-----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, IhAfBJG/TDHGCg+mCNCCCO0+2bYQHoNPArYGXAsByDkdcVZ5gv2cihNHGqg1ovTs YQlLMuI2vxq84ixnbjEo2Q== 0000929624-99-001097.txt : 19990615 0000929624-99-001097.hdr.sgml : 19990615 ACCESSION NUMBER: 0000929624-99-001097 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19990609 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19990611 FILER: COMPANY DATA: COMPANY CONFORMED NAME: URS CORP /NEW/ CENTRAL INDEX KEY: 0000102379 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ENGINEERING SERVICES [8711] IRS NUMBER: 941381538 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-07567 FILM NUMBER: 99645191 BUSINESS ADDRESS: STREET 1: 100 CALIFORNIA ST STE 500 CITY: SAN FRANCISCO STATE: CA ZIP: 94111 BUSINESS PHONE: 4157742700 MAIL ADDRESS: STREET 1: 100 CALIFORNIA STREET STREET 2: SUITE 500 CITY: SAN FRANCISCO STATE: CA ZIP: 94111 FORMER COMPANY: FORMER CONFORMED NAME: THORTEC INTERNATIONAL INC DATE OF NAME CHANGE: 19900222 FORMER COMPANY: FORMER CONFORMED NAME: URS CORP /DE/ DATE OF NAME CHANGE: 19871214 8-K 1 FORM 8-K SECURITIES EXCHANGE AND COMMISSION Washington, D. C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): June 9, 1999 URS Corporation (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation) 1-7567 94-1381538 (Commission File No.) (I.R.S. Employer Identification No.) 100 California Street, Suite 500, San Francisco, California 94111-4529 (Address of principal executive offices and zip code) Registrant's telephone number, including area code: (415) 774-2700 1 Item 2. Acquisition or Disposition of Assets On June 9, 1999, URS Corporation, a Delaware corporation ("URS"), through its wholly-owned subsidiary, Demeter Acquisition Corporation, a Delaware corporation (the "Purchaser") accepted for payment 17,858,895 shares of common stock, par value $.01 per share (the "Shares"), of Dames & Moore Group (the "Company"), that had been validly tendered and not withdrawn, including approximately 245,236 Shares tendered pursuant to notices of guaranteed delivery, pursuant to the Purchaser's tender offer for all outstanding Shares at a price of $16.00 per Share (the "Offer"). The Offer expired at 12:00 midnight, New York City time, on Tuesday, June 8, 1999. The Offer was made pursuant to an Offer to Purchase, dated as of May 11, 1999, as amended, and pursuant to an Agreement and Plan of Merger (the "Merger Agreement") dated as of May 5, 1999 among the Company, URS and the Purchaser. After the consummation of the Offer, the Merger Agreement provides, among other things, for Purchaser to be merged with and into the Company, with the Company surviving as a wholly-owned subsidiary of URS following the merger (the "Merger"). The Shares purchased pursuant to the Offer constitute approximately 96% of the issued and outstanding Shares. The remaining Shares, other than shares owned directly or indirectly by URS, Purchaser or the Company (and except for shares of Common Stock owned by any holder who properly demands appraisal rights) will be converted into the right to receive $16.00 in cash upon consummation of the Merger. In accordance with the provisions of the Merger Agreement, effective upon payment for the Shares by the Purchaser, the following designees of Purchaser were appointed to the Company's Board of Directors: Kent P. Ainsworth, Martin M. Koffel, Joseph Masters and Jean-Yves Perez. In accordance with the terms of the Merger Agreement, Arthur C. Darrow, Robert F. Clarke and A. Ewan Macdonald will remain on the Board of Directors of the Company until consummation of the Merger, and Ursula M. Burns, Gary R. Krieger, George D. Leal, Michael R. Peevey, Harald Peipers, and Arthur E. Williams resigned as Directors of the Company. The total purchase price paid by Purchaser in connection with the Offer was provided through the issuance by URS of $100 million of Series A and Series C Preferred Stock to RCBA Strategic Partners, L.P., the issuance by URS of $200 milion of senior subordinated increasing rate notes pursuant to a bridge financing facility provided by Morgan Stanley Senior Funding, Inc., and borrowings of up to $450 million of the $550 million available under a senior secured credit facility between URS, certain guarantors, including the Company, and Wells Fargo Bank, National Association, as administrative agent, which includes three term loan facilities in the aggregate amount of $450 million and a revolving credit facility in the amount of $100 million. The term loan facilities consist of a $250 million tranche ("Term Loan A"), a $100 million tranche ("Term Loan B") and another $100 million tranche ("Term Loan C"). Term Loan A matures six years from the funding date; Term Loan B matures seven years from the funding date; Term Loan C matures eight years from the funding date; and the revolving credit facility matures six years from the funding date. 2 A portion of Term Loan A will be available to URS on a delayed draw-down basis to fund payments due upon close of the Merger. The remainder of the revolving credit facility will be used for URS' working capital requirements and for general corporate purposes and to pay for any appraisal rights that dissenting stockholders may have. The term loans each bear interest, at URS' option, at a rate per annum equal to either (1) the Base Rate or (2) LIBOR, in each case plus an applicable margin. The revolving credit facility bears interest, at URS' option, at a rate per annum equal to either (a) the Base Rate, (b) LIBOR or (c) the Adjusted Sterling Rate, in each case plus an applicable margin. The applicable margin adjusts according to a performance pricing grid based on a ratio of Funded Debt to EBITDA (as defined in the credit facility). The "Base Rate" is defined as the higher of (1) Wells Fargo Bank, National Association's Prime Rate and (2) the Federal Funds Rate plus 9.50%. "LIBOR" is defined as the offered quotation that first class banks in the London interbank market offer to Wells Fargo Bank, National Association for dollar deposits, as adjusted for reserve requirements. The "Adjusted Sterling Rate" is defined as the rate per annum displayed by Reuters at which Sterling is offered to Wells Fargo Bank, National Association in the London interbank market as determined by the British Bankers' Association. The press release issued by URS with respect to the purchase of Shares pursuant to the Offer is incorporated herein by this reference. Item 7. Financial Statements and Exhibits (a) Financial Statements of Dames & Moore Group are included as Exhibit 99.2 to this Form 8-K. (b) Unaudited Pro Forma Combined Financial Information of URS and Dames & Moore (filed as Exhibit 99.1 to URS' Current Report on Form 8-K, dated May 7, 1999, and incorporated herein by reference). (c) Exhibit Number Exhibit 2.1 Agreement and Plan of Merger, dated May 5, 1999, by and among Dames & Moore Group, URS Corporation and Demeter Acquisition Corporation (filed as Exhibit 2.1 to URS' Current Form 8-K, dated May 7, 1999, and incorporated herein by reference). 2.2 Credit Agreement, dated June 9, 1999, by and between Wells Fargo Bank, N.A. and URS Corporation. 2.3 Note Purchase Agreement, dated June 9, 1999, by and between Morgan Stanley Senior Funding, Inc. and URS Corporation. 3 2.4 Securities Purchase Agreement, dated May 5, 1999, by and between RCBA Strategic Partners, L.P. and URS Corporation. 99.1 Press Release, dated June 9, 1999 (filed as Exhibit (a)(12) to URS' Schedule 14D-1 dated May 11, 1999, as amended, and incorporated herein by reference). 99.2 Financial Statements of Dames & Moore Group. Independent Auditors' Report. Consolidated Statements of Financial Position as of March 26, 1999 and March 27, 1998. Consolidated Statements of Operations for the years ended March 26, 1999, March 27, 1998 and March 28, 1997. Consolidated Statements of Changes in Shareholders' Equity for the years ended March 26, 1999, March 27, 1998 and March 28, 1997. Consolidated Statements of Cash Flows for the years ended March 26, 1999, March 27, 1998 and March 28, 1997. Notes to Consolidated Financial Statements. Supplementary Financial Information--Selected Quarterly Financial Data (unaudited). Schedule II--Valuation and Qualifying Accounts. 4 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. URS Corporation Dated: June 11, 1999 By: /s/ Kent P. Ainsworth --------------------- Kent P. Ainsworth Executive Vice President Chief Financial Officer and Secretary 5 EXHIBIT INDEX Exhibit Number Description - ------ ----------- 2.1 Agreement and Plan of Merger, dated May 5, 1999, by and among Dames & Moore Group, URS Corporation and Demeter Acquisition Corporation (filed as Exhibit 2.1 to URS' Current Form 8-K, dated May 7, 1999, and incorporated herein by reference). 2.2 Credit Agreement, dated June 9, 1999, by and between Wells Fargo Bank, N.A. and URS Corporation. 2.3 Note Purchase Agreement, dated June 9, 1999, by and between Morgan Stanley Senior Funding, Inc. and URS Corporation. 2.4 Securities Purchase Agreement, dated May 5, 1999, by and between RCBA Strategic Partners, L.P. and URS Corporation. 23.1 Consent of Independent Auditors, dated June 10, 1999. 99.1 Press Release, dated June 9, 1999 (filed as Exhibit (a)(12) to URS' Schedule 14D-1 dated May 11, 1999, as amended, and incorporated herein by reference). 99.2 Financial Statements of Dames & Moore Group. Independent Auditors' Report. Consolidated Statements of Financial Position as of March 26, 1999 and March 27, 1998. Consolidated Statements of Operations for the years ended March 26, 1999, March 27, 1998 and March 28, 1997. Consolidated Statements of Changes in Shareholders' Equity for the years ended March 26, 1999, March 27, 1998 and March 28, 1997. Consolidated Statements of Cash Flows for the years ended March 26, 1999, March 27, 1998 and March 28, 1997. Notes to Consolidated Financial Statements. Supplementary Financial Information--Selected Quarterly Financial Data (unaudited). Schedule II--Valuation and Qualifying Accounts. 6 EX-2.2 2 CREDIT AGREEMENT DATED 06/09/1999 EXHIBIT 2.2 URS CORPORATION CREDIT AGREEMENT This CREDIT AGREEMENT is dated as of June 9, 1999 and entered into by and among URS CORPORATION, a Delaware corporation ("Company"), THE FINANCIAL INSTITUTIONS LISTED ON THE SIGNATURE PAGES HEREOF (each individually referred to herein as a "Lender" and collectively as "Lenders"), and WELLS FARGO BANK, NATIONAL ASSOCIATION ("Wells Fargo"), as agent for Lenders (in such capacity, "Administrative Agent") and as a Co-Lead Arranger and MORGAN STANLEY SENIOR FUNDING, INC. ("Morgan Stanley") as Co-Lead Arranger (collectively, in such capacity, "Co-Arrangers") and syndication agent (in such capacity, "Syndication Agent"). R E C I T A L S - - - - - - - - WHEREAS, Company has formed its direct wholly owned Subsidiary, Merger Sub (this and other capitalized terms used in these recitals without definition being used as defined in subsection 1.1), for the purpose of acquiring all of the outstanding shares of the common stock, par value $.01 per share, of DMG ("DMG Common Stock"); WHEREAS, on or before the Closing Date, RCBA will purchase shares of Company Series A Preferred Stock and Company Series C Preferred Stock for cash consideration of $100,000,000; WHEREAS, on or before the Closing Date, Company will issue and sell not less than $200,000,000 in aggregate principal amount of Senior Subordinated Notes or, in lieu thereof, not less than $200,000,000 in aggregate principal amount of Bridge Notes; WHEREAS, Merger Sub has offered to purchase all of the issued and outstanding shares of DMG Common Stock for $16.00 per share pursuant to the Tender Offer; WHEREAS, Merger Sub, Company and DMG have entered into the Merger Agreement pursuant to which, upon completion of the Tender Offer and, with respect to clauses (i) and (ii), upon receipt of the approval of holders of at least a majority of the outstanding shares of DMG Common Stock (if required by law): (i) Merger Sub will be merged with and into DMG pursuant to the Merger Agreement, with DMG being the surviving corporation in the Merger (such surviving corporation is sometimes referred to herein as the "Surviving Corporation"); (ii) Each of the shares of DMG Common Stock outstanding immediately before the consummation of the Merger (other than shares to be cancelled as described in clause (iii) below and shares held by those who perfect appraisal rights under Delaware state law if such rights are available) will be converted into the right to receive a cash payment; (iii) Each of the shares of DMG Common Stock outstanding immediately before the consummation of the Merger held by Company, Merger Sub, DMG or any of their respective direct or indirect Subsidiaries (the "Other DMG Shares") shall be cancelled and retired without payment of any consideration therefor; (iv) As a result of the Merger, each of the shares of the Capital Stock of Merger Sub outstanding immediately before the consummation of the Merger will be converted into shares of common stock, par value $.01 per share, of Surviving Corporation (the "Surviving Corporation Common Stock"); and (v) Following the Merger, all of the outstanding shares of Surviving Corporation Common Stock will be owned by Company. WHEREAS, Company desires that Lenders extend certain credit facilities to Company to provide financing for (i) the purchase of the Tendered Shares, the payment of a portion of the Transaction Costs and the payment of reasonable costs and expenses associated with the Tender Offer; (ii) the purchase pursuant to the Merger of all shares of DMG Common Stock (other than Other DMG Shares) not tendered in the Tender Offer, the payment of the balance of the Transaction Costs, and the payment of reasonable costs and expenses associated with the Merger; (iii) the refinancing of certain existing debt of Company and DMG and (iv) the working capital and other general corporate purposes of Company; WHEREAS, Lenders have agreed to extend certain credit facilities to Company the proceeds of which will be used, together with the proceeds of the issuance and sale of the Senior Subordinated Notes or the Bridge Notes and the proceeds of the issuance of shares of Company Series A Preferred Stock and Company Series C Preferred Stock described above, (i) to fund the Acquisition Financing Requirements and (ii) to provide financing for working capital and other general corporate purposes of Company and its Subsidiaries; WHEREAS, Company desires to secure all of the Obligations hereunder and under the other Loan Documents by granting to Administrative Agent, on behalf of Lenders, a First Priority Lien on substantially all of its personal property, including a pledge of 100% of the Capital Stock held by Company of certain of its Domestic Subsidiaries and the lesser of (i) 100% of the Capital Stock held by Company of certain of its Foreign Subsidiaries or (ii) 65% of the Capital Stock of any such Foreign Subsidiary; and WHEREAS, certain of the Domestic Subsidiaries of Company have agreed to guarantee the Obligations hereunder and under the other Loan Documents and to secure their guaranties by granting to Administrative Agent, on behalf of Lenders, a First Priority Lien on substantially all of their respective personal property, including a pledge of 100% of the Capital Stock held by such Domestic Subsidiaries of certain of their respective Domestic Subsidiaries and the lesser of (i) 100% of the Capital Stock held by such Domestic Subsidiaries of certain of their respective Foreign Subsidiaries or (ii) 65% of the Capital Stock of any such Foreign Subsidiary: 2 NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, Company, Lenders, Co-Arrangers, Syndication Agent and Administrative Agent agree as follows: Section 1. DEFINITIONS 1.1 Certain Defined Terms. --------------------- The following terms used in this Agreement shall have the following meanings: "Acquisition Financing Requirements" means the aggregate of all amounts necessary (i) to finance the purchase of Tendered Shares pursuant to the Tender Offer, (ii) to finance the purchase of shares of DMG Common Stock that have been converted into the right to receive payment pursuant to the Merger (including those for which appraisal rights have been perfected), (iii) to repay amounts outstanding under the Existing Credit Agreements, and (iv) to pay Transaction Costs. "Acquisition Revolving Loans" has the meaning assigned to that term in subsection 2.5A. "Adjusted Domestic Sterling Rate" means, for any Interest Rate Determination Date with respect to an Interest Period for a Domestic Sterling Rate Loan, the rate per annum displayed by Reuters at which Sterling is offered to the Administrative Agent in the London interbank market at 11:00 A.M. (London time) as determined by the British Bankers' Association based upon rates supplied by the Reference Banks, as ranked and arithmetically averaged between the middle two quartiles only and rounded upward, if necessary, to the nearest 1/16 of 1%. "Adjusted Eurodollar Rate" means, for any Interest Rate Determination Date with respect to an Interest Period for a Eurodollar Rate Loan, the rate per annum obtained by dividing (i) the offered quotation (rounded upward to the -------- nearest 1/16 of 1%) by first class banks in the London interbank market to Wells Fargo for U.S. dollar deposits of amounts in same day funds comparable to the principal amount of the Eurodollar Rate Loan of Wells Fargo for which the Adjusted Eurodollar Rate is then being determined (which principal amount shall be deemed to be $1,000,000 in the event Wells Fargo is not making, converting to or continuing such a Eurodollar Rate Loan) with maturities comparable to such Interest Period as of approximately 11:00 A.M. (London time) on such Interest Rate Determination Date by (ii) a percentage equal to 100% minus the stated -- ----- maximum rate of all reserve requirements (including any marginal, emergency, supplemental, special or other reserves) applicable on such Interest Rate Determination Date to any member bank of the Federal Reserve System in respect of "Eurocurrency liabilities" as defined in Regulation D (or any successor category of liabilities under Regulation D). "Administrative Agent" has the meaning assigned to that term in the introduction to this Agreement and also means and includes any successor Administrative Agent appointed pursuant to subsection 9.5. 3 "Affected Class" has the meaning assigned to that term in subsection 10.6. "Affected Lender" has the meaning assigned to that term in subsection 2.6C. "Affected Loans" has the meaning assigned to that term in subsection 2.6C. "Affiliate", as applied to any Person, means any other Person directly or indirectly controlling, controlled by, or under common control with, that Person or is a director or officer of such Person. For the purposes of this definition, "control" (including, with correlative meanings, the terms "controlling", "controlled by" and "under common control with"), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person, whether through the ownership of voting securities or by contract or otherwise. Any Person, other than a Lender, who owns beneficially or of record Securities representing more than 5% of the total outstanding Securities of Company shall be an Affiliate of Company. "Aggregate Amounts Due" has the meaning assigned to that term in subsection 10.5. "Agreement" means this Credit Agreement dated as of June 9, 1999, as it may be amended, supplemented or otherwise modified from time to time. "Applicable Commitment Fee Percentage" means, as at any date of determination, the percentage per annum set forth below opposite the applicable Leverage Ratio, as determined in accordance with subsection 2.3: Leverage Ratio Commitment -------------- ---------- Fee --- -------------------------------------------------- Greater than or equal to 4.00 to 1.00 2.75 Greater than or equal to 3.50 to 1.00 2.50 Greater than or equal to 3.00 to 1.00 2.25 Greater than or equal to 2.50 to 1.00 2.00 Greater than or equal to 2.00 to 1.00 1.75 Less than 2.00 to 1.00 1.50 ------------------------------------------- 4 "Applicable Margin" means, as at any date of determination and for any type of Loan, the percentage per annum set forth below opposite the applicable Leverage Ratio with respect to such type of Loan, as determined in accordance with subsection 2.2A:
