any Borrower or any Guarantor fails to (A) pay when due and payable (whether at maturity or otherwise) the full amount of any principal payment (together with any applicable premium) or interest then accrued on the Note or as otherwise required pursuant to any other Financing Document or (B) pay within five (5) days of the date when due and payable (whether at maturity or otherwise) the full amount of any other amounts payable under this Agreement, the Note or any other Financing Document, or (y) the Company fails to redeem the Warrant or Underlying Common Stock as provided in the Warrant; (ii) any WSI Party: (a) breaches, or fails to perform or observe, any of the covenants contained in SECTIONS 5, 6 AND 9 hereof; or (b) breaches, or fails to perform or observe, any other provision contained herein, in the Note, any other instrument delivered pursuant hereto or thereto or any other Financing Document and such failure continues uncured for 30 days; (iii) any representation, warranty or information contained herein or required to be furnished to the Purchaser or holder of the Securities pursuant to this Agreement or any other Transaction Document, or any other writing furnished by any Transaction Party to Purchaser or holder of the Securities, is false or misleading in any material respect on the date made, repeated or furnished; (iv) any WSI Party makes an assignment for the benefit of creditors or admits in writing its inability to pay its debts generally as they become due; or an order, judgment, decree or injunction is entered adjudicating any WSI Party bankrupt or insolvent or requiring the dissolution or split up of any WSI Party or preventing any WSI Party from conducting all or any part of its business; or any order for relief with respect to any WSI Party is entered under the Federal Bankruptcy Code; or any WSI Party petitions or applies to any tribunal for the appointment of a custodian, trustee, receiver or 53 liquidator of any WSI Party, or of any substantial part of the assets of any WSI Party, or commences any proceeding relating to any WSI Party under any bankruptcy reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation or similar laws of any jurisdiction now or hereafter in effect; or any such petition or application is filed, or any such proceeding is commenced, against any WSI Party and either (a) such WSI Party by any act indicates its approval thereof, consents thereto or acquiescence therein or (b) such petition, application or proceeding is not dismissed within 60 days; or any corporate action is taken by any WSI Party in contemplation of or for the purpose of effecting any of the foregoing; (v) a judgment in excess of $250,000 is rendered against any WSI Party and, within 60 days after entry thereof, such judgment is not discharged in full or execution thereof stayed pending appeal, or within 60 days after the expiration of any such stay, such judgment is not discharged in full; (vi) any WSI Party's assets are attached, seized, subjected to a writ or distress warrant, or are levied upon, or come within the possession of any receiver, trustee, custodian or assignee for the benefit of creditors in connection with any obligations or liabilities of the WSI Parties in excess of $100,000 in the aggregate; (vii) any WSI Party defaults in the performance of any obligation (other than Indebtedness pursuant to the Senior Loan Agreements) if the effect of such default is to cause an amount exceeding $100,000 to become due prior to its stated maturity or to permit the holder or holders of such obligation to cause an amount exceeding $100,000 to become due prior to its stated maturity; (viii) (a) any WSI Party defaults (1) in payment when due (after taking into account any applicable grace period) of any amounts (whether by upon scheduled payment, required prepayment, required cash collection, acceleration, demand or otherwise) of any Material Indebtedness or (2) in compliance with the terms, covenants or other provisions of any such indenture, loan agreement, note or other instrument, if the effect of such default in compliance is to accelerate or, solely in the case of Indebtedness other than pursuant to the Senior Loan Agreements, to permit the acceleration of the stated maturity of such Material Indebtedness (whether or not actually accelerated) or (in the case of demand obligations) results in demand for payment of such Indebtedness, or (b) any other event shall occur or condition shall exist with respect to such Material Indebtedness, if the effect of such event or condition is to cause, or, solely in the case of Indebtedness other than pursuant to the Senior Loan Agreements, permit the holders thereof to cause, such Material Indebtedness to become due and payable; (ix) any WSI Party defaults in the performance or observance of any provision of any agreement or commitment (other than