Revolving Tranche A Tranche B Tranche C Revolving Dollar Sterling --------- --------- --------- ---------------- ------------------------------------------------------------------------------------------------------------------ Leverage Euro- Euro- Euro- Euro- Ratio Base dollar Base dollar Base dollar Base dollar ---- ---- ------ ---- ---- ---- ------ ---- ------ - ------------------------------------------------------------------------------------------------------------------------------ Greater than or equal to 4.00 to 1.00 1.75 2.75 2.25 3.25 2.50 3.50 1.75 2.75 2.75 - ------------------------------------------------------------------------------------------------------------------------------ Greater than or equal to 3.50 to 1.00 1.50 2.50 2.25 3.25 2.50 3.50 1.50 2.50 2.50 - ------------------------------------------------------------------------------------------------------------------------------ Greater than or equal to 3.00 to 1.00 1.25 2.25 2.25 3.25 2.50 3.50 1.25 2.25 2.25 - ------------------------------------------------------------------------------------------------------------------------------ Greater than or equal to 2.50 to 1.00 1.00 2.00 2.00 3.00 2.25 3.25 1.00 2.00 2.00 - ------------------------------------------------------------------------------------------------------------------------------ Greater than or equal to 2.00 to 1.00 0.75 1.75 2.00 3.00 2.25 3.25 0.75 1.75 1.75 - ------------------------------------------------------------------------------------------------------------------------------ Less than 2.00 to 1.00 0.50 1.50 2.00 3.00 2.25 3.25 0.50 1.50 1.50 - ------------------------------------------------------------------------------------------------------------------------------
"Applicable Currency" means, as to any particular payment or Loan, Dollars or Sterling in which it is denominated or is payable. "Applied Amount" has the meaning assigned to that term in subsection 2.4B(iv)(b). "Asset Sale", as applied to any Person, means the sale by such Person or any of its Subsidiaries to any other Person of (i) any of the stock of any Subsidiary of such Person (other than any stock sold to licensed professionals employed by such Person or its Subsidiaries in order to comply with licensing laws or any stock sold to qualify directors if required by applicable law), (ii) substantially all of the assets of any division or line of business of such Person or any of its Subsidiaries (other than the assets of any division or line of business to the extent that the aggregate value of such assets is less than $1,000,000), or (iii) any other assets (whether tangible or intangible) of such Person or any of its Subsidiaries (other than any assets to the extent that the aggregate value of such assets sold in any single transaction or related series of transactions during any Fiscal Year is less than $1,000,000). "Assignment Agreement" means an Assignment Agreement substantially in the form of Exhibit XIII annexed hereto. ------------ "Bankruptcy Code" means Title 11 of the United States Code entitled "Bankruptcy", as now and hereafter in effect, or any successor statute. "Base Rate Loans" means Term Loans and Revolving Dollar Loans bearing interest at rates determined by reference to the Dollar Base Rate. 5 "Bridge Loan Agreement" means the Note Purchase Agreement dated as of the Closing Date between Company and the purchasers listed therein and the indenture with respect to the Rollover Notes provided for therein, as such agreement or indenture, as the case may be, may be amended from time to time to the extent permitted under subsection 7.13B. "Bridge Notes" means the Senior Subordinated Increasing Rate Notes due June 9, 2000. "Business Day" means (i) for all purposes other than as covered by clause (ii) below, any day excluding Saturday, Sunday and any day which is a legal holiday under the laws of the State of California or is a day on which banking institutions located in such state are authorized or required by law or other governmental action to close, and (ii) with respect to all notices, determinations, fundings, issuances and payments in connection with the Adjusted Eurodollar Rate, the Adjusted Domestic Sterling Rate or any Eurodollar Rate Loans or any Domestic Sterling Rate Loans, any day that is a Business Day described in clause (i) above and that is also (a) a day for trading by and between banks in Dollar or Sterling, as the case may be, deposits in the London interbank market and (b) a day on which banking institutions are open for business in London. "Capital Lease", as applied to any Person, means any lease of any property (whether real, personal or mixed) by that Person as lessee that, in conformity with GAAP, is accounted for as a capital lease on the balance sheet of that Person. "Capital Stock" means (i) in the case of a corporation, corporate stock, (ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, (iii) in the case of a partnership, partnership interests (whether general or limited), (iv) in the case of a limited liability company, membership interests, and (v) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distribution of assets of, the issuing Person. "Cash" means money, currency or a credit balance in a Deposit Account. "Cash Equivalents" means, as at any date of determination, (i) marketable securities (a) issued or directly and unconditionally guaranteed as to interest and principal by the United States Government or (b) issued by any agency of the United States of America the obligations of which are backed by the full faith and credit of the United States of America, in each case maturing within one year after such date; (ii) marketable direct obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof, in each case maturing within one year after such date and having, at the time of the acquisition thereof, the highest rating obtainable from either Standard & Poor's Ratings Group ("S&P") or Moody's Investors Service, Inc. ("Moody's"); (iii) commercial paper maturing no more than one year from the date of creation thereof and having, at the time of the acquisition thereof, a rating of at least A-1 from S&P or at least P-1 from Moody's; (iv) certificates of deposit or bankers' acceptances maturing within one year after such date and issued or accepted by any Lender or by any commercial bank organized under the laws of the United States of America, any state thereof, the District of Columbia or any foreign country recognized by the United States of America and which bank (a) is at least "adequately 6 capitalized" (as defined in the regulations of its primary Federal banking regulator), (b) has Tier 1 capital (as defined in such regulations) of not less than $100,000,000 (or the foreign currency equivalent thereof), and (c) has outstanding debt which is rated "A" (or such similar equivalent rating) or higher by at least one nationally recognized statistical rating organization (as defined in Rule 436 under the Securities Act); and (v) shares of any money market mutual fund that (a) has at least 95% of its assets invested continuously in the types of investments referred to in clauses (i) and (ii) above, (b) has net assets of not less than $500,000,000, and (c) has the highest rating obtainable from either S&P or Moody's. "Certificate re Non-Bank Status" means a certificate substantially in the form of Exhibit XIV annexed hereto delivered by a Lender to Administrative ----------- Agent pursuant to subsection 2.7B(iii). "Class" means, as applied to Lenders, each of the following three classes of Lenders: (i) Lenders having Revolving Loan Exposure and Term Loan A Exposure; (ii) Lenders having Term Loan B Exposure; and (iii) Lenders having Term Loan C Exposure. "Closing Date" means the date, on or before September 30, 1999, on which the initial Loans are made. "Closing Date Company Disclosure Letter" means the letter dated the Closing Date delivered to Administrative Agent by Company containing information with respect to Company and its Subsidiaries and DMG and its Subsidiaries. "Closing Date Compliance Certificate" means a certificate substantially in the form of Exhibit X annexed hereto delivered to --------- Administrative Agent and Lenders by Company pursuant to subsection 4.1I. "Closing Date Loan Documents" means this Agreement, the Subsidiary Guaranty, the Notes, the Pledge and Security Agreement and the Tender Pledge Agreement. "Closing Date Loan Parties" means Company, each of the Domestic Subsidiaries of Company required to execute the Subsidiary Guaranty pursuant to subsection 4.1, and DMG. "Co-Arrangers" has the meaning assigned to that term in the introduction to this Agreement. "Collateral" means, collectively, all of the real, personal and mixed property (including Capital Stock) in which Liens are purported to be granted pursuant to the Collateral Documents as security for the Obligations. "Collateral Documents" means the Pledge and Security Agreement, the Tender Pledge Agreement, the Mortgages, and all other instruments or documents delivered by any Loan Party pursuant to this Agreement or any of the other Loan Documents in order to grant to Administrative Agent, on behalf of Lenders, a Lien on any real, personal or mixed property (including Capital Stock) of that Loan Party as security for the Obligations. 7 "Commencement of the Third Stage of EMU" means January 1, 1999. "Commitments" means the commitments of Lenders to make Loans as set forth in subsection 2.1A. "Company" has the meaning assigned to that term in the introduction to this Agreement. "Company Certificates of Designation" means the Certificates of Designation for the Company Series A Preferred Stock, Company Series B Preferred Stock and Company Series C Preferred Stock, in the form delivered to Administrative Agent on May 3, 1999, as such Certificates of Designation may be further amended from time to time to the extent permitted under subsection 7.13B. "Company Series A Preferred Stock" means the Series A Preferred Stock, $1.00 par value per share, of Company. "Company Series B Preferred Stock" means the Series B Convertible Exchangeable Preferred Stock, $1.00 par value per share, of Company. "Company Series C Preferred Stock" means the Series C Preferred Stock, $1.00 par value per share, of Company. "Compliance Certificate" means a certificate substantially in the form of Exhibit IX annexed hereto delivered to Administrative Agent and Lenders by ---------- Company pursuant to subsection 6.1(iii). "Consolidated Capital Expenditures" means, for any period, the sum, without duplication, of (i) the aggregate of all expenditures (whether paid in cash or other consideration or accrued as a liability and including that portion of Capital Leases which is capitalized on the consolidated balance sheet of Company and its Subsidiaries) by Company and its Subsidiaries during that period for fixed assets and leasehold improvements of Company and its Subsidiaries plus ---- (ii) to the extent not covered by clause (i) of this definition, the aggregate of all expenditures by Company and its Subsidiaries during that period to purchase or develop computer software or systems (but only to the extent such expenditures are capitalized on the consolidated balance sheet of Company and its Subsidiaries in conformity with GAAP) minus (iii) to the extent included in ----- clause (i) of this definition, the total cash consideration expended by Company and its Subsidiaries during such period to acquire (by purchase or otherwise) the business, property or fixed assets of any Person, or the stock or other evidence of beneficial ownership of any Person that, as a result of such acquisition, becomes a Subsidiary of Company. "Consolidated Cash Interest Expense" means, for any period, Consolidated Interest Expense for such period, excluding, however, any interest expense not payable in Cash (including amortization of discount and amortization of debt issuance costs). "Consolidated Current Assets" means, as at any date of determination, the total assets of Company and its Subsidiaries on a consolidated basis which may properly be classified as current assets in conformity with GAAP. 8 "Consolidated Current Liabilities" means, as at any date of determination, the total liabilities of Company and its Subsidiaries on a consolidated basis which may properly be classified as current liabilities in conformity with GAAP, (i) excluding (a) the aggregate principal amount of all outstanding Revolving Loans and (b) the maximum aggregate amount which is or at any time thereafter may become available for drawing under all Letters of Credit then outstanding and (ii) including the current portion of the aggregate principal amount of all outstanding Term Loans. "Consolidated EBITDA" means, for any period, the sum of the amounts for such period of (i) Consolidated Net Income, (ii) Consolidated Interest Expense, (iii) provisions for taxes based on income, (iv) total depreciation expense, (v) total amortization expense, and (vi) other non-cash items reducing Consolidated Net Income less other non-cash items increasing Consolidated Net ---- Income, all of the foregoing as determined on a consolidated basis for Company and its Subsidiaries in conformity with GAAP; provided, however, that -------- ------- Consolidated EBITDA for any four-Fiscal Quarter period which includes one or more Fiscal Quarters prior to completion of the Tender Offer shall be equal to the sum of (i) Consolidated EBITDA for such period plus (ii) the product of (a) ---- $6,350,000, and (b) twelve minus the number of months that have elapsed since the completion of the Tender Offer; provided, further, that in the event a -------- ------- Subsequent Acquisition is consummated during any four-Fiscal Quarter period, Consolidated EBITDA shall be calculated after giving pro forma effect thereto as if such Subsequent Acquisition occurred on the first day of such four-Fiscal Quarter period. "Consolidated Excess Cash Flow" means, for any period, an amount (if positive) equal to (i) Consolidated EBITDA for such period minus (ii) the sum, ----- without duplication, of (a) Consolidated Principal Payments for such period, (b) Consolidated Capital Expenditures (net of any proceeds of any related financings with respect to such expenditures) for such period, (c) Consolidated Cash Interest Expense for such period, (d) the provision for current taxes based on income of Company and its Subsidiaries on a consolidated basis and payable in Cash during such period, and (e) the aggregate amount of all expenditures by Company and its Subsidiaries during that period to acquire (by purchase or otherwise) the business, property or fixed assets of any other Person, or the stock or other evidence of beneficial ownership of any other Person that, as a result of such acquisition, becomes a Subsidiary of Company (net of any proceeds of any related financings with respect to such expenditures). "Consolidated Fixed Charges" means, for any period, the sum (without duplication) of the amounts for such period of (i) Consolidated Interest Expense, (ii) provisions for taxes based on income and payable in Cash, and (iii) Consolidated Scheduled Principal Payments, all of the foregoing as determined on a consolidated basis for Company and its Subsidiaries in conformity with GAAP. "Consolidated Interest Expense" means, for any period, total interest expense (including that portion attributable to Capital Leases in accordance with GAAP and capitalized interest) of Company and its Subsidiaries on a consolidated basis with respect to all outstanding Indebtedness of Company and its Subsidiaries during such period, including all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing and net costs under Interest Rate Agreements to which Company or any of its Subsidiaries is a party, but excluding, however, any amounts referred to in subsection 2.3 9 payable to Administrative Agent and Lenders on or before the Closing Date and amounts paid pursuant to subsection 2.3 of the Existing URS Credit Agreement. "Consolidated Net Income" means, for any period, the net income (or loss) of Company and its Subsidiaries on a consolidated basis for such period taken as a single accounting period determined in conformity with GAAP; provided -------- that there shall be excluded (i) the income (or loss) of any Person (other than a Subsidiary of Company) in which any other Person (other than Company or any of its Subsidiaries) has a joint interest, except to the extent of the amount of dividends or other distributions actually paid to Company or any of its Subsidiaries by such Person during such period, (ii) the income (or loss) of any Person accrued prior to the date it becomes a Subsidiary of Company or is merged into or consolidated with Company or any of its Subsidiaries or that Person's assets are acquired by Company or any of its Subsidiaries, (iii) the income of any Subsidiary of Company to the extent that the declaration or payment of dividends or similar distributions by that Subsidiary of that income is not at the time permitted by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Subsidiary, (iv) any after-tax gains or losses attributable to Asset Sales by Company or any of its Subsidiaries or returned surplus assets of any Pension Plan of Company or any of its Subsidiaries, and (v) (to the extent not included in clauses (i) through (iv) above) any net extraordinary gains or net non-cash extraordinary losses. "Consolidated Principal Payments" means, for any period, the aggregate amount of all net voluntary and scheduled repayments of principal by Company and its Subsidiaries on a consolidated basis during such period under all Indebtedness of Company or any of its Subsidiaries (including the principal component of Capital Leases). "Consolidated Scheduled Principal Payments" means, for any period, the aggregate amount of all scheduled repayments of principal by Company and its Subsidiaries on a consolidated basis during such period under all Indebtedness of Company or any of its Subsidiaries (including the principal component of Capital Leases). "Consolidated Total Funded Debt" means, as at any date of determination, the sum, on a consolidated basis, of (i) the aggregate principal amount of all outstanding Term Loans, (ii) the aggregate amount of that portion of obligations with respect to Capital Leases of Company or any of its Subsidiaries that is properly classified as a liability on a balance sheet in conformity with GAAP, (iii) the aggregate principal amount of all outstanding Indebtedness of Company or any of its Subsidiaries for borrowed money evidenced by a note or similar written instrument, (iv) the aggregate principal amount of all outstanding Subordinated Indebtedness, and (v) the aggregate principal amount of all outstanding Revolving Loans. "Contingent Obligation", as applied to any Person, means any direct or indirect liability, contingent or otherwise, of that Person (i) with respect to any Indebtedness, lease, dividend or other obligation of another if the primary purpose or intent thereof by the Person incurring the Contingent Obligation is to provide assurance to the obligee of such obligation of another that such obligation of another will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such obligation will be protected (in whole or in part) against loss in respect thereof, (ii) with respect to any letter of credit issued for the 10 account of that Person or as to which that Person is otherwise liable for reimbursement of drawings, or (iii) under Hedge Agreements. Contingent Obligations shall include (a) the direct or indirect guaranty, endorsement (otherwise than for collection or deposit in the ordinary course of business), co-making, discounting with recourse or sale with recourse by such Person of the obligation of another, (b) the obligation to make take-or-pay or similar payments if required regardless of non-performance by any other party or parties to an agreement, and (c) any liability of such Person for the obligation of another through any agreement (contingent or otherwise) (1) to purchase, repurchase or otherwise acquire such obligation or any security therefor, or to provide funds for the payment or discharge of such obligation (whether in the form of loans, advances, stock purchases, capital contributions or otherwise) or (2) to maintain the solvency or any balance sheet item, level of income or financial condition of another if, in the case of any agreement described under subclauses (1) or (2) of this sentence, the primary purpose or intent thereof is as described in the preceding sentence. The amount of any Contingent Obligation in the form of a letter of credit or a guaranty of a specified amount shall be equal to the face amount of the letter of credit or the amount of the obligation so guaranteed or otherwise supported, as the case may be, or, if less, the amount to which such Contingent Obligation is specifically limited. The amount of any Contingent Obligation which is not in the form of a guaranty of a specified amount shall be equal to the reasonably anticipated maximum amount of such Contingent Obligation as determined by Company in good faith. "Contractual Obligation", as applied to any Person, means any provision of any Security issued by that Person or of any material indenture, mortgage, deed of trust, contract, undertaking, agreement or other instrument to which that Person is a party or by which it or any of its properties is bound or to which it or any of its properties is subject. "Currency Agreement" means any foreign exchange contract, currency swap agreement, futures contract, option contract, synthetic cap or other similar agreement or arrangement. "Deposit Account" means a demand, time, savings, passbook or like account with a bank, savings and loan association, credit union or like organization, other than an account evidenced by a negotiable certificate of deposit. "DMG" means Dames & Moore Group, a Delaware corporation. "DMG Common Stock" has the meaning assigned to that term in the Recitals to this Agreement. "DMG Fiscal Year" means, prior to consummation of the Merger, the fiscal year of DMG and its Subsidiaries ending on the last Friday of March in each calendar year. "DMG Loan Proceeds Notes" means those certain promissory notes issued by DMG in favor of Company to evidence (i) all amounts advanced to DMG by Company on the Closing Date and (ii) the proceeds of all Revolving Loans advanced to DMG from Company from time to time during the period from and including the Closing Date to and including the Merger Date. 11 "Dollar Base Rate" means, at any time, the higher of (i) the Prime Rate or (ii) the rate which is 1/2 of 1% in excess of the Federal Funds Effective Rate. "Dollar Equivalent" means, at any time, (i) as to any amount denominated in Dollars, the amount thereof at such time, and (ii) as to any amount denominated in Sterling, the equivalent amount in Dollars as determined by Administrative Agent at such time on the basis of the Spot Rate for the purchase of Dollars with Sterling on the most recent computation date provided for in subsection 2.4D(i). "Dollars" and the sign "$" mean the lawful money of the United States of America. "Domestic Sterling Rate Loans" means Revolving Sterling Loans bearing interest at rates determined by reference to the Adjusted Domestic Sterling Rate. "Domestic Subsidiary" means any Subsidiary organized or incorporated under the laws of a state of the United States of America. "Eligible Assignee" means (i) (a) a commercial bank organized under the laws of the United States of America or any state thereof and having a combined capital and surplus of at least $100,000,000; (b) a savings and loan association or savings bank organized under the laws of the United States of America or any state thereof and having a combined capital and surplus of at least $100,000,000; (c) a commercial bank organized under the laws of any other country or a political subdivision thereof and having a combined capital and surplus of at least $100,000,000; provided that (1) such bank is acting through -------- a branch or agency located in the United States of America or (2) such bank is organized under the laws of a country that is a member of the Organization for Economic Cooperation and Development or a political subdivision of such country; and (d) any other entity which is an "accredited investor" (as defined in Regulation D under the Securities Act) which extends credit or buys loans as one of its businesses, including insurance companies, investment funds, mutual funds and lease financing companies, and which have a combined capital and surplus, a net worth or total assets of at least $100,000,000; and (ii) any Lender and any Affiliate of any Lender or, with respect to any Lender that is a fund that invests in loans, any other fund that invests in loans and is advised or managed by the same investment advisor as such Lender or by an Affiliate of such Lender; provided that no Affiliate of Company shall be an Eligible Assignee. - -------- "EMU" means Economic and Monetary Union as contemplated in the Treaty on European Union. "EMU Legislation" means legislative measures of the European Council for the introduction of, changeover to or operation of a single or unified European currency (whether known as the euro or otherwise), being in part the implementation of the third stage of EMU. "Employee Benefit Plan", as applied to any Person, means any "employee benefit plan" as defined in Section 3(3) of ERISA which is or was maintained or contributed to by such Person, any of its Subsidiaries or any of their respective ERISA Affiliates. 12 "Environmental Claim" means any investigation, notice, notice of violation, claim, action, suit, proceeding, demand, abatement order or other order or directive (conditional or otherwise), by any governmental authority or any other Person, arising (i) pursuant to or in connection with any actual or alleged violation of any Environmental Law, (ii) in connection with any Hazardous Materials or any actual or alleged Hazardous Materials Activity, or (iii) in connection with any actual or alleged damage, injury, threat or harm to health, safety, natural resources or the environment. "Environmental Laws" means any and all current or future statutes, ordinances, orders, rules, regulations, guidance documents, judgments, Governmental Authorizations, or any other requirements of governmental authorities relating to (i) environmental matters, including those relating to any Hazardous Materials Activity, (ii) the generation, use, storage, transportation or disposal of Hazardous Materials, or (iii) occupational safety and health, industrial hygiene, land use or the protection of human, plant or animal health or welfare, in any manner applicable to Company or any of its Subsidiaries or any Facility, including the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. (S) 9601 et seq.), the -- --- Hazardous Materials Transportation Act (49 U.S.C. (S) 1801 et seq.), the -- --- Resource Conservation and Recovery Act (42 U.S.C. (S) 6901 et seq.), the Federal -- --- Water Pollution Control Act (33 U.S.C. (S) 1251 et seq.), the Clean Air Act (42 -- --- U.S.C. (S) 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. (S) 2601 -- --- et seq.), the Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. (S) - -- --- 136 et seq.), the Occupational Safety and Health Act (29 U.S.C. (S) 651 et -- --- -- seq.), the Oil Pollution Act (33 U.S.C. (S) 2701 et seq.) and the Emergency - --- ------ Planning and Community Right-to-Know Act (42 U.S.C. (S) 11001 et seq.), each as -- --- amended or supplemented, any analogous present or future state or local statutes or laws, and any regulations promulgated pursuant to any of the foregoing. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor thereto. "ERISA Affiliate," as applied to any Person, means (i) any corporation which is a member of a controlled group of corporations within the meaning of Section 414(b) of the Internal Revenue Code of which that Person is a member; (ii) any trade or business (whether or not incorporated) which is a member of a group of trades or businesses under common control within the meaning of Section 414(c) of the Internal Revenue Code of which that Person is a member; and (iii) any member of an affiliated service group within the meaning of Section 414(m) or (o) of the Internal Revenue Code of which that Person, any corporation described in clause (i) above or any trade or business described in clause (ii) above is a member. Any former ERISA Affiliate of Company or any of its Subsidiaries shall continue to be considered an ERISA Affiliate of Company or such Subsidiary within the meaning of this definition with respect to the period such entity was an ERISA Affiliate of Company or such Subsidiary and with respect to liabilities arising after such period for which Company or such Subsidiary could be liable under the Internal Revenue Code or ERISA. "ERISA Event" means (i) a "reportable event" within the meaning of Section 4043 of ERISA and the regulations issued thereunder with respect to any Pension Plan of Company or any of its Subsidiaries (excluding those for which the provision for 30-day notice to the PBGC has been waived by regulation); (ii) the failure to meet the minimum funding standard 13 of Section 412 of the Internal Revenue Code with respect to any Pension Plan of Company or any of its Subsidiaries (whether or not waived in accordance with Section 412(d) of the Internal Revenue Code) or the failure by Company or any of its Subsidiaries to make by its due date a required installment under Section 412(m) of the Internal Revenue Code with respect to any Pension Plan or the failure by Company or any of its Subsidiaries to make any required contribution to a Multiemployer Plan; (iii) the provision by the administrator of any Pension Plan of Company or any of its Subsidiaries pursuant to Section 4041(a)(2) of ERISA of a notice of intent to terminate such plan in a distress termination described in Section 4041(c) of ERISA; (iv) the withdrawal by Company, any of its Subsidiaries or any of their respective ERISA Affiliates from any Pension Plan with two or more contributing sponsors or the termination of any such Pension Plan resulting in liability pursuant to Section 4063 or 4064 of ERISA; (v) the institution by the PBGC of proceedings to terminate any Pension Plan of Company or any of its Subsidiaries, or the occurrence of any event or condition which might constitute grounds under ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan of Company or any of its Subsidiaries; (vi) the imposition of liability on Company, any of its Subsidiaries or any of their respective ERISA Affiliates pursuant to Section 4062(e) or 4069 of ERISA or by reason of the application of Section 4212(c) of ERISA; (vii) the withdrawal of Company, any of its Subsidiaries or any of their respective ERISA Affiliates in a complete or partial withdrawal (within the meaning of Sections 4203 and 4205 of ERISA) from any Multiemployer Plan if there is any potential liability therefor, or the receipt by Company, any of its Subsidiaries or any of their respective ERISA Affiliates of notice from any Multiemployer Plan that it is in reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA, or that it intends to terminate or has terminated under Section 4041A or 4042 of ERISA; (viii) the occurrence of an act or omission which could give rise to the imposition on Company, any of its Subsidiaries or any of their respective ERISA Affiliates of fines, penalties, taxes or related charges under Chapter 43 of the Internal Revenue Code or under Section 409, Section 502(c), (i) or (l), or Section 4071 of ERISA in respect of any Employee Benefit Plan; (ix) the assertion of a material claim (other than routine claims for benefits) against any Employee Benefit Plan of Company or any of its Subsidiaries other than a Multiemployer Plan or the assets thereof, or against Company, any of its Subsidiaries or any of their respective ERISA Affiliates in connection with any Employee Benefit Plan; (x) receipt from the Internal Revenue Service of notice of the failure of any Pension Plan of Company or any of its Subsidiaries (or any other Employee Benefit Plan of Company or any of its Subsidiaries intended to be qualified under Section 401(a) of the Internal Revenue Code) to qualify under Section 401(a) of the Internal Revenue Code, or the failure of any trust forming part of any Pension Plan of Company or any of its Subsidiaries to qualify for exemption from taxation under Section 501(a) of the Internal Revenue Code; or (xi) the imposition of a Lien pursuant to Section 401(a)(29) or 412(n) of the Internal Revenue Code or pursuant to ERISA with respect to any Pension Plan of Company or any of its Subsidiaries. "euro" means the single currency of participating member states of the European Union. "euro Unit" means the currency unit of the euro. "Eurodollar Rate Loans" means Loans bearing interest at rates determined by reference to the Adjusted Eurodollar Rate as provided in subsection 2.2A. 14 "Event of Default" means each of the events set forth in Section 8. "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, and any successor statute. "Exchange Assets" has the meaning assigned to that term in subsection 2.4B(iii)(a)(2). "Exchange Rate" means, on any date when an amount expressed in a currency other than Dollars is to be determined with respect to any Letter of Credit, the nominal rate of exchange of the Issuing Lender in the New York foreign exchange market for the purchase by the Issuing Lender (by cable transfer) of such currency in exchange for Dollars at 12:00 noon (New York time) one Business Day prior to such date, expressed as a number of units of such currency per one Dollar. "Existing Company Letters of Credit" means those letters of credit issued for the account of Company and identified on Schedule 1.1 of the Closing ------------ Date Company Disclosure Letter. "Existing Credit Agreements" means, collectively, (i) the Existing URS Credit Agreement and (ii) the Existing DMG Credit Agreement, in each case as amended prior to the Closing Date. "Existing DMG Credit Agreement" means that certain Amended and Restated Credit Agreement dated as of October 22, 1998 among DMG, the several lenders from time to time parties thereto, and Canadian Imperial Bank of Commerce, as administrative agent. "Existing DMG Letters of Credit" means those letters of credit issued for the account of DMG and identified on Schedule 1.1 of the Closing Date ------------ Company Disclosure Letter. "Existing Senior Subordinated Note Indenture" means the Indenture, dated as of March 16, 1989, between Thortec International, Inc. and MTrust Corp, National Association, as amended by Amendment Number 1 and Amendment Number 2, as such indenture may be further amended from time to time to the extent permitted under subsection 7.13B. "Existing Senior Subordinated Notes" means Company's 8% Senior Subordinated Notes due 2004 in the original aggregate principal amount of $36,814,500 and the remaining aggregate principal amount of $6,455,000 as of the Closing Date. "Existing Subordinated Agreements" means, collectively, the Existing Senior Subordinated Note Indenture and the Existing Subordinated Note Indenture. "Existing Subordinated Indebtedness" means, collectively, the Existing Senior Subordinated Notes and the Existing Subordinated Notes. "Existing Subordinated Note Indenture" means the Indenture, dated as of February 15, 1987, between Company and The Bank of New York as assignee of First Interstate 15 Bank of California, as amended by Amendment Number 1, as such indenture may be further amended from time to time to the extent permitted under subsection 7.13B. "Existing Subordinated Notes" means Company's 6 1/2% Convertible Subordinated Notes due 2012 in the original aggregate principal amount of $57,500,000 and the remaining aggregate principal amount of $1,833,000 as of the Closing Date. "Existing URS Credit Agreement" means that certain Credit Agreement dated as of November 14, 1997 among Company, the lenders party thereto, and Wells Fargo, as administrative agent. "Facilities" means any and all real