those relating to Indebtedness) and such default has or is reasonably likely to have a Material Adverse Effect; (x) there shall occur any "Event of Default" under and as defined in either of the Senior Loan Agreements or any of the other documents entered into between the Senior Lender and Hamilton or Maverick in connection therewith; 54 (xi) any of this Agreement, the Note or the Warrant shall cease to be in full force and effect or declared to be null and void by a court of competent jurisdiction; (xii) a Change in Control shall occur; (xiii) since the Closing, there shall have occurred an event or condition shall exist which could reasonably be expected to have a Material Adverse Effect; (xiv) the institution of any steps by any WSI Party or any ERISA Affiliate or any other Person to terminate a Pension Plan if, as a result of such termination, any WSI Party or any such ERISA Affiliate could be required to make a contribution to such Pension Plan, or could reasonably expect to incur a liability or obligation to such Pension Plan, and, in the opinion of the holders of the Note holding a majority of the aggregate outstanding principal amount of the Note, such contribution, liability or obligation would reasonably be expected to have a Material Adverse Effect; (xv) (1) with respect to any Plan, a prohibited transaction within the meaning of Section 4975 of the Code or Section 406 of ERISA occurs which, in the reasonable determination of the holders of the Note holding a majority of the aggregate outstanding principal amount of the Note, could result in liability to any WSI Party; (2) with respect to any Title IV Plan, the filing of a notice to voluntarily terminate any such plan in a distress termination; (3) with respect to any Multiemployer Plan, any WSI Party or any ERISA Affiliate shall incur any Withdrawal Liability; (4) with respect to any Qualified Plan, any WSI Party or any ERISA Affiliate shall incur an accumulated funding deficiency or request a funding waiver from the IRS; or (5) with respect to any Title IV Plan or Multiemployer Plan which has an ERISA Event not described in clauses (2) through (4) hereof, in the reasonable determination of the holders of the Note holding a majority of the aggregate outstanding principal amount of the Note, there is a reasonable likelihood for termination of any such plan by the PBGC; provided, however, that the events listed in clauses (1) through (5) hereof shall constitute Events of Default only if the liability, deficiency or waiver request of such WSI Party or any ERISA Affiliate, whether or not assessed, could, in the opinion of the holders of the Note holding a majority of the aggregate outstanding principal amount of the Note, reasonably be expected to have a Material Adverse Effect; (xvi) the Loan Party Guaranty or any provision thereof shall cease to be in full force or effect as to any Guarantor, or any Guarantor or any Person acting by or on behalf of any Guarantor shall deny or disaffirm such Guarantor's obligations under the Loan Party Guaranty, or any Guarantor shall default in the due performance or observance of any term, covenant or agreement on its part to be performed or observed pursuant to the Loan Party Guaranty and such default shall continue beyond any grace period specifically applicable thereof; (xvii) if any term or provision of any of the Intercreditor Agreements shall at any time and for any reason cease to be in full force and effect or shall be declared null and void, or the validity of enforceability thereof shall be contested by any party thereto (other than a Purchaser), or any party thereto (other than a Purchaser) shall deny it has 55 any further liability or obligations under any of the Intercreditor Agreements or any party thereto (other than a Purchaser) shall fail to perform any of its obligations under any of the Intercreditor Agreements; (xviii) if any term or provision of any of the Pledge Agreements shall at any time and for any reason cease to be in full force and effect or shall be declared null and void, or the validity of enforceability thereof shall be contested by any party thereto (other than a Purchaser), or any party thereto (other than a Purchaser) shall deny it has any further liability or obligations under any of the Pledge Agreements, or any party thereto (other than a Purchaser) shall fail to perform any of its obligations under any of the Pledge Agreements, or any default or event of default shall occur thereunder, or if any representation or warranty made by any party thereto (other than a Purchaser) shall fail to have been true when made or deemed made; (xix) any of the Tab Merger Documents, at any time after its execution and delivery and for any reason, ceases to be in full force and effect (except pursuant to its terms) or is declared null and void, or any party thereto denies it has any further liability or obligation under (except pursuant to its terms); or (xx) there shall occur any default by any party under any of the Tab Merger Documents which could reasonably be expected to expose any Transaction Party to a claim, loss or liability in excess of $275,000. Each of the foregoing shall constitute Events of Default whatever the reason or cause for any such Event of Default and whether it is voluntary or involuntary or is effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body. 10.2 CONSEQUENCES OF EVENTS OF DEFAULT. (i) If any Event of Default has occurred and is continuing, then the interest rate on the Note shall increase automatically by an increment of five percentage points effective as of the date of the Event of Default. Any increase of the interest rate resulting from the operation of this subsection shall terminate as of the close of business on the date on which no Event of Default exists (subject to subsequent increases pursuant to this subsection). (ii) If an Event of Default of the type described in SECTION 10.1(iv) has occurred, then the aggregate outstanding principal amount of the Note (together with all accrued interest thereon and all other amounts due and payable with respect thereto) shall become immediately due and payable without any action on the part of the holders of the Note, and the Borrowers shall immediately pay to the holders of the Note all amounts due and payable with respect to the Note. (iii) If an Event of Default (other than under SECTION 10.1(iv)) has occurred and is continuing, then any holder or holders of the Note then outstanding may declare all or any portion of the outstanding principal amount of the Note (together with all accrued interest thereon and all other amounts due and payable with respect thereto) to be 56 immediately due and payable and may demand immediate payment of all or any portion of the outstanding principal amount of the Note (together with all such other amounts then due and payable) owned by such holder or holders. The Borrowers shall give prompt written notice of any such demand to the other holders of the Note, each of which may demand immediate payment of all or any portion of such holder's Note. If any holder or holders of the Note demand immediate payment of all or any portion of the Note, the Borrowers shall immediately pay to such holder or holders all amounts due and payable with respect to the Note. (iv) If any Event of Default has occurred and is continuing, the amount of Workstream Administrative Expenses permitted to be paid hereunder shall be reduced as described in SECTION 6.1. 11. MISCELLANEOUS. 11.1 EXPENSES. The WSI Parties shall, jointly and severally, pay, and hold the Purchasers and all holders of Securities harmless against liability for the payment of, and reimburse on demand as and when incurred from and against, (i) all reasonable out-of-pocket costs and expenses incurred by each of them in connection with their due diligence review of the Transaction Parties, the preparation, negotiation, execution and interpretation of this Agreement, the Note, the Warrant, the other Financing Documents and the other Transaction Documents and the agreements contemplated hereby and thereby, and the consummation of all of the transactions contemplated hereby and thereby (including all reasonable fees and expenses of outside legal counsel, environmental consultants and accountants), which costs and expenses shall be payable at the Closing or, if the Closing does not occur, payable upon demand, (ii) all reasonable out-of-pocket fees and expenses actually incurred with respect to any amendments or waivers (whether or not the same become effective) under or in respect of each of the Transaction Documents (including all expenses incurred in connection with any proposed merger, sale or recapitalization of the Company), (iii) all recording and filing fees, stamp and other taxes which may be payable in respect of the execution and delivery of this Agreement, the other Transaction Documents or the issuance, delivery or acquisition of any Securities or any shares of Common Stock issuable upon exercise of the Warrants or any Class A Common Stock issuable upon conversion of the Class B Common Stock, and (iv) the fees and expenses incurred with respect to the interpretation and enforcement of the rights granted under this Agreement, the Securities, and the other Transaction Documents (including costs of collection) and the investigation and enforcement of rights with respect to any Event of Default. If any WSI Party fails to pay when due any amounts due the Purchasers (giving effect to any applicable cure or grace period, if any) or fails to comply with any of its obligations pursuant to this Agreement or any other agreement, document or instrument executed or delivered in connection herewith (giving effect to any applicable cure