property (including all buildings, fixtures or other improvements located thereon) now, hereafter or heretofore owned, leased, operated or used by Company or any of its Subsidiaries or any of their respective predecessors or Affiliates. "Federal Funds Effective Rate" means, for any period, a fluctuating interest rate equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by Administrative Agent from three Federal funds brokers of recognized standing selected by Administrative Agent. "Financial Plan" has the meaning assigned to that term in subsection 6.1(xii). "First Priority" means, with respect to any Lien purported to be created in any Collateral pursuant to any Collateral Document, that (i) such Lien has priority over any other Lien on such Collateral (other than Permitted Encumbrances) and (ii) such Lien is the only Lien (other than Permitted Encumbrances and Liens permitted pursuant to subsection 7.2A) to which such Collateral is subject. "Fiscal Quarter" means a fiscal quarter of any Fiscal Year. "Fiscal Year" means the fiscal year of Company and its Subsidiaries ending on October 31 of each calendar year. For purposes of this Agreement, any particular Fiscal Year shall be designated by reference to the calendar year in which such Fiscal Year ends. "Flood Hazard Property" means a Mortgaged Property located in an area designated by the Federal Emergency Management Agency as having special flood or mud slide hazards. "Foreign Subsidiary" means any Subsidiary formed or organized under the laws of a jurisdiction other than a state of the United States of America. "Funding and Payment Office" means in respect of fundings, issuances and payments (i) with respect to Term Loans, Revolving Dollar Loans and Swing Line Loans, the office of Administrative Agent located at 201 3rd Street, 8th Floor, San Francisco, California 16 94103; (ii) with respect to Revolving Sterling Loans, the office of Lloyds Bank P.L.C. in London (International SC 309634; Swift ID No.: LOYDGB2L) for the account of Wells Fargo (Acct. No. 01084802 with the following reference note: "For Account of Wells Fargo Bank, San Francisco, Reference: Sterling Loan"); or (iii) with respect to any Loans, such office of Administrative Agent or Swing Line Lender as may from time to time hereafter be designated as such in a written notice delivered by Administrative Agent and Swing Line Lender to Company and each Lender. "Funding Date" means the date of the funding of a Loan. "GAAP" means, subject to the limitations on the application thereof set forth in subsection 1.2, generally accepted accounting principles set forth in opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession, in each case as the same are applicable to the circumstances as of the date of determination. "Governmental Acts" has the meaning assigned to that term in subsection 3.5A. "Governmental Authorization" means any permit, license, authorization, plan, directive, consent order or consent decree of or from any federal, state or local governmental authority, agency or court. "Hazardous Materials" means (i) any chemical, material or substance at any time defined as or included in the definition of "hazardous substances", "hazardous wastes", "hazardous materials", "extremely hazardous waste", acutely hazardous waste", "radioactive waste", "biohazardous waste", "pollutant", "toxic pollutant", "contaminant", "restricted hazardous waste", "infectious waste", "toxic substances", or any other term or expression intended to define, list or classify substances by reason of properties harmful to health, safety or the indoor or outdoor environment (including harmful properties such as ignitability, corrosivity, reactivity, carcinogenicity, toxicity, reproductive toxicity, "TCLP toxicity" or "EP toxicity" or words of similar import under any applicable Environmental Laws); (ii) any oil, petroleum, petroleum fraction or petroleum derived substance; (iii) any drilling fluids, produced waters and other wastes associated with the exploration, development or production of crude oil, natural gas or geothermal resources; (iv) any flammable substances or explosives; (v) any radioactive materials; (vi) any asbestos-containing materials; (vii) urea formaldehyde foam insulation; (viii) electrical equipment which contains any oil or dielectric fluid containing polychlorinated biphenyls; (ix) pesticides; and (x) any other chemical, material or substance, exposure to which is prohibited, limited or regulated by any governmental authority or which may or could pose a hazard to the health and safety of the owners, occupants or any Persons in the vicinity of any Facility or to the indoor or outdoor environment. "Hazardous Materials Activity" means any past, current, proposed or threatened activity, event or occurrence involving any Hazardous Materials, including the use, manufacture, possession, storage, holding, presence, existence, location, Release, threatened Release, discharge, placement, generation, transportation, processing, construction, treatment, 17 abatement, removal, remediation, disposal, disposition or handling of any Hazardous Materials, and any corrective action or response action with respect to any of the foregoing. "Hedge Agreement" means an Interest Rate Agreement or a Currency Agreement designed to hedge against fluctuations in interest rates or currency values, respectively. "Inactive Subsidiary" has the meaning assigned to that term in subsection 5.1E. "Indebtedness", as applied to any Person, means (i) all indebtedness for borrowed money, (ii) that portion of obligations with respect to Capital Leases that is properly classified as a liability on a balance sheet in conformity with GAAP, (iii) notes payable and drafts accepted representing extensions of credit whether or not representing obligations for borrowed money, (iv) any obligation owed for all or any part of the deferred purchase price of property or services (excluding any such obligations incurred under ERISA), which purchase price is (a) due more than six months from the date of incurrence of the obligation in respect thereof or (b) evidenced by a note or similar written instrument, excluding, in the case of both clauses (a) and (b), accounts receivable from Company and its Subsidiaries arising in the ordinary course of business, and (v) all indebtedness secured by any Lien on any property or asset owned or held by that Person regardless of whether the indebtedness secured thereby shall have been assumed by that Person or is nonrecourse to the credit of that Person. Obligations under Interest Rate Agreements and Currency Agreements constitute (1) in the case of Hedge Agreements, Contingent Obligations, and (2) in all other cases, Investments, and in neither case constitute Indebtedness. "Indemnified Liabilities" has the meaning assigned to that term in subsection 10.3. "Indemnitee" has the meaning assigned to that term in subsection 10.3. "Intellectual Property" means all patents, trademarks, tradenames, copyrights, technology, know-how and processes used in or necessary for the conduct of the business of Company and its Subsidiaries as currently conducted that are material to the condition (financial or otherwise), business or operations of Company and its Subsidiaries, taken as a whole. "Interest Payment Date" means (i) with respect to any Base Rate Loan, the last Business Day of each January, April, July and October of each year, commencing on the first such date to occur after the Closing Date; provided, -------- however, that the first Interest Payment Date with respect to any Base Rate Loan - ------- shall be October 31, 1999 and (ii) with respect to any Eurodollar Rate Loan or Domestic Sterling Rate Loan, the last day of each Interest Period applicable to such Loan; provided that in the case of each Interest Period of six or twelve -------- months "Interest Payment Date" shall also include each date that is three months, or an integral multiple thereof, after the commencement of such Interest Period. "Interest Period" has the meaning assigned to that term in subsection 2.2B. "Interest Rate Agreement" means any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement or other similar agreement or arrangement. 18 "Interest Rate Determination Date" means each date for calculating the Adjusted Eurodollar Rate or the Adjusted Domestic Sterling Rate, for purposes of determining the interest rate in respect of an Interest Period. The Interest Rate Determination Date in respect of calculating the Adjusted Eurodollar Rate and the Adjusted Domestic Sterling Rate shall be the second Business Day prior to the first day of the related Interest Period. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended to the date hereof and from time to time hereafter, and any successor statute. "Investment" means (i) any direct or indirect purchase or other acquisition by Company or any of its Subsidiaries of, or of a beneficial interest in, any Securities of any other Person (including any Subsidiary of Company), (ii) any direct or indirect redemption, retirement, purchase or other acquisition for value, by any Subsidiary of Company from any Person other than Company or any of its Subsidiaries, of any equity Securities of such Subsidiary, (iii) any direct or indirect loan, advance (other than advances to employees for moving, entertainment and travel expenses, drawing accounts and similar expenditures in the ordinary course of business) or capital contribution by Company or any of its Subsidiaries to any other Person, including all indebtedness and accounts receivable from that other Person that, in the case of accounts receivable from Persons other than Company and its Subsidiaries, are not current assets or did not arise from sales to that other Person in the ordinary course of business and, in the case of accounts receivable from Company and its Subsidiaries, did not arise in the ordinary course of business, or (iv) Interest Rate Agreements or Currency Agreements not constituting Hedge Agreements. The amount of any Investment shall be the original cost of such Investment plus the cost of all additions thereto, without any adjustments for increases or decreases in value, or write-ups, write-downs or write-offs with respect to such Investment and minus the amount of any return of capital contributed in respect of any Investment (not to exceed the original cost of such Investment plus the cost of all additions thereto). "Issuing Lender" means, with respect to any Letter of Credit, Wells Fargo. "Joint Venture" means a joint venture, partnership or other similar arrangement, whether in corporate, partnership or other legal form; provided -------- that in no event shall any Subsidiary of any Person be considered to be a Joint Venture to which such Person is a party. "Lender" and "Lenders" means the persons identified as "Lenders" and listed on the signature pages of this Agreement, together with their successors and permitted assigns pursuant to subsection 10.1, and the term "Lenders" shall include Swing Line Lender unless the context otherwise requires; provided that the term "Lenders", when used in the context of a particular Commitment, shall mean Lenders having that Commitment. "Letter of Credit" or "Letters of Credit" means (i) any letter of credit or similar instrument issued or to be issued by the Issuing Lender for the account of Company pursuant to subsection 3.1 for the purpose of supporting (a) Indebtedness of Company or any of its Subsidiaries in respect of industrial revenue or development bonds or financings, (b) workers' compensation liabilities of Company or any of its Subsidiaries, (c) the obligations of third party insurers of Company or any of its Subsidiaries arising by virtue of the laws of any jurisdiction requiring third party insurers, (d) obligations with respect to Capital Leases or Operating Leases 19 of Company or any of its Subsidiaries, and (e) performance, payment, deposit or surety obligations of Company or any of its Subsidiaries, in any case if required by law or governmental rule or regulation or in accordance with custom and practice in the industry; provided that Letters of Credit may not be issued -------- for the purpose of supporting any Indebtedness constituting "antecedent debt" (as that term is used in Section 547 of the Bankruptcy Code), and (ii) the Existing Company Letters of Credit. "Letter of Credit Usage" means, as at any date of determination, the sum of (i) the maximum aggregate amount which is or at any time thereafter may become available for drawing under all Letters of Credit then outstanding plus ---- (ii) the aggregate amount of all drawings under Letters of Credit honored by the Issuing Lender and not theretofore reimbursed by Company (including any such reimbursement out of the proceeds of Revolving Dollar Loans pursuant to subsection 3.3B). For purposes of this definition, any amount described in clause (i) or (ii) of the preceding sentence which is denominated in a currency other than Dollars shall be valued based on the applicable Exchange Rate for such currency as of the applicable date of determination. "Leverage Ratio" means, as at any date of determination, the ratio of (i) Consolidated Total Funded Debt as of such date to (ii) Consolidated EBITDA for the four-Fiscal Quarter period ending on such date. "Lien" means any lien, mortgage, pledge, assignment, security interest, charge or encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof, and any agreement to give any security interest) and any option, trust or other preferential arrangement having the practical effect of any of the foregoing. "Loan" or "Loans" means one or more of the Term Loans, Revolving Loans or Swing Line Loans or any combination thereof. "Loan Documents" means this Agreement, the Notes, the Letters of Credit (and any applications for, or reimbursement agreements or other documents or certificates executed by Company in favor of the Issuing Lender relating to, the Letters of Credit), the Subsidiary Guaranty and the Collateral Documents. "Loan Party" means each of Company and any Subsidiary Guarantor, and "Loan Parties" means all such Persons, collectively. "Margin Stock" has the meaning assigned to that term in Regulation U of the Board of Governors of the Federal Reserve System as in effect from time to time. "Material Adverse Effect", as applied to any Person, means (i) a material adverse effect upon the business, operations, properties, assets, liabilities, financial condition or prospects of such Person and its Subsidiaries, taken as a whole, or (ii) the material impairment of the ability of any Loan Party to perform, or of Administrative Agent or Lenders to enforce, the Obligations. 20 "Material Real Property" means, as at any date of determination, any fee interest in real property of Company or any of its Subsidiaries having a fair market value of $10,000,000 or more. "Maximum Consolidated Capital Expenditures Amount" has the meaning assigned to that term in subsection 7.8. "Merger" means the merger of DMG with Merger Sub in accordance with the terms of the Merger Agreement, with DMG being the surviving corporation in such Merger. "Merger Agreement" means that certain Agreement and Plan of Merger by and among DMG, Company and Merger Sub dated as of May 5, 1999 in the form delivered to Administrative Agent and Lenders prior to their execution of this Agreement and as such agreement may be amended from time to time thereafter to the extent permitted under subsection 7.13A. "Merger Date" means the date that the Merger becomes effective in accordance with the terms of the Merger Agreement. "Merger Date Loan Documents" means the Subsidiary Guaranty and the Pledge and Security Agreement. "Merger Date Loan Parties" means each of the Domestic Subsidiaries of DMG required to execute the Subsidiary Guaranty pursuant to subsection 4.2. "Merger Sub" means Demeter Acquisition Corporation, a Delaware corporation and a wholly-owned Subsidiary of Company. "Minimum Shares" means more than 50% of the shares of DMG Common Stock, on a fully diluted basis. "Morgan Stanley" has the meaning assigned to that term in the introduction to this Agreement. "Mortgage" means a security instrument (whether designated as a deed of trust or a mortgage or by any similar title) executed and delivered by any Loan Party, in such form as may be approved by Administrative Agent in its sole discretion, with such changes thereto as may be recommended by Administrative Agent's local counsel based on local laws or customary local mortgage or deed of trust practices. "Mortgages" means all such instruments, collectively. "Mortgaged Property" has the meaning assigned to that term in subsection 6.8. "Multiemployer Plan" means any Employee Benefit Plan which is a "multiemployer plan" as defined in Section 3(37) of ERISA. "National Currency Unit" means the unit of currency (other than a euro Unit) of a Participating Member State. 21 "Net Asset Sale Proceeds" means, with respect to any Asset Sale by Company or any of its Subsidiaries, Cash payments (including any Cash received by way of deferred payment pursuant to, or by monetization of, a note receivable or otherwise, but only as and when so received) received from such Asset Sale, net of any bona fide direct costs incurred in connection with such Asset Sale, including (i) income taxes reasonably estimated to be actually payable within two years of the date of such Asset Sale as a result of any gain recognized in connection with such Asset Sale and (ii) payment of the outstanding principal amount of, premium or penalty, if any, and interest on any Indebtedness (other than the Loans) that is secured by a Lien on the stock or assets in question and that is required to be repaid under the terms thereof as a result of such Asset Sale. "Net Debt Securities Proceeds" has the meaning assigned to that term in subsection 2.4B(iii)(d). "Net Equity Securities Proceeds" has the meaning assigned to that term in subsection 2.4B(iii)(e). "Net Insurance/Condemnation Proceeds" means any Cash payments or proceeds attributable to a loss by Company or any of its Subsidiaries (i) under any business interruption or casualty insurance policy in respect of a covered loss thereunder or (ii) as a result of the taking of any assets of Company or any of its Subsidiaries by any Person pursuant to the power of eminent domain, condemnation or otherwise, or pursuant to a sale of any such assets to a purchaser with such power under threat of such a taking, in each case net of any actual and reasonable documented costs incurred by Company or any of its Subsidiaries in respect thereof. "Net Pension Proceeds" has the meaning assigned to that term in subsection 2.4B(iii)(c). "Net Proceeds Amount" has the meaning assigned to that term in subsection 2.4B(iii)(g). "Non-US Lender" has the meaning assigned to that term in subsection 2.7B(iii)(a). "Notes" means one or more of the Revolving Notes, Tranche A Term Notes, Tranche B Term Notes, Tranche C Term Notes or Swing Line Note or any combination thereof. "Notice of Borrowing" means a notice substantially in the form of Exhibit I annexed hereto delivered by Company to Administrative Agent pursuant - --------- to subsection 2.1B with respect to a proposed borrowing. "Notice of Conversion/Continuation" means a notice substantially in the form of Exhibit II annexed hereto delivered by Company to Administrative ---------- Agent pursuant to subsection 2.2D with respect to a proposed conversion or continuation of the applicable basis for determining the interest rate with respect to the Loans specified therein. 