or grace period, if any), the WSI Parties shall, upon demand by the Purchasers, pay to the Purchasers such further amounts as shall be sufficient to cover the out-of-pocket cost and expense (including, but not limited to outside attorneys' fees) actually incurred by or on behalf of the Purchasers in collecting all such amounts due or in otherwise enforcing the Purchasers' rights and remedies hereunder. The WSI Parties also agree to pay to the Purchaser all costs and expenses actually incurred by them, including reasonable compensation to their outside attorneys for all services rendered, in connection with the 57 investigation of any Event of Default and enforcement of their rights hereunder or under the other Transaction Documents. 11.2 REMEDIES. Each holder of Securities shall have all rights and remedies set forth in this Agreement and the other Financing Documents and all rights and remedies which such holders have been granted at any time under any other agreement or contract and all of the rights which such holders have under any law. No remedy hereunder or thereunder conferred is intended to be exclusive of any other remedy, and each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or thereunder or now or hereafter existing at law or in equity or by statute or otherwise. Any Person having any rights under any provision of this Agreement shall be entitled to enforce such rights specifically (without posting a bond or other security), to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law. 11.3 PURCHASER'S INVESTMENT REPRESENTATIONS. The Purchaser hereby represents that it is acquiring the Restricted Securities purchased hereunder or acquired pursuant hereto for its own account with the present intention of holding such securities for purposes of investment, and that it has no intention of selling such securities in a public distribution in violation of the federal securities laws or any applicable state securities laws; provided that nothing contained herein shall prevent any Purchaser and subsequent holders of Restricted Securities from transferring such securities in compliance with the provisions of SECTION 7 hereof. Each certificate or instrument representing Restricted Securities shall be imprinted with a legend in substantially the following form: "The securities represented by this certificate were originally issued on _____________, 2002 and have not been registered under the Securities Act of 1933, as amended. The transfer of the securities represented by this certificate is subject to the conditions specified in the Note and Warrant Purchase Agreement, dated as of September ___, 2002, and as amended, restated, amended and restated, supplemented or otherwise modified from time to time, by and among HS Morgan Limited Partnership, the Company, Hamilton Sorter Co., Inc. and New Maverick Desk, Inc., the initial holder hereof and certain investors, who from time to time become parties thereto in accordance with the provisions thereof, and the Company reserves the right to refuse the transfer of such security until such conditions have been fulfilled with respect to such transfer. Upon written request, a copy of such conditions shall be furnished by the Company to the holder hereof without charge." 11.4 AMENDMENTS AND WAIVERS. Except as otherwise expressly provided herein, the provisions of this Agreement and the provisions of the Note may be amended and a WSI Party may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the WSI Parties have obtained the written consent of the holders of a majority of the outstanding principal amount of the Note; provided that no such action shall change (i) the rate at which or the manner in which interest accrues on the Note or the time at which such interest becomes payable or (ii) any provision relating to the scheduled payments or 58 prepayments of principal on the Note, without the written consent of all of the holders of the outstanding principal amount of the Note; provided further, that if the Note is not outstanding, the provisions of this Agreement may be amended or waived and a WSI Party may take any action herein prohibited, only if they have obtained the written consent of the holders of a majority of the Underlying Common Stock or the Warrant. No other course of dealing between the WSI Parties, on the one hand, and the holders of the Securities, on the other hand, or any delay in exercising any rights hereunder or under the Note or the other Financing Documents shall operate as a waiver of any rights of any such holders. For purposes of this Agreement, any portion of the Securities held by the Company or any of its Subsidiaries shall not be deemed to be outstanding. If any WSI Party pays any consideration to any holder of the Securities for such holder's consent to any amendment, modification or waiver hereunder, the WSI Parties shall also pay each other holder granting its consent hereunder equivalent consideration computed on a pro rata basis. 11.5 SURVIVAL OF AGREEMENT. All covenants, representations and warranties contained in this Agreement, the Note and/or the other Transaction Documents or otherwise made in writing by any WSI Party in connection herewith or therewith shall survive the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby, regardless of any investigation made by any Purchaser or on its behalf. In addition, the obligations of the WSI Parties pursuant to SECTIONS 11.1, 11.13, 11.16 and 11.17 shall survive the repayment of all amounts payable pursuant to this Agreement, the Note, the Warrant and the Stockholders Agreement. 11.6 NO SETOFFS, ETC. All payments hereunder and under the Note and the other Financing Documents shall be made by the Borrowers and the Guarantors without setoff, offset, deduction or counterclaim, free and clear of all taxes, levies, imports, duties, fees and charges, and without any withholding, restriction or conditions imposed by any governmental authority. If the Borrowers or any Guarantor shall be required by any law to deduct, setoff or withhold any amount from or in respect of any payment to any Purchaser hereunder or under the Note, then the amount so payable to such Purchaser shall be increased as may be necessary so that, after making all required deductions, setoffs and withholdings, such Purchaser shall receive an amount equal to the sum it would have received had no such deductions, setoffs or withholding been made. 11.7 SUCCESSORS AND ASSIGNS. All covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto shall bind and inure to the benefit of the respective successors and assigns of the parties hereto whether or not so expressed; provided that no WSI Party shall be permitted to assign its rights or obligations under this Agreement or the other Financing Documents. In addition, and whether or not any express assignment has been made, the provisions of this Agreement which are for any Purchaser's benefit as a purchaser or holder of Securities are also for the benefit of, and enforceable by, any subsequent holder of such Securities; provided, however, that in the absence of an Event of Default, no Purchaser and no other holder of Securities shall transfer or assign any of the Securities to any competitor of Hamilton or Maverick. Except as otherwise expressly provided herein, nothing expressed in or implied from this Agreement or the Financing Documents is intended to give, or shall be construed to give, any Person, other than the parties hereto and thereto and their permitted 59 successors and assigns, any benefit or legal or equitable right, remedy or claim under or by virtue of this Agreement or any such other document. 11.8 SEVERABILITY. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement. 11.9 COUNTERPARTS. This Agreement may be executed in two or more counterparts, any one of which need not contain the signatures of more than one party, but all such counterparts taken together shall constitute one and the same Agreement. 11.10 DESCRIPTIVE HEADINGS; INTERPRETATION. The descriptive headings of this Agreement and the Note are inserted for convenience only and do not constitute a substantive part of this Agreement. 11.11 GOVERNING LAW. ALL ISSUES AND QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT AND THE SCHEDULES HERETO AND (EXCEPT AS OTHERWISE EXPRESSLY PROVIDED THEREIN) THE EXHIBITS HERETO SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF OHIO, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW RULES OR PROVISIONS (WHETHER OF THE STATE OF OHIO OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF OHIO. IN FURTHERANCE OF THE FOREGOING, THE INTERNAL LAW OF THE STATE OF OHIO SHALL CONTROL THE INTERPRETATION AND CONSTRUCTION OF THIS AGREEMENT (AND ALL SCHEDULES AND EXHIBITS HERETO), EVEN THOUGH UNDER THAT JURISDICTION'S CHOICE OF LAW OR CONFLICT OF LAW ANALYSIS, THE SUBSTANTIVE LAW OF SOME OTHER JURISDICTION WOULD ORDINARILY APPLY. 11.12 NOTICES. All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to have been given when delivered personally to the recipient, sent to the recipient by reputable overnight courier service (charges prepaid), mailed to the recipient by certified or registered mail, return receipt requested and postage prepaid or sent via facsimile to the number set forth below with a copy mailed to the recipient as set forth above. Such notices, demands and other communications shall be sent to the Purchaser and to the WSI Parties at the addresses indicated below: To HSM: c/o Morgan Schiff & Co., Inc. 26th Floor East 280 Park Avenue New York, New York 10017 Attn: J. Carr Gamble III, Esq. Facsimile: (212) 548-6755 60 With a copy (which shall not constitute notice) to: Keating, Muething & Klekamp, PLL 1400 Provident Tower One East Fourth Street Cincinnati, Ohio 45202 Attn: Edward E. Steiner, Esq. Facsimile: (513) 579-6457 To the Company and its Subsidiaries: Workstream Inc. 608 Mercantile Center 414 Walnut Street Cincinnati, OH 45202 Attn: Thaddeus S. Jaroszewicz Facsimile: (513) 241-0332 61 With a copy (which shall not constitute notice) to: Keating, Muething & Klekamp, PLL 1400 Provident Tower One East Fourth Street Cincinnati, Ohio 45202 Attn: Edward E. Steiner, Esq. Facsimile: (513) 579-6457 To the Purchaser: Banc One Mezzanine Corporation 100 East Broad Street 7th Floor Columbus, Ohio 43215 Attn: Cheryl L. Turnbull Facsimile: (614) 248-5518 With a copy (which shall not constitute notice) to: Jones, Day, Reavis & Pogue 901 Lakeside Avenue Cleveland, OH 44114 Attn: Rachel L. Rawson, Esq. Facsimile: (216) 579-0212 or to such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party. Any notices or communications made hereunder by the Purchaser or any holder of the Securities may be made to the Company on behalf of all the Borrowers, and any notices or communications that are to be given by the Borrowers hereunder may be given by the Company on the behalf of all Borrowers. 11.13 CONSIDERATION FOR WARRANT; TREATMENT OF FEES. The Purchaser, the Company and the other Borrowers acknowledge and agree that the fair market value of the Note issued hereunder is $6,000,000, the fair market value of the Warrant issued hereunder is $1,000,000 and that, for all purposes (including tax and accounting), the consideration for the issuance of the Warrant shall be allocated as set forth in Section 2.2 hereof. The Purchaser, the Company and the other Borrowers shall file their respective federal, state and local Tax Returns in a manner which is consistent with such valuation and allocation and shall not take any action or position (whether in preparation of Tax Returns, financial statements or otherwise) which is inconsistent with any of the above. 11.14 CONSTRUCTION. The parties hereto have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement. The parties intend that each 62 representation, warranty, and covenant contained herein shall have independent significance. If any party has breached any representation, warranty, or covenant contained herein in any respect or any Event of Default shall occur, the fact that there exists another representation, warranty, or covenant or Event of Default relating to the same subject matter (regardless of the relative levels of specificity) which such party has not breached shall not detract from or mitigate the fact that such party is in breach of the first representation, warranty, or covenant or that the first Event of Default shall have occurred. 11.15 COMPLETE AGREEMENT. This Agreement, those documents expressly referred to herein and the other documents of even date herewith delivered or executed in connection with the transactions contemplated hereby embody the complete agreement and understanding among the parties and supersede any prior agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way. Except as expressly represented and warranted in SECTION 4.5 hereof, no WSI Party nor any shareholder, partner, member, manager, officer or director of any WSI Party shall be deemed to have made any representation or warranty to the Purchaser with respect to any projections, estimates or budgets of future revenues, expenses or expenditures or future results of operations. 11.16 INDEMNIFICATION. In consideration of the Purchaser's execution and delivery of this Agreement and purchase of the Securities hereunder and in addition to all of the WSI Parties' other obligations under this Agreement and in addition to all other rights and remedies available at law or in equity, each WSI Party shall, jointly and severally, defend, protect and indemnify each Purchaser and each other holder of Securities and all of their officers, directors, shareholders, partners, affiliates, employees, agents, representatives, successors and assigns (including those retained in connection with the transactions contemplated by this Agreement) (collectively, the "INDEMNITEES"), and save and hold each of them harmless from and against, and pay on behalf of or reimburse such party on demand as and when incurred, any and all actions, causes of action, suits, claims, losses (including diminutions in value and consequential damages), costs, penalties, fees, liabilities and damages and expenses in connection therewith (irrespective of whether any such Indemnitee is a party to the action for which indemnification hereunder is sought), including reasonable attorneys' fees and disbursements, interest and penalties and all amounts paid in investigation, defense or settlement of any of the foregoing and claims relating to any of the foregoing (the "LIABILITIES"), incurred by the Indemnitees or any of them as a result of, or arising out of, or relating to (a) any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of the issuance of the Securities, (b) the execution, delivery, performance or enforcement of this Agreement and any other instrument, document or agreement executed pursuant hereto by any of the Indemnitees, except to the extent any such Liabilities are caused by the particular Indemnitee's gross negligence or willful misconduct, (c) the past, present or future environmental condition of any property owned, operated or used by any WSI Party, their predecessors or successors or of any offsite treatment, storage or disposal location associated therewith, including the presence on or under, or the escape, seepage, leakage, spillage, discharge, emission, release, or threatened release into, onto or from, any such property or location of any Hazardous Substance (including any losses, liabilities, damages, injuries, penalties, fees, costs, expenses or claims asserted or arising under any Environmental and Safety Requirement) regardless of whether caused by, or within the control of, the WSI Parties. To the extent that the foregoing undertaking by the WSI Parties may 63 be unenforceable for any reason, the WSI Parties shall make the maximum contribution to the payment and satisfaction of each of the Liabilities which is permissible under applicable law. 11.17 PAYMENT SET ASIDE. To the extent that the Company, the other Borrowers or any Guarantor makes a payment or payments to the Purchaser or any other holder of Securities hereunder or under the Note or the Purchaser or any other holder of Securities enforces its rights or exercises its right of setoff hereunder or thereunder, and such payment or payments or the proceeds of such enforcement or setoff or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company, the other Borrowers or any Guarantor, a trustee, receiver or any other Person under any law (including any bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred. 11.18 JURISDICTION AND VENUE. Each WSI Party and each holder of the Securities hereby (i) submits to the non-exclusive jurisdiction of any state or Federal court sitting in Columbus, Ohio in any legal suit, action or proceeding arising out of or relating to this Agreement or the Financing Documents, and (ii) agrees that all claims in respect of the action or proceeding may be heard or determined in any such court. Each WSI Party and each holder of the Securities hereby waives any defense of inconvenient forum to the maintenance of any action or proceeding so brought and waives any bond, surety or other security that might be required of the other party with respect thereto. Any party may make service on any other party by sending or delivering a copy of the process to the party to be served at the address and in the manner provided for the giving of notices in SECTION 11.12. Each WSI Party and each holder of the Securities hereby agrees that a final judgment not subject to further appeal in any action or proceeding so brought shall be conclusive and may be enforced by suit on the judgment or in any other manner provided by law. Nothing herein shall affect the right to serve process in any other manner permitted by law or shall limit the right of any party to bring proceedings against any WSI Party in the courts of any other jurisdiction. The choice of forum for the WSI Parties set forth in this SECTION 11.18 shall not be deemed to preclude the enforcement by any party of any judgment obtained in any other forum or the taking by any party of any action to enforce the same in any other appropriate jurisdiction. 11.19 WAIVER OF RIGHT TO JURY TRIAL. EACH WSI PARTY AND EACH HOLDER OF THE SECURITIES HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TRIAL BY JURY IN ANY LITIGATION IN ANY COURT WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF THIS AGREEMENT OR THE FINANCING DOCUMENTS OR THE VALIDITY, PROTECTION, INTERPRETATION, COLLECTION OR ENFORCEMENT THEREOF. EACH WSI PARTY AGREES THAT THIS SECTION 11.19 IS A SPECIFIC AND MATERIAL ASPECT OF THIS AGREEMENT AND ACKNOWLEDGES THAT THE PURCHASER WOULD NOT PURCHASE THE SECURITIES HEREUNDER IF THIS SECTION 11.19 WERE NOT PART OF THIS AGREEMENT. 64 11.20 CERTAIN WAIVERS. Each of the Borrowers hereby waives diligence, presentment, protest and demand and notice of protest and demand, dishonor and nonpayment of the Note, and expressly agrees that the Note, or any payment thereunder, may be extended from time to time and that the holder thereof may accept security for the Note or release security for the Note, all without in any way affecting the liability of the Borrowers thereunder. 