22 "Notice of Issuance of Letter of Credit" means a notice substantially in the form of Exhibit III annexed hereto delivered by Company to Administrative ----------- Agent pursuant to subsection 3.1B(i) with respect to the proposed issuance of a Letter of Credit. "Obligations" means all obligations of every nature of each Loan Party from time to time owed to Administrative Agent, Lenders or any of them under the Loan Documents, whether for principal, interest, reimbursement of amounts drawn under Letters of Credit, fees, expenses, indemnification or otherwise. "Officer's Certificate" means, as applied to any corporation, a certificate executed on behalf of such corporation by its president or by its chief financial officer; provided that every Officer's Certificate with respect -------- to the compliance with a condition precedent to the making of any Loans hereunder shall include (i) a statement that the officer making or giving such Officer's Certificate has read such condition and any definitions or other provisions contained in this Agreement relating thereto, (ii) a statement that, in the opinion of the signer, he or she has made or has caused to be made such examination or investigation as is necessary to enable such signer to express an informed opinion as to whether or not such condition has been complied with, and (iii) a statement as to whether, in the opinion of the signer, such condition has been complied with. "Operating Lease" as applied to any Person, means any lease (including leases that may be terminated by the lessee at any time) of any property (whether real, personal or mixed) that is not a Capital Lease other than any such lease under which that Person is the lessor. "Organizational Documents" means (i) with respect to any corporation, its certificate or articles of incorporation and its bylaws, (ii) with respect to any limited partnership, its certificate of limited partnership and its partnership agreement, (iii) with respect to any general partnership, its partnership agreement, (iv) with respect to any limited liability company, its articles or certificate of organization and its operating agreement, and (v) with respect to any other entity, its equivalent organizational, governing documents. "Original Currency" has the meaning assigned to that term in subsection 10.20A. "Other Currency" has the meaning assigned to that term in subsection 10.20A. "PBGC" means the Pension Benefit Guaranty Corporation or any successor thereto. "Participating Member State" means each state so described in any EMU Legislation. "Pension Plan" means any Employee Benefit Plan, other than a Multiemployer Plan, which is subject to Section 412 of the Internal Revenue Code or Section 302 of ERISA. "Permitted Encumbrances" means the following types of Liens (excluding any such Lien imposed pursuant to Section 401(a)(29) or 412(n) of the Internal Revenue Code or by ERISA, any such Lien relating to or imposed in connection with any Environmental Claim): 23 (i) Liens for taxes, assessments or governmental charges or claims the payment of which is not, at the time, required by subsection 6.3; (ii) statutory Liens of landlords, statutory Liens of banks and rights of set-off, statutory Liens of carriers, warehousemen, mechanics, repairmen, workmen and materialmen, and other Liens imposed by law, in each case incurred in the ordinary course of business (a) for amounts not yet overdue or (b) for amounts that are overdue and that (in the case of any such amounts overdue for a period in excess of five days) are being contested in good faith by appropriate proceedings, so long as (1) such reserves or other appropriate provisions, if any, as shall be required by GAAP shall have been made for any such contested amounts, and (2) in the case of a Lien with respect to any portion of the Collateral, such contest proceedings operate to stay the sale of any portion of the Collateral on account of such Lien; (iii) Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security, or to secure the performance of tenders, statutory obligations, surety, bid and appeal bonds, bids, leases, government contracts, trade contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money), so long as no foreclosure, sale or similar proceedings have been commenced with respect to any portion of the Collateral on account thereof; (iv) any attachment or judgment Lien not constituting an Event of Default under subsection 8.8; (v) leases or subleases granted to third parties in accordance with any applicable terms of the Collateral Documents and not interfering in any material respect with the ordinary conduct of the business of Company or any of its Subsidiaries; (vi) easements, rights-of-way, restrictions, encroachments, and other minor defects or irregularities in title, in each case which do not and will not interfere in any material respect with the ordinary conduct of the business of Company or any of its Subsidiaries; (vii) any (a) interest or title of a lessor or sublessor under any lease not prohibited by this Agreement, (b) restriction or encumbrance that the interest or title of such lessor or sublessor may be subject to, or (c) subordination of the interest of the lessee or sublessee under such lease to any restriction or encumbrance referred to in the preceding clause (b), so long as the holder of such restriction or encumbrance agrees to recognize the rights of such lessee or sublessee under any such material lease; (viii) Liens arising from filing UCC financing statements relating solely to leases and Liens permitted by this Agreement; (ix) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods; 24 (x) any zoning or similar law or right reserved to or vested in any governmental office or agency to control or regulate the use of any real property; and (xi) licenses of patents, trademarks and other intellectual property rights granted by Company or any of its Subsidiaries in the ordinary course of business and not interfering in any material respect with the ordinary conduct of the business of Company or such Subsidiary. "Person" means and includes natural persons, corporations, limited partnerships, general partnerships, limited liability companies, limited liability partnerships, joint stock companies, Joint Ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts or other organizations, whether or not legal entities, and governments (whether federal, state or local, domestic or foreign, and including political subdivisions thereof) and agencies or other administrative or regulatory bodies thereof. "Pledge and Security Agreement" means the Pledge and Security Agreement executed and delivered by the Closing Date Loan Parties on the Closing Date and the Merger Date Loan Parties on the Merger Date and to be executed and delivered by additional Subsidiaries of Company from time to time thereafter in accordance with subsection 6.7, substantially in the form of Exhibit XV annexed ---------- hereto, as such Pledge and Security Agreement may thereafter be amended, supplemented or otherwise modified from time to time. "Pledged Collateral" means, collectively, the "Pledged Collateral" as defined in the Pledge and Security Agreement and the Tender Pledge Agreement. "Potential Event of Default" means a condition or event that, after notice or lapse of time or both, would constitute an Event of Default. "Prime Rate" means the rate most recently announced by Wells Fargo at its principal office in San Francisco from time to time as its "Prime Rate." The Prime Rate is one of Wells Fargo's base rates and serves as the basis upon which effective rates of interest are calculated for those loans making reference thereto, and is evidenced by the recording thereof after its announcement in such internal publication or publications as Wells Fargo may designate. Wells Fargo or any other Lender may make commercial loans or other loans at rates of interest at, above or below the Prime Rate. Any change in the interest rate resulting from a change in such Prime Rate shall become effective as of 12:01 A.M. (San Francisco time) of the Business Day on which each change in Prime Rate is announced by Wells Fargo. "Pro Rata Share" means (i) with respect to all payments, computations and other matters relating to the Tranche A Term Loan Commitment or the Tranche A Term Loan of any Lender, the percentage obtained by dividing (a) the Tranche A -------- Term Loan Exposure of that Lender by (b) the aggregate Tranche A Term Loan -- Exposure of all Lenders, (ii) with respect to all payments, computations and other matters relating to the Tranche B Term Loan Commitment or the Tranche B Term Loan of any Lender, the percentage obtained by dividing (a) the Tranche B -------- Term Loan Exposure of that Lender by (b) the aggregate Tranche B Term Loan -- Exposure of all Lenders, (iii) with respect to all payments, computations and other matters relating to the Tranche C Term Loan Commitment or the Tranche C Term Loan of any Lender, the percentage 25 obtained by dividing (a) the Tranche C Term Loan Exposure of that Lender by (b) -------- the aggregate Tranche C Term Loan Exposure of all Lenders, (iv) with respect to all payments, computations and other matters relating to the Revolving Loan Commitment or the Revolving Loans of any Lender or any Letters of Credit issued or participations therein purchased by any Lender or any participations in any Swing Line Loans purchased by any Lender, the percentage obtained by dividing -------- (a) the Revolving Loan Exposure of that Lender by (b) the aggregate Revolving -- Loan Exposure of all Lenders, and (v) for all other purposes with respect to each Lender, the percentage obtained by dividing (a) the sum of the Tranche A -------- Term Loan Exposure of that Lender plus the Tranche B Term Loan Exposure of that ---- Lender plus the Tranche C Term Loan Exposure of that Lender plus the Revolving ---- ---- Loan Exposure of that Lender by (b) the sum of the aggregate Tranche A Term Loan -- Exposure of all Lenders plus the aggregate Tranche B Term Loan Exposure of all ---- Lenders plus the aggregate Tranche C Term Loan Exposure of all Lenders plus the ---- aggregate Revolving Loan Exposure of all Lenders, in any such case as the applicable percentage may be adjusted by assignments permitted pursuant to subsection 10.1. The initial Pro Rata Share of each Lender for purposes of each of clauses (i), (ii), (iii), (iv) and (v) of the preceding sentence is set forth opposite the name of that Lender in Schedule 2.1 annexed hereto. ------------ "Proceedings" has the meaning assigned to that term in subsection 6.1(ix). "Projections" means the consolidated projected balance sheets and consolidated projected statements of income and cash flows of Company and its Subsidiaries, prepared by Company assuming the Merger has been consummated, for each of Fiscal Years 1999 through 2007 delivered to Administrative Agent by Company under cover of a letter dated May 3, 1999. "PTO" means the United States Patent and Trademark Office or any successor or substitute office in which filings are necessary or, in the opinion of Administrative Agent, desirable in order to create or perfect Liens on any Collateral. "RCBA" means RCBA Strategic Partners, L.P., a Delaware limited partnership. "RCBA Registration Rights Agreement" means the Registration Rights Agreement dated as of the Closing Date between Company and RCBA, as such agreement may be amended from time to time to the extent permitted under subsection 7.13B. "Real Property Asset" means, at any date of determination, any interest then owned by any Loan Party in any real property. "Reference Banks" means the banks designated by the British Bankers' Association as the reference panel of banks that reflect the balance of the London interbank market. "Refunded Swing Line Loans" has the meaning assigned to that term in subsection 2.1A(vi). "Register" has the meaning assigned to that term in subsection 2.1D. "Regulation D" means Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time. 26 "Reimbursement Date" has the meaning assigned to that term in subsection 3.3B. "Related Agreements" means, collectively, the Merger Agreement, the Bridge Loan Agreement or the Senior Subordinated Note Indenture, as the case may be, the Securities Purchase Agreement, the Company Certificates of Designation, the RCBA Registration Rights Agreement, the Warrant Agreements to be entered into between Company and the parties to the Bridge Loan Agreement, the Warrants to be issued thereunder, and the Subsidiary Guaranty to be executed by the Subsidiary Guarantors for the benefit of the parties to the Bridge Loan Agreement. "Release" means any release, spill, emission, leaking, pumping, pouring, injection, escaping, deposit, disposal, discharge, dispersal, dumping, leaching or migration of Hazardous Materials into the indoor or outdoor environment (including, without limitation, the abandonment or disposal of any barrels, containers or other closed receptacles containing any Hazardous Materials), including the movement of any Hazardous Materials through the air, soil, surface water or groundwater. "Requisite Class Lenders" means, at any date of determination (i) for the Class of Lenders having Tranche A Term Loan Exposure and/or Revolving Loan Exposure, Lenders having or holding at least 51% of the sum of the aggregate Tranche A Term Loan Exposure of all Lenders plus the aggregate Revolving Loan ---- Exposure of all Lenders, (ii) for the Class of Lenders having Tranche B Term Loan Exposure, Lenders having or holding at least 51% of the aggregate Tranche B Term Loan Exposure of all Lenders and (iii) for the Class of Lenders having Tranche C Term Loan Exposure, Lenders having or holding more than at least 51% of the aggregate Tranche C Term Loan Exposure of all Lenders. "Requisite Lenders" means, at any date of determination, two or more Lenders having or holding at least 51% of the sum of (i) the aggregate Tranche A Term Loan Exposure of all Lenders plus (ii) the aggregate Tranche B Term Loan ---- Exposure of all Lenders plus (iii) the aggregate Tranche C Term Loan Exposure of ---- all Lenders plus (iv) the aggregate Revolving Loan Exposure of all Lenders; ---- provided, however, that if as of any date of determination there is only one - -------- ------- Lender, then such Lender shall constitute Requisite Lenders. "Responsible Officer" means, with respect to any Person, the chief executive officer, the chief financial officer, the president, the general counsel or any other employee who is a member of the Board of Directors of such Person. "Restricted Junior Payment" means (i) any dividend or other distribution, direct or indirect, on account of any shares of any class of stock of Company or any of its Subsidiaries now or hereafter outstanding, except a dividend payable solely in shares of that class of stock to the holders of that class, (ii) any redemption, retirement, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any shares of any class of stock of Company or any of its Subsidiaries now or hereafter outstanding, (iii) 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 stock of Company or any of its Subsidiaries now or hereafter outstanding, and (iv) any payment or prepayment of principal of, premium, if any, or interest on, or 27 redemption, purchase, retirement, defeasance (including in-substance or legal defeasance), sinking fund or similar payment with respect to, any Subordinated Indebtedness. "Reuters" means the display designated as Page LIBOR 01 (as to Sterling) on the Reuters Service or such other screen by the Reuters Service as shall display the London interbank offered rates for deposits in Sterling quoted by selected banks. "Revolving Dollar Loans" means the Revolving Loans denominated and payable in Dollars made by Lenders to Company pursuant to subsection 2.1A(iv). "Revolving Loan Commitment" means the commitment of a Lender to make Revolving Dollar Loans and Revolving Sterling Loans to Company pursuant to subsections 2.1A(iv) and 2.1A(v), and "Revolving Loan Commitments" means such commitments of all Lenders in the aggregate. "Revolving Loan Commitment Termination Date" means June 9, 2005. "Revolving Loan Exposure" means, with respect to any Lender as of any date of determination (i) prior to the termination of the Revolving Loan Commitments, that Lender's Revolving Loan Commitment and (ii) after the termination of the Revolving Loan Commitments, the sum of (a) the aggregate outstanding principal amount of the Revolving Loans of that Lender plus (b) in ---- the event that Lender is the Issuing Lender, the aggregate Letter of Credit Usage in respect of all Letters of Credit issued by that Lender (in each case net of any participations purchased by other Lenders in such Letters of Credit or any unreimbursed drawings thereunder) plus (c) the aggregate amount of all ---- participations purchased by that Lender in any outstanding Letters of Credit or any unreimbursed drawings under any Letters of Credit plus (d) in the case of ---- Swing Line Lender, the aggregate outstanding principal amount of all Swing Line Loans (net of any participations therein purchased by other Lenders) plus (e) ---- the aggregate amount of all participations purchased by that Lender in any outstanding Swing Line Loans. "Revolving Loans" means one or more of the Revolving Dollar Loans and the Revolving Sterling Loans, or any combination thereof. "Revolving Notes" means (i) the promissory notes of Company issued pursuant to subsection 2.1E on the Closing Date and (ii) any promissory notes issued by Company pursuant to the last sentence of subsection 10.1B(i) in connection with assignments of the Revolving Loan Commitments and Revolving Loans of any Lenders, in each case substantially in the form of Exhibit IV ---------- annexed hereto, as they may be amended, supplemented or otherwise modified from time to time. "Revolving Sterling Loans" means the Revolving Loans denominated and payable in Sterling made by Lenders to Company pursuant to subsection 2.1A(v). "Revolving Sterling Loan Commitment" means the commitment of a Lender to make Revolving Sterling Loans to Company pursuant to subsection 2.1A(v), and "Revolving Sterling Loan Commitments" means such commitments of all Lenders in the aggregate. 28 "Rollover Notes" means the subordinated promissory notes issued by Company pursuant to the Bridge Loan Agreement in the event the Bridge Notes are not paid in full on or prior to June 9, 2000. "Securities" means any stock, shares, partnership interests, voting trust certificates, certificates of interest or participation in any profit- sharing agreement or arrangement, options, warrants, bonds, debentures, notes, or other evidences of indebtedness, secured or unsecured, convertible, subordinated or otherwise, or in general any instruments commonly known as "securities" or any certificates of interest, shares or participations in temporary or interim certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire, any of the foregoing. "Securities Act" means the Securities Act of 1933, as amended from time to time, and any successor statute. "Securities Purchase Agreement" means the Securities Purchase Agreement dated as of May 5, 1999 by and between RCBA and Company, in the form delivered to Administrative Agent and Lenders prior to their execution of this Agreement and as such agreement may be amended from time to time thereafter to the extent permitted under subsection 7.13A. "Senior Subordinated Note Indenture" means the Senior Subordinated Indenture among Company and the trustee named therein pursuant to which the Senior Subordinated Notes are issued, as such indenture may be amended from time to time to the extent permitted under subsection 7.13B. "Senior Subordinated Notes" means the Senior Subordinated Notes due 2009 of Company issued pursuant to the Senior Subordinated Note Indenture. "Significant Subsidiary" means, as of any date of determination, any Subsidiary of Company that, together with its Subsidiaries, (i) for the most recent Fiscal Year accounted for more than 5% of the consolidated revenues of Company and its Subsidiaries or (ii) as of the end of such Fiscal Year was the owner of more than 5% of the consolidated assets of Company and its Subsidiaries, all as set forth on the most recently available consolidated financial statements of Company and its Subsidiaries for such Fiscal Year. "Solvent" means, with respect to any Person, that as of the date of determination both (i) (a) the then fair saleable value of the property of such Person is (1) greater than the total amount of liabilities (including contingent liabilities) of such Person and (2) not less than the amount that will be required to pay the probable liabilities on such Person's then existing debts as they become absolute and matured considering all financing alternatives and potential asset sales reasonably available to such Person; (b) such Person's capital is not unreasonably small in relation to its business or any contemplated or undertaken transaction; and (c) such Person does not intend to incur, or believe (nor should it reasonably believe) that it will incur, debts beyond its ability to pay such debts as they become due; and (ii) such Person is "solvent" within the meaning given that term and similar terms under applicable laws relating to fraudulent transfers and conveyances. For purposes of this definition, the amount of any contingent liability at any 29 time shall be computed as the amount that, in light of all of the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability. "Spot Rate" for Dollars or Sterling means the rate quoted by Wells Fargo as the spot rate for the purchase by Wells Fargo of such currency with the other currency through its foreign exchange desk at approximately 11:00 A.M. (San Francisco time) on the date two Business Days prior to the date as of which the foreign exchange computation is made. "Sterling" and the sign "(Pounds)" mean the lawful money of the United Kingdom. "Subordinated Indebtedness" means (i) the Existing Subordinated Indebtedness, (ii) the Senior Subordinated Notes, (iii) the Bridge Notes, (iv) the Rollover Notes and (v) any other Indebtedness of Company or any of its Subsidiaries subordinated in right of payment to the Obligations pursuant to documentation containing maturities, amortization schedules, covenants, defaults, remedies, subordination provisions and other material terms in form and substance satisfactory to Administrative Agent and Requisite Lenders. "Subsequent Acquisition" has the meaning assigned to that term in subsection 7.7(vi). "Subsidiary" means, with respect to any Person, any corporation, partnership, limited liability company, association, or other business entity of which more than 50% of the total voting power of shares of stock or other ownership interests entitled (without regard to the occurrence of any contingency) to vote in the election of the Person or Persons (whether directors, managers, trustees or other Persons performing similar functions) having the power to direct or cause the direction of the management and policies 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; provided that in no event shall any Joint Venture be considered to be a -------- Subsidiary of any Person. "Subsidiary Guarantor" means DMG and any Domestic Subsidiary of Company and any Domestic Subsidiary of DMG that executes and delivers the Subsidiary Guaranty on the Closing Date or the Merger Date or from time to time thereafter pursuant to subsection 6.7. "Subsidiary Guaranty" means the Subsidiary Guaranty executed and delivered by DMG and certain existing Subsidiaries of Company on the Closing Date and certain existing Subsidiaries of DMG on the Merger Date and to be executed and delivered by additional Subsidiaries of Company from time to time thereafter in accordance with subsection 6.7 substantially in the form of Exhibit XVI annexed hereto, as such Subsidiary Guaranty may hereafter be - ----------- amended, supplemented or otherwise modified from time to time. "Supplemental Collateral Agent" has the meaning assigned to that term in subsection 9.1B. "Surviving Corporation" has the meaning assigned to that term in the Recitals to this Agreement. 30 "Surviving Corporation Common Stock" has the meaning assigned to that term in the Recitals to this Agreement. "Swing Line Lender" means Wells Fargo, or any Person serving as a successor Administrative Agent hereunder, in its capacity as Swing Line Lender hereunder. "Swing Line Loan Commitment" means the commitment of Swing Line Lender to make Swing Line Loans to Company pursuant to subsection 2.1A(vi). "Swing Line Loans" means the Loans made by Swing Line Lender to Company pursuant to subsection 2.1A(vi). "Swing Line Note" means any promissory note of Company issued pursuant to subsection 2.1E to evidence the Swing Line Loans of Swing Line Lender, substantially in the form of Exhibit VIII annexed hereto, as it may be amended, ------------ supplemented or otherwise modified from time to time. "Syndication Agent" has the meaning assigned to that term in the introduction to this Agreement. "Target" has the meaning assigned to that term in subsection 7.7(vi). "Tax" or "Taxes" means any present or future tax, levy, impost, duty, charge, fee, deduction or withholding of any nature and whatever called, by whomsoever, on whomsoever and wherever imposed, levied, collected, withheld or assessed; provided that "Tax on the overall net income" of a Person shall be -------- construed as a reference to a tax imposed by the jurisdiction in which that Person is organized or in which that Person's principal office (and/or, in the case of a Lender, its lending office) is located or in which that Person (and/or, in the case of a Lender, its lending office) is deemed to be doing business on all or part of the net income, profits or gains (whether worldwide, or only insofar as such income, profits or gains are considered to arise in or to relate to a particular jurisdiction, or otherwise) of that Person (and/or, in the case of a Lender, its lending office). "Tender Offer" means the offer to purchase for cash all of the outstanding shares of DMG Common Stock by Company pursuant to the Tender Offer Materials. "Tender Offer Materials" means the Tender Offer Statement on Schedule 14D-1 filed by Merger Sub on May 11, 1999 with the Securities and Exchange Commission pursuant to Section 14(d)(1) of the Exchange Act, together with all exhibits thereto, including the form of "Offer to Purchase For Cash", set forth in Exhibit (a)(1) thereto, and any amendments prior to the date hereof that relate only to any extension of time during which the offer to purchase remains outstanding or to the results of the Tender Offer and other amendments that are approved by Requisite Lenders. "Tender Pledge Agreement" means the Pledge Agreement executed and delivered by DMG on the Closing Date, substantially in the form of Exhibit XVII ------------ annexed hereto, as such Pledge Agreement may thereafter be amended, supplemented or otherwise modified from time to time. 31 "Tendered Shares" means all shares of DMG Common Stock tendered to and purchased by Merger Sub pursuant to the Tender Offer. "Term Loans" means, collectively, the Tranche A Term Loans, the Tranche B Term Loans and the Tranche C Term Loans. "Total Purchase Price" means, with respect to any Subsequent Acquisition, (i) the sum, without duplication, of (a) the aggregate amount of all consideration payable by or on behalf of Company or any of its Subsidiaries in connection with such Subsequent Acquisition in Cash, property (including Securities of Company), services, notes, bonds, debentures or other debt instruments, (b) the aggregate principal amount of all Indebtedness assumed by Company or any or its Subsidiaries in connection with such Subsequent Acquisition, (c) the reasonable estimate of the amount of any Contingent Obligation of Company or any of its Subsidiaries incurred in connection with such Subsequent Acquisition, and (d) the aggregate amount of any Indebtedness incurred by Company or any Subsidiary in connection with such Subsequent Acquisition minus (ii) all Cash and Cash Equivalents acquired by Company or any ----- of its Subsidiaries as a result of such Subsequent Acquisition. For purposes of this definition, any amount which is payable in a currency other than Dollars shall be valued based on the applicable Exchange Rate for such currency as of the date of such Subsequent Acquisition. "Total Utilization of Revolving Loan Commitments" means, as at any date of determination, the sum of (i) the aggregate principal amount of all outstanding Revolving Loans (other than Revolving Loans made for the purpose of repaying any Refunded Swing Line Loans or reimbursing the Issuing Lender for any amount drawn under any Letter of Credit but not yet so applied) plus (ii) the ---- aggregate principal amount of all outstanding Swing Line Loans plus (iii) the ---- Letter of Credit Usage. "Tranche A Term Loan Commitment" means the commitment of a Lender to make a Tranche A Term Loan to Company pursuant to subsection 2.1A(i), and "Tranche A Term Loan Commitments" means such commitments of all Lenders in the aggregate. "Tranche A Term Loan Commitment Termination Date" means the date that is 180 days after the Closing Date. "Tranche A Term Loan Exposure" means, with respect to any Lender as of any date of determination (i) prior to the funding of the Tranche A Term Loans, that Lender's Tranche A Term Loan Commitment and (ii) after the funding of the Tranche A Term Loans, the outstanding principal amount of the Tranche A Term Loan of that Lender. "Tranche A Term Loan Maturity Date" means June 9, 2005. "Tranche A Term Loans" means the Loans made by Lenders to Company pursuant to subsection 2.1A(i). "Tranche A Term Notes" means (i) the promissory notes of Company issued pursuant to subsection 21E on the Closing Date and (ii) any promissory notes issued by Company pursuant to the last sentence of subsection 10.1B(i) in connection with assignments of the Tranche A Term Loan Commitments or Tranche A Term Loans of any Lenders, in each case 32 substantially in the form of Exhibit V annexed hereto, as they may be amended, --------- supplemented or otherwise modified from time to time. "Tranche B Term Loan Commitment" means the commitment of a Lender to make a Tranche B Term Loan to Company pursuant to subsection 2.1A(ii), and "Tranche B Term Loan Commitments" means such commitments of all Lenders in the aggregate. "Tranche B Term Loan Exposure" means, with respect to any Lender as of any date of determination (i) prior to the funding of the Tranche B Term Loans, that Lender's Tranche B Term Loan Commitment and (ii) after the funding of the Tranche B Term Loans, the outstanding principal amount of the Tranche B Term Loan of that Lender. "Tranche B Term Loan Maturity Date" means June 9, 2006. "Tranche B Term Loans" means the Loans made by Lenders to Company pursuant to subsection 2.1A(ii). "Tranche B Term Notes" means (i) the promissory notes of Company issued pursuant to subsection 2.1E on the Closing Date and (ii) any promissory notes issued by Company pursuant to the last sentence of subsection 10.1B(i) in connection with assignments of the Tranche B Term Loan Commitments or Tranche B Term Loans of any Lenders, in each case substantially in the form of Exhibit VI ---------- annexed hereto, as they may be amended, supplemented or otherwise modified from time to time. "Tranche C Term Loan Commitment" means the commitment of a Lender to make a Tranche C Term Loan to Company pursuant to subsection 2.1A(iii), and "Tranche C Term Loan Commitments" means such commitments of all Lenders in the aggregate. "Tranche C Term Loan Exposure" means, with respect to any Lender as of any date of determination (i) prior to the funding of the Tranche C Term Loans, that Lender's Tranche C Term Loan Commitment and (ii) after the funding of the Tranche C Term Loans, the outstanding principal amount of the Tranche C Term Loan of that Lender. "Tranche C Term Loan Maturity Date" means June 9, 2007. "Tranche C Term Loans" means the Loans made by Lenders to Company pursuant to subsection 2.1A(iii). "Tranche C Term Notes" means (i) the promissory notes of Company issued pursuant to subsection 2.1E on the Closing Date and (ii) any promissory notes issued by Company pursuant to the last sentence of subsection 10.1B(i) in connection with assignments of the Tranche C Term Loan Commitments or Tranche C Term Loans of any Lenders, in each case substantially in the form of Exhibit VII ----------- annexed hereto, as they may be amended, supplemented or otherwise modified from time to time. "Transaction Costs" means the sum of (i) the fees, costs and expenses payable by Company on or before the Closing Date in connection with the transactions contemplated by the Loan Documents and the Related Agreements, (ii) the fees payable by Company on or before 33 the Merger Date in connection with the transactions contemplated by the Loan Documents and the Related Agreements and (iii) all expenses (including attorney's fees and costs), damages and settlement payments payable in connection with any litigation relating to the Tender Offer or the Merger. "Treaty on European Union" means the Treaty of Rome of March 25, 1957, as amended by the Single European Act 1986 and the Maastricht Treaty (which was signed at Maastricht on February 7, 1992 and came into force on November 1, 1993), as amended from time to time. "UCC" means the Uniform Commercial Code (or any similar or equivalent legislation) as in effect in any applicable jurisdiction. "URS" means URS Corporation, a Delaware corporation, prior to consummation of the Tender Offer. "Wells Fargo" has the meaning assigned to that term in the introduction to this Agreement. "Year 2000 Compliant" has the meaning assigned to that term in subsection 6.10. 1.2 Accounting Terms; Utilization of GAAP for Purposes of Calculations Under ------------------------------------------------------------------------ Agreement. Except as otherwise expressly provided in this Agreement, all - --------- accounting terms not otherwise defined herein shall have the meanings assigned to them in conformity with GAAP. Financial statements and other information required to be delivered by Company to Lenders pursuant to clauses (i), (ii), and (xii) of subsection 6.1 shall be prepared in accordance with GAAP as in effect at the time of such preparation (and delivered together with the reconciliation statements provided for in subsection 6.1(iv)). Calculations in connection with the definitions, covenants and other provisions of this Agreement shall utilize accounting principles and policies in conformity with those used to prepare the financial statements referred to in subsection 5.3. 1.3 Other Definitional Provisions and Rules of Construction. ------------------------------------------------------- A. Any of the terms defined herein may, unless the context otherwise requires, be used in the singular or the plural, depending on the reference. B. References to "Sections" and "subsections" shall be to Sections and subsections, respectively, of this Agreement unless otherwise specifically provided. C. The use herein of the word "include" or "including", when following any general statement, term or matter, shall not be construed to limit such statement, term or matter to the specific items or matters set forth immediately following such word or to similar items or matters, whether or not nonlimiting language (such as "without limitation" or "but not limited to" or words of similar import) is used with reference thereto, but rather shall be deemed to refer to all other items or matters that fall within the broadest possible scope of such general statement, term or matter. 