11.21 NATURE OF OBLIGATIONS. Other than the issuance and sale of the Warrant and issuance of the Underlying Common Stock being the obligation solely of the Company, the obligations of the WSI Parties hereunder and under all of the Financing Documents to which any WSI Party is a party, including without limitation in respect of the Note and Warrant, and in respect of all representations, warranties, covenants and agreements of any WSI Party contained in this Agreement or any of the other Financing Documents or any other agreement, instrument notice, consent or other document delivered in connection with the transactions contemplated by the Financing Documents, are joint and several primary obligations, whether not so expressed in any Financing Document. It shall not be necessary for any WSI Party to have expressly become a party of any Financing Document in order for such WSI Party to be bound as a party thereto. The obligations of each WSI Party under this SECTION 11.21 shall be unconditional and absolute and, without limiting the generality of the foregoing shall not be released, discharged or otherwise affected by the occurrence of any act or omission to act or delay of any kind by another WSI Party, the Purchaser, any holder of the Securities, or any other person or any circumstance whatsoever which might, but for the provisions of this SECTION 11.21, constitute a legal or equitable discharge of such WSI Party's obligations under this section or the other provisions of any of the Financing Documents. 11.22 CONFIDENTIALITY. Each Purchaser and each other holder of the Securities agrees, during the term of this Agreement and at all times thereafter, to keep confidential any information furnished or made available to it by any WSI Party pursuant to this Agreement that is marked confidential or that is disclosed pursuant to written instructions from the WSI Party that the confidentiality of such information must be maintained by a Purchaser or such other holder; provided that nothing herein shall prevent any Purchaser or other holder from disclosing such information (i) to any other Purchaser or other holder of the Securities or any Affiliate of any Purchaser or other holder of the Securities, or any officer, director, employee, agent or advisor of any Purchaser or other holder of the Securities or Affiliate of any Purchaser or other holder of the Securities; (ii) as required by any law, rule or regulation; (iii) upon the order of any court or administrative agency; (iv) upon the request or demand of any regulatory agency or authority; (v) that is or becomes available to the public or that is or becomes available to any Purchaser or other holder of the Securities other than as a result of a disclosure by any Purchaser or other holder of the Securities prohibited by this Agreement; (vi) in connection with any litigation to which such Purchasers or other holder of the Securities or any of its Affiliates may be a party; (vii) to the extent necessary in connection with the exercise of any right or remedy under this Agreement or the other Financing Documents; (viii) subject to provisions substantially similar to those contained in this SECTION 11.22, to any actual or proposed assignee; and (ix) to the extent that the WSI Parties shall have consented in writing to such disclosure. Nothing set forth in this SECTION 11.22 shall obligate any Purchaser or holder of the Securities to return any materials furnished by the WSI Parties. * * * * * 65 IN WITNESS WHEREOF, the parties hereto have executed this Note and Warrant Purchase Agreement on the date first written above. HS MORGAN LIMITED PARTNERSHIP By: HS Morgan Corp., Its General Partner Name: ------------------------------------- Title: ------------------------------------ WORKSTREAM INC. By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ HAMILTON SORTER CO., INC. By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ NEW MAVERICK DESK, INC. By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ BANC ONE MEZZANINE CORPORATION By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ 66 LIST OF EXHIBITS Exhibit A - Note Exhibit B - Warrant Exhibit C - Registration Agreement Exhibit D - Loan Party Guaranty Exhibit E - Security Agreement Exhibit F-1 - Company Pledge Agreement Exhibit F-2 - HSM Pledge Agreement Exhibit F-3 - MSTP Pledge Agreement Exhibit G-1 - Senior Intercreditor Agreement Exhibit G-2 - Dessy Intercreditor Agreement Exhibit H - Solvency Certificate Exhibit I - Collateral Assignment of Insurance Exhibit J - Company Balance Sheet Exhibit K - HSM Balance Sheet Exhibit L - Company Projections Exhibit M - HSM Projections 67 LIST OF DISCLOSURE SCHEDULES Liens Schedule Use of Proceeds Schedule Capitalization Schedule Restrictions Schedule Financial Statements Schedule Liabilities Schedule Developments Schedule Assets Schedule Taxes Schedule Contracts Schedule Employee Benefits Schedule Intellectual Property Schedule Litigation Schedule Brokerage Schedule Consents Schedule Insurance Schedule Environmental and Safety Matters Schedule Affiliated Transactions Schedule 68 -----END PRIVACY-ENHANCED MESSAGE-----