34 Section 2. AMOUNTS AND TERMS OF COMMITMENTS AND LOANS 2.1 Commitments; Making of Loans; Notes. ----------------------------------- A. Commitments. Subject to the terms and conditions of this Agreement and in reliance upon the representations and warranties of Company herein set forth, each Lender hereby severally agrees to make the Loans described in subsections 2.1A(i), 2.1A(ii), 2.1A(iii), 2.1A(iv) and 2.1A(v), and Swing Line Lender hereby agrees to make the Loans described in subsection 2.1A(vi). (i) Tranche A Term Loans. Each Lender severally agrees to lend to -------------------- Company on the Closing Date and on the Merger Date an amount not exceeding its Pro Rata Share of the aggregate amount of the Tranche A Term Loan Commitments to be used for the purposes identified in subsections 2.5A and 2.5B. The amount of each Lender's Tranche A Term Loan Commitment is set forth opposite its name on Schedule 2.1 annexed hereto and the aggregate ------------ amount of the Tranche A Term Loan Commitments is $250,000,000; provided -------- that the Tranche A Term Loan Commitments of Lenders shall be adjusted to give effect to any assignments of the Tranche A Term Loan Commitments pursuant to subsection 10.1B. Each Lender's Tranche A Term Loan Commitment shall expire immediately and without further action on September 30, 1999, if the Closing Date has not occurred on or before that date and shall expire immediately and without further action on the Tranche A Term Loan Commitment Termination Date if the Merger Date has not occurred on or before that date. Company may make only two borrowings under the Tranche A Term Loan Commitments. Amounts borrowed under this subsection 2.1A(i) and subsequently repaid or prepaid may not be reborrowed. (ii) Tranche B Term Loans. Each Lender severally agrees to lend to -------------------- Company on the Closing Date an amount not exceeding its Pro Rata Share of the aggregate amount of the Tranche B Term Loan Commitments to be used for the purposes identified in subsection 2.5A. The amount of each Lender's Tranche B Term Loan Commitment is set forth opposite its name on Schedule -------- 2.1 annexed hereto and the aggregate amount of the Tranche B Term Loan --- Commitments is $100,000,000; provided that the Tranche B Term Loan -------- Commitments of Lenders shall be adjusted to give effect to any assignments of the Tranche B Term Loan Commitments pursuant to subsection 10.1B. Each Lender's Tranche B Term Loan Commitment shall expire immediately and without further action on September 30, 1999 if the Tranche B Term Loans are not made on or before that date. Company may make only one borrowing under the Tranche B Term Loan Commitments. Amounts borrowed under this subsection 2.1A(ii) and subsequently repaid or prepaid may not be reborrowed. (iii) Tranche C Term Loans. Each Lender severally agrees to lend to -------------------- Company on the Closing Date an amount not exceeding its Pro Rata Share of the aggregate amount of the Tranche C Term Loan Commitments to be used for the purposes identified in subsection 2.5A. The amount of each Lender's Tranche C Term Loan Commitment is set forth opposite its name on Schedule -------- 2.1 annexed hereto and the aggregate amount of the Tranche C Term Loan --- Commitments is $100,000,000; provided that the Tranche C Term -------- 35 Loan Commitments of Lenders shall be adjusted to give effect to any assignments of the Tranche C Term Loan Commitments pursuant to subsection 101.B. Each Lender's Tranche C Term Loan Commitment shall expire immediately and without further action on September 30, 1999 if the Tranche C Term Loans are not made on or before that date. Company may make only one borrowing under the Trance C Term Loan Commitments. Amounts borrowed under this subsection 2.1A(iii) and subsequently repaid or prepaid may not be reborrowed. (iv) Revolving Dollar Loans. Each Lender severally agrees, subject to ---------------------- the limitations set forth below with respect to the maximum amount of Revolving Dollar Loans permitted to be outstanding from time to time, to lend to Company from time to time during the period from the Closing Date to but excluding the Revolving Loan Commitment Termination Date an aggregate amount, the Dollar Equivalent of which shall not exceed its Pro Rata Share of the aggregate amount of the Revolving Dollar Loan Commitments to be used for the purposes identified in subsection 2.5C. The original amount of each Lender's Revolving Dollar Loan Commitment is set forth opposite its name on Schedule 2.1 annexed hereto and the aggregate original ------------ amount of the Revolving Dollar Loan Commitments is $100,000,000; provided -------- that the Revolving Dollar Loan Commitments of Lenders shall be adjusted to give effect to any assignments of the Revolving Dollar Loan Commitments pursuant to subsection 10.1B. Each Lender's Revolving Dollar Loan Commitment shall expire on the Revolving Loan Commitment Termination Date and all Revolving Dollar Loans and all other amounts owed hereunder with respect to the Revolving Dollar Loans and the Revolving Dollar Loan Commitments shall be paid in full no later than that date; provided that -------- each Lender's Revolving Dollar Loan Commitment shall expire immediately and without further action on September 30, 1999 if the Tranche C Term Loans are not made on or before that date. Amounts borrowed under this subsection 2.1A(iv) may be repaid and reborrowed to but excluding the Revolving Loan Commitment Termination Date. (v) Revolving Sterling Loans. Each Lender severally agrees, subject ------------------------ to the limitations set forth below with respect to the maximum amount of Revolving Sterling Loans permitted to be outstanding from time to time, to lend to Company a portion of the Revolving Loan Commitments from time to time during the period from the Closing Date to but excluding the Revolving Loan Commitment Termination Date an aggregate amount, the Dollar Equivalent of which shall not exceed its Pro Rata Share of the aggregate amount of the Revolving Sterling Loan Commitments to be used for the purposes identified in subsection 2.5C. The original amount of each Lender's Revolving Sterling Loan Commitment is set forth opposite its name on Schedule 2.1 annexed ------------ hereto and the aggregate original amount of the Revolving Sterling Loan Commitments is $15,000,000; provided that the Revolving Sterling Loan -------- Commitments of Lenders shall be adjusted to give effect to any assignments of the Revolving Loan Commitments pursuant to subsection 10.1B. Each Lender's Revolving Sterling Loan Commitment shall expire on the Revolving Loan Commitment Termination Date and all Revolving Sterling Loans and all other amounts owed hereunder with respect to the Revolving Sterling Loans and the Revolving Sterling Loan Commitments shall be paid in full no later than that date; provided that each Lender's Revolving Sterling Loan -------- Commitment shall expire immediately and without further action on September 30, 1999 if the Tranche C Term 36 Loans are not made on or before that date. Amounts borrowed under this subsection 2.1A(v) may be repaid and reborrowed to but excluding the Revolving Loan Commitment Termination Date. Revolving Loans constituting Revolving Dollar Loans may not be converted into Revolving Sterling Loans and Revolving Loans constituting Revolving Sterling Loans may not be converted into Revolving Dollar Loans; provided that, subject to applicable law, borrowings in one currency may be -------- used to purchase the other currency and the other currency so purchased may be used to repay borrowings made in such other currency. (vi) Swing Line Loans. Swing Line Lender hereby agrees, subject to ---------------- the limitations set forth below with respect to the maximum amount of Swing Line Loans permitted to be outstanding from time to time, to make a portion of the Revolving Loan Commitments available to Company from time to time during the period from the Closing Date to but excluding the Revolving Loan Commitment Termination Date by making Swing Line Loans to Company in an aggregate amount not exceeding the amount of the Swing Line Loan Commitment to be used for the purposes identified in subsection 2.5C, notwithstanding the fact that such Swing Line Loans, when aggregated with Swing Line Lender's outstanding Revolving Loans and Swing Line Lender's Pro Rata Share of the Letter of Credit Usage then in effect, may exceed Swing Line Lender's Revolving Loan Commitment. The original amount of the Swing Line Loan Commitment is $5,000,000; provided that any reduction of the Revolving -------- Loan Commitments made pursuant to subsection 2.4B(ii) or 2.4B(iii) which reduces the aggregate Revolving Loan Commitments to an amount less than the then current amount of the Swing Line Loan Commitment shall result in an automatic corresponding reduction of the Swing Line Loan Commitment to the amount of the Revolving Loan Commitments, as so reduced, without any further action on the part of Company, Administrative Agent or Swing Line Lender. The Swing Line Loan Commitment shall expire on the Revolving Loan Commitment Termination Date and all Swing Line Loans and all other amounts owed hereunder with respect to the Swing Line Loans shall be paid in full no later than that date; provided that the Swing Line Loan Commitment shall -------- expire immediately and without further action on September 30, 1999 if the Tranche C Term Loans are not made on or before that date. Amounts borrowed under this subsection 2.1A(vi) may be repaid and reborrowed to but excluding the Revolving Loan Commitment Termination Date. With respect to any Swing Line Loans which have not been voluntarily prepaid by Company pursuant to subsection 2.4B(i), Swing Line Lender may, at any time in its sole and absolute discretion, deliver to Administrative Agent (with a copy to Company), no later than 9:00 A.M. (San Francisco time) on the first Business Day in advance of the proposed Funding Date, a notice (which shall be deemed to be a Notice of Borrowing given by Company) requesting Lenders to make Revolving Dollar Loans that are Base Rate Loans on such Funding Date in an amount equal to the amount of such Swing Line Loans (the "Refunded Swing Line Loans") outstanding on the date such notice is given which Swing Line Lender requests Lenders to prepay. Anything contained in this Agreement to the contrary notwithstanding, (a) the proceeds of such Revolving Dollar Loans made by Lenders other than Swing Line Lender shall be immediately delivered by 37 Administrative Agent to Swing Line Lender (and not to Company) and applied to repay a corresponding portion of the Refunded Swing Line Loans and (b) on the day such Revolving Dollar Loans are made, Swing Line Lender's Pro Rata Share of the Refunded Swing Line Loans shall be deemed to be paid with the proceeds of a Revolving Dollar Loan made by Swing Line Lender, and such portion of the Swing Line Loans deemed to be so paid shall no longer be outstanding as Swing Line Loans and shall no longer be due under the Swing Line Note, if any, of Swing Line Lender but shall instead constitute part of Swing Line Lender's outstanding Revolving Dollar Loans and shall be due under the Revolving Note, if any, of Swing Line Lender. Company hereby authorizes Administrative Agent and Swing Line Lender to charge Company's accounts with Administrative Agent and Swing Line Lender (up to the amount available in each such account) in order to immediately pay Swing Line Lender the amount of the Refunded Swing Line Loans to the extent the proceeds of such Revolving Dollar Loans made by Lenders, including the Revolving Dollar Loan deemed to be made by Swing Line Lender, are not sufficient to repay in full the Refunded Swing Line Loans. If any portion of any such amount paid (or deemed to be paid) to Swing Line Lender should be recovered by or on behalf of Company from Swing Line Lender in bankruptcy, by assignment for the benefit of creditors or otherwise, the loss of the amount so recovered shall be ratably shared among all Lenders in the manner contemplated by subsection 10.5. If for any reason (a) Revolving Dollar Loans are not made upon the request of Swing Line Lender as provided in the immediately preceding paragraph in an amount sufficient to repay any amounts owed to Swing Line Lender in respect of any outstanding Swing Line Loans or (b) the Revolving Loan Commitments are terminated at a time when any Swing Line Loans are outstanding, each Lender shall be deemed to, and hereby agrees to, have purchased a participation in such outstanding Swing Line Loans in an amount equal to its Pro Rata Share (calculated, in the case of the foregoing clause (b), immediately prior to such termination of the Revolving Loan Commitments) of the unpaid amount of such Swing Line Loans together with accrued interest thereon. Upon one Business Day's notice from Swing Line Lender, each Lender shall deliver to Swing Line Lender an amount equal to its respective participation in same day funds at the Funding and Payment Office. In order to further evidence such participation (and without prejudice to the effectiveness of the participation provisions set forth above), each Lender agrees to enter into a separate participation agreement at the request of Swing Line Lender in form and substance reasonably satisfactory to Swing Line Lender. In the event any Lender fails to make available to Swing Line Lender the amount of such Lender's participation as provided in this paragraph, Swing Line Lender shall be entitled to recover such amount on demand from such Lender together with interest thereon at the rate customarily used by Swing Line Lender for the correction of errors among banks for three Business Days and thereafter at the Dollar Base Rate. In the event Swing Line Lender receives a payment of any amount in which other Lenders have purchased participations as provided in this paragraph, Swing Line Lender shall promptly distribute to each such other Lender its Pro Rata Share of such payment. Anything contained herein to the contrary notwithstanding, each Lender's obligation to make Revolving Dollar Loans for the purpose of repaying any Refunded Swing Line Loans pursuant to the second preceding paragraph and each Lender's 38 obligation to purchase a participation in any unpaid Swing Line Loans pursuant to the immediately preceding paragraph shall be absolute and unconditional and shall not be affected by any circumstance, including (a) any set-off, counterclaim, recoupment, defense or other right which such Lender may have against Swing Line Lender, Company or any other Person for any reason whatsoever; (b) the occurrence or continuation of an Event of Default or a Potential Event of Default; (c) the occurrence of any Material Adverse Effect; (d) any breach of this Agreement or any other Loan Document by any party thereto; or (e) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing; provided that -------- such obligations of each Lender are subject to the condition that (1) Swing Line Lender believed in good faith that all conditions under Section 4 to the making of the applicable Refunded Swing Line Loans or other unpaid Swing Line Loans, as the case may be, were satisfied at the time such Refunded Swing Line Loans or unpaid Swing Line Loans were made or (2) the satisfaction of any such condition not satisfied had been waived in accordance with subsection 10.6 prior to or at the time such Refunded Swing Line Loans or other unpaid Swing Line Loans were made. (vii) Certain Limitations. Anything contained in this Agreement to ------------------- the contrary notwithstanding, the Revolving Loans and the Revolving Loan Commitments shall be subject to the following limitations: (a) in no event shall the Total Utilization of Revolving Loan Commitments at any time exceed the Revolving Loan Commitments then in effect; (b) in no event shall the aggregate principal amount of all outstanding Revolving Sterling Loans exceed the Revolving Sterling Loan Commitment then in effect; and (c) during the period from and including the Closing Date to and excluding the Merger Date, in no event shall the aggregate principal amount of Revolving Loans exceed the sum of the aggregate principal amount of Acquisition Revolving Loans plus $25,000,000. ---- B. Borrowing Mechanics. Term Loans or Revolving Loans made on any Funding Date (other than Revolving Dollar Loans made pursuant to a request by Swing Line Lender pursuant to subsection 2.1A(vi) for the purpose of repaying any Refunded Swing Line Loans or Revolving Dollar Loans made pursuant to subsection 3.3B for the purpose of reimbursing the Issuing Lender for the amount of a drawing under a Letter of Credit) shall be in an aggregate minimum amount of $500,000 and integral multiples of $10,000 in excess of that amount; provided that Term Loans -------- made on any Funding Date as Eurodollar Rate Loans with a particular Interest Period shall be in an aggregate minimum amount equal to or in excess of $5,000,000 and that Revolving Dollar Loans made on any Funding Date as Eurodollar Rate Loans with a particular Interest Period shall be in an aggregate minimum amount of $5,000,000 and integral multiples of $1,000,000 in excess of that amount. Revolving Sterling Loans made on any Funding Date shall be in an aggregate minimum amount of (Pounds)2,500,000 and integral multiples of (Pounds)1,000,000 in excess of that amount. Swing Line Loans made on any Funding Date shall be in an aggregate minimum amount of $100,000 and integral multiples of $100,000 in excess of that amount. Whenever Company desires that Lenders make Term Loans or Revolving Loans it shall deliver to Administrative Agent a Notice of Borrowing substantially in the form of Exhibit I annexed hereto no later than --------- 9:00 A.M. (San Francisco time) at least (i) three Business Days in advance of the proposed Funding Date (in the case of a Eurodollar Rate Loan); (ii) one Business Day in advance of the proposed Funding Date (in the case of a Base Rate Loan); or (iii) four Business 39 Days in advance of the proposed Funding Date (in the case of a Domestic Sterling Rate Loan). Whenever Company desires that Swing Line Lender make a Swing Line Loan, it shall deliver to Administrative Agent a Notice of Borrowing no later than 1:00 P.M. (San Francisco time) on the proposed Funding Date. The Notice of Borrowing shall specify (i) the proposed Funding Date (which shall be a Business Day), (ii) the amount and type of Loans requested, (iii) in the case of Swing Line Loans and any Revolving Dollar Loans made on the Closing Date, that such Loans shall be Base Rate Loans, (iv) in the case of Revolving Loans not made on the Closing Date, whether such Loans shall be Revolving Dollar Loans or Revolving Sterling Loans and, in the case of Revolving Dollar Loans, whether such Loans shall be Base Rate Loans or Eurodollar Rate Loans, and (v) in the case of any Loans requested to be made as Eurodollar Rate Loans or Domestic Sterling Rate Loans, the initial Interest Period requested therefor. Term Loans and Revolving Dollar Loans may be continued as or converted into Base Rate Loans and Eurodollar Rate Loans in the manner provided in subsection 2.2D. Revolving Sterling Loans may be continued as Domestic Sterling Rate Loans in the manner provided in subsection 2.2D. In lieu of delivering the above-described Notice of Borrowing, Company may give Administrative Agent telephonic notice by the required time of any proposed borrowing under this subsection 2.1B; provided -------- that such notice shall be promptly confirmed in writing by delivery of a Notice of Borrowing to Administrative Agent on or before the applicable Funding Date. Neither Administrative Agent nor any Lender shall incur any liability to Company in acting upon any telephonic notice referred to above that Administrative Agent believes in good faith to have been given by a duly authorized officer or other person authorized to borrow on behalf of Company or for otherwise acting in good faith under this subsection 2.1B, and upon funding of Loans by Lenders in accordance with this Agreement pursuant to any such telephonic notice Company shall have effected Loans hereunder. Company shall notify Administrative Agent prior to the funding of any Loans in the event that any of the matters to which Company is required to certify in the applicable Notice of Borrowing is no longer true and correct in all material respects as of the applicable Funding Date, and the acceptance by Company of the proceeds of any Loans shall constitute a re-certification by Company, as of the applicable Funding Date, as to the matters to which Company is required to certify in the applicable Notice of Borrowing. Except as otherwise provided in subsections 2.6B, 2.6C and 2.6G, a Notice of Borrowing for a Eurodollar Rate Loan or a Domestic Sterling Rate Loan (or telephonic notice in lieu thereof) shall be irrevocable, and Company shall be bound to make a borrowing in accordance therewith. C. Disbursement of Funds. All Term Loans and Revolving Loans under this Agreement shall be made by Lenders simultaneously and proportionately to their respective Pro Rata Shares, it being understood that no Lender shall be responsible for any default by any other Lender in that other Lender's obligation to make a Loan requested hereunder nor shall the Commitment of any Lender to make the particular type of Loan requested be increased or decreased as a result of a default by any other Lender in that other Lender's obligation to make a Loan requested hereunder. Promptly after receipt by Administrative Agent of a Notice of Borrowing pursuant to subsection 2.1B (or telephonic notice in lieu thereof), Administrative Agent shall notify each Lender or Swing Line Lender, as the case may be, of the proposed 40 borrowing. Each Lender shall make the amount of its Loan available to Administrative Agent not later than 11:00 A.M. (San Francisco time) or 12:00 Noon (London time), as applicable, on the applicable Funding Date, and Swing Line Lender shall make the amount of its Swing Line Loan available to Administrative Agent not later than 11:00 A.M. (San Francisco time) on the applicable Funding Date in same day funds in Dollars, at the Funding and Payment Office. In the case of Revolving Sterling Loans, such notice will also provide the approximate Dollar Equivalent of the amount of such Lender's Pro Rata Share of such Revolving Sterling Loans, and Administrative Agent will, upon the determination of the exact Dollar Equivalent of such amount on the applicable Funding Date, promptly notify such Lender of such amount; provided that, unless -------- Administrative Agent shall otherwise agree with any Lender in writing, nothing in this sentence shall relieve any Lender of its obligation to fund its Pro Rata Share of all Loans in the Applicable Currency. Except as provided in subsection 2.1A(vi) and subsection 3.3B with respect to Revolving Loans used to repay Refunded Swing Line Loans or to reimburse the Issuing Lender for the amount of a drawing under a Letter of Credit issued by it, upon satisfaction or waiver of the conditions precedent specified in subsection 4.1 (in the case of Loans made on the Closing Date) 4.2 (in the case of Loans made on the Merger Date) and 4.3 (in the case of all Loans), Administrative Agent shall make the proceeds of such Loans available to Company on the applicable Funding Date by causing an amount of same day funds in Dollars or Sterling, as the case may be, equal to the proceeds of all such Loans received by Administrative Agent from Lenders or Swing Line Lender, as the case may be, to be credited to the account of Company at the Funding and Payment Office. Unless Administrative Agent shall have been notified by any Lender prior to the Funding Date for any Loans that such Lender does not intend to make available to Administrative Agent the amount of such Lender's Loan requested on such Funding Date, Administrative Agent may assume that such Lender has made such amount available to Administrative Agent on such Funding Date and Administrative Agent may, in its sole discretion, but shall not be obligated to, make available to Company a corresponding amount on such Funding Date. If such corresponding amount is not in fact made available to Administrative Agent by such Lender, Administrative Agent shall be entitled to recover such corresponding amount on demand from such Lender together with interest thereon, for each day from such Funding Date until the date such amount is paid to Administrative Agent, at the customary rate set by Administrative Agent for the correction of errors among banks for three Business Days and thereafter at the Dollar Base Rate. If such Lender does not pay such corresponding amount forthwith upon Administrative Agent's demand therefor, Administrative Agent shall promptly notify Company and Company shall immediately pay such corresponding amount to Administrative Agent together with interest thereon, for each day from such Funding Date until the date such amount is paid to Administrative Agent, at the rate payable under this Agreement for Base Rate Loans. Nothing in this subsection 2.1C shall be deemed to relieve any Lender from its obligation to fulfill its Commitments hereunder or to prejudice any rights that Company may have against any Lender as a result of any default by such Lender hereunder. D. The Register. (i) Administrative Agent shall maintain, at its address referred to in subsection 10.8, a register for the recordation of the names and addresses of Lenders and the Commitments and Loans of each Lender from time to time (the "Register"). The 41 Register shall be available for inspection by Company or any Lender at any reasonable time and from time to time upon reasonable prior notice. (ii) Administrative Agent shall record in the Register the Tranche A Term Loan Commitment, Tranche B Term Loan Commitment, Tranche C Term Loan Commitment, Revolving Sterling Loan Commitment and Revolving Loan Commitment and the Term Loans and Revolving Loans from time to time of each Lender, the Swing Line Loan Commitment and the Swing Line Loans from time to time of Swing Line Lender, and each repayment or prepayment in respect of the principal amount of the Term Loans or Revolving Loans of each Lender or the Swing Line Loans of Swing Line Lender. Any such recordation shall be conclusive and binding on Company and each Lender, absent manifest error; provided that failure to make any such recordation, or any error in such -------- recordation, shall not affect any Lender's commitments or Company's Obligations in respect of any applicable Loans. (iii) Each Lender shall record on its internal records (including the Notes, if any, held by such Lender) the amount of the Term Loans and each Revolving Loan made by it and each payment in respect thereof. Any such recordation shall be conclusive and binding on Company, absent manifest error; provided that failure to make any such recordation, or any error in -------- such recordation, shall not affect any Lender's Commitments or Company's Obligations in respect of any applicable Loans; and provided, further that -------- ------- in the event of any inconsistency between the Register and any Lender's records, the recordations in the Register shall govern. (iv) Company, Administrative Agent and Lenders shall deem and treat the Persons listed as Lenders in the Register as the holders and owners of the corresponding Commitments and Loans listed therein for all purposes hereof, and no assignment or transfer of any such Commitment or Loan shall be effective, in each case unless and until an Assignment Agreement effecting the assignment or transfer thereof shall have been accepted by Administrative Agent and recorded in the Register as provided in subsection 10.1B(ii). Prior to such recordation, all amounts owed with respect to the applicable Commitment or Loan shall be owed to the Lender listed in the Register as the owner thereof, and any request, authority or consent of any Person who, at the time of making such request or giving such authority or consent, is listed in the Register as a Lender shall be conclusive and binding on any subsequent holder, assignee or transferee of the corresponding Commitments or Loans. (v) Company hereby designates Administrative Agent to serve as Company's agent solely for purposes of maintaining the Register as provided in this subsection 2.1D, and Company hereby agrees that, to the extent Administrative Agent serves in such capacity, Administrative Agent and its officers, directors, employees, agents and affiliates shall constitute Indemnitees for all purposes under subsection 10.3. E. Optional Notes. On the Closing Date, and if so requested by any Lender by written notice to Company (with a copy to Administrative Agent) or at any time thereafter, Company shall execute and deliver to such Lender (and/or, if applicable and if so specified in such notice, to any Person who is an assignee of such Lender pursuant to subsection 10.1) on the 42 Closing Date (or, if such notice is delivered after the Closing Date, promptly after Company's receipt of such notice) a promissory note or promissory notes to evidence such Lender's Tranche A Term Loan, Tranche B Term Loan, Tranche C Term Loan, Revolving Loans or Swing Line Loans, as the case may be, substantially in the form of Exhibit V, Exhibit VI, Exhibit VII, Exhibit V or Exhibit VIII --------- ---------- ----------- --------- ------------ annexed hereto, respectively, with appropriate insertions. Administrative Agent may deem and treat the payee of any Note as the owner thereof for all purposes hereof unless and until an Assignment Agreement effecting the assignment or transfer thereof shall have been accepted by Administrative Agent as provided in subsection 10.1B(ii). Any request, authority or consent of any person or entity who, at the time of making such request or giving such authority or consent, is the holder of any Note shall be conclusive and binding on any subsequent holder, assignee or transferee of that Note or of any Note or Notes issued in exchange therefor. 2.2 Interest on the Loans. --------------------- A. Rate of Interest. Subject to the provisions of subsections 2.6 and 2.7, each Term Loan and each Revolving Loan shall bear interest on the unpaid principal amount thereof from the date made through maturity (whether by acceleration or otherwise) at a rate determined by reference to (a) in the case of Revolving Dollar Loans, the Dollar Base Rate or the Adjusted Eurodollar Rate, as the case may be, and (b) in the case of Revolving Sterling Loans, the Adjusted Domestic Sterling Rate. Subject to the provisions of subsection 2.7, each Swing Line Loan shall bear interest on the unpaid principal amount thereof from the date made through maturity (whether by acceleration or otherwise) at a rate determined by reference to the Dollar Base Rate. The applicable basis for determining the rate of interest with respect to any Term Loan or any Revolving Loan shall be selected by Company initially at the time a Notice of Borrowing is given with respect to such Loan pursuant to subsection 2.1B, and the basis for determining the interest rate with respect to any Term Loan or any Revolving Dollar Loan may be changed from time to time pursuant to subsection 2.2D. If on any day a Term Loan or Revolving Dollar Loan is outstanding with respect to which notice has not been delivered to Administrative Agent in accordance with the terms of this Agreement specifying the applicable basis for determining the rate of interest, then for that day that Loan shall bear interest determined by reference to the Dollar Base Rate. (i) Subject to the provisions of subsections 2.2E and 2.7, the Tranche A Term Loans and the Revolving Loans shall bear interest through maturity as follows: (a) if a Base Rate Loan, then (1) for the period from and including the Closing Date to and excluding the date on which Administrative Agent receives a Compliance Certificate pursuant to subsection 6.1(iii) for the Fiscal Quarter ended July 31, 2000, at the sum of the Dollar Base Rate plus 1.75% and (2) thereafter, at the sum ---- of the Dollar Base Rate plus the appropriate Applicable Margin; or ---- (b) if a Eurodollar Rate Loan, then (1) for the period from and including the Closing Date to and excluding the date on which Administrative Agent receives a Compliance Certificate pursuant to subsection 6.1(iii) for the Fiscal Quarter ended July 31, 2000, at the sum of the Adjusted Eurodollar Rate 43 plus 2.75% and (2) thereafter, at the sum of the Adjusted Eurodollar ---- Rate plus the appropriate Applicable Margin; or (c) if a Domestic Sterling Rate Loan, then, (1) for the period from and including the Closing Date to and excluding the date on which Administrative Agent receives a Compliance Certificate pursuant to subsection 6.1(iii) for the Fiscal Quarter ended July 31, 2000, at the sum of the Adjusted Domestic Sterling Rate, plus 2.75% and (2) ---- thereafter at the sum of the Adjusted Domestic Sterling Rate, plus the ---- appropriate Applicable Margin. (ii) Subject to the provisions of subsections 2.2E and 2.7, the Tranche B Term Loans shall bear interest through maturity as follows: (a) if a Base Rate Loan, then (1) for the period from and including the Closing Date to and excluding the date on which Administrative Agent receives a Compliance Certificate pursuant to subsection 6.1(iii) for the Fiscal Quarter ended July 31, 2000, at the sum of the Dollar Base Rate plus 2.25% and (2) thereafter, at the sum of the Dollar Base Rate plus the appropriate Applicable Margin; or ---- (b) If a Eurodollar Rate Loan, then (1) for the period from and including the Closing Date to and excluding the date on which Administrative Agent receives a Compliance Certificate pursuant to subsection 6.1(iii) for the Fiscal Quarter ended July 31, 2000, at the sum of the Adjusted Eurodollar Rate plus 3.25% and (2) thereafter, at ---- the sum of the Adjusted Eurodollar Rate plus the appropriate ---- Applicable Margin. (iii) Subject to the provisions of subsections 2.2E and 2.7, the Tranche C Term Loans shall bear interest through maturity as follows: (a) if a Base Rate Loan, then (1) for the period from and including the Closing Date to and excluding the date on which Administrative Agent receives a Compliance Certificate pursuant to subsection 6.1(iii) for the Fiscal Quarter ended July 31, 2000, at the sum of the Dollar Base Rate plus 2.50% and (2) thereafter, at the sum ---- of the Dollar Base Rate plus the appropriate Applicable Margin; or ---- (b) if a Eurodollar Rate Loan, then (1) for the period from and including the Closing Date to and excluding the date on which Administrative Agent receives a Compliance Certificate pursuant to subsection 6.1(iii) for the Fiscal Quarter ended July 31, 2000, at the sum of the Adjusted Eurodollar Rate plus 3.50% and (2) thereafter, at ---- the sum of the Adjusted Eurodollar Rate plus the appropriate ---- Applicable Margin. (iv) Subject to the provisions of subsections 2.2E and 2.7, the Swing Line Loans shall bear interest through maturity (a) for the period from and including the Closing Date to and excluding the date on which Administrative Agent receives a Compliance Certificate pursuant to subsection 6.1(iii) for the Fiscal Quarter ended July 31, 2000, at the sum of the Dollar Base Rate plus 1.75% and (b) thereafter, at the sum of the ---- Dollar Base Rate plus the Applicable Margin with respect to Revolving ---- Dollar 44 Loans that are Base Rate Loans. The Applicable Margin shall be determined on the first day of the calendar month following the delivery of each Compliance Certificate pursuant to subsection 6.1(iii), commencing with the Compliance Certificate for the Fiscal Quarter ended July 31, 2000, by reference to such Compliance Certificate (without regard to any subsequent corrections to reflect year-end audit adjustments). The appropriate Applicable Margin so determined shall apply to all Loans for the period from and including the date of determination to and excluding the first day of the calendar month following the delivery of the next Compliance Certificate; provided, however, that (1) if the Company fails to -------- ------- deliver any Compliance Certificate in a timely manner pursuant to subsection 6.1(iii) or (2) upon the occurrence and during the continuation of any Event of Default, the highest percentage per annum set forth in the definition of the appropriate Applicable Margin shall apply to all Loans for the period from and including the first day of the calendar month following the date on which such Compliance Certificate was required to be delivered to and excluding the date on which Administrative Agent receives such Compliance Certificate or during the continuation of such Event of Default, as the case may be. B. Interest Periods. In connection with each Eurodollar Rate Loan or Domestic Sterling Rate Loan, as the case may be, Company may, pursuant to the applicable Notice of Borrowing or Notice of Conversion/Continuation, as the case may be, select an interest period (each an "Interest Period") to be applicable to such Loan, which Interest Period shall be, at Company's sole option, either a one, two, three, or six month or, if available to all Lenders, twelve month period; provided that: -------- (i) the initial Interest Period for any Eurodollar Rate Loan or Domestic Sterling Rate Loan, as the case may be, shall commence on the Funding Date in respect of such Loan, in the case of a Loan initially made as a Eurodollar Rate Loan or Domestic Sterling Rate Loan, as the case may be, or on the date specified in the applicable Notice of Conversion/Continuation, in the case of a Loan converted to a Eurodollar Rate Loan; (ii) in the case of immediately successive Interest Periods applicable to a Eurodollar Rate Loan or Domestic Sterling Rate Loan, as the case may be, continued as such pursuant to a Notice of Conversion/Continuation, each successive Interest Period shall commence on the day on which the next preceding Interest Period expires; (iii) if an Interest Period would otherwise expire on a day that is not a Business Day, such Interest Period shall expire on the next succeeding Business Day; provided that, if any Interest Period would -------- otherwise expire on a day that is not a Business Day but is a day of the month after which no further Business Day occurs in such month, such Interest Period shall expire on the next preceding Business Day; (iv) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (v) of this subsection 2.2B, end on the last Business Day of a calendar month; 45 (v) no Interest Period with respect to any portion of the Tranche A Term Loans shall extend beyond the Tranche A Term Loan Maturity Date, no Interest Period with respect to any portion of the Tranche B Term Loans shall extend beyond the Tranche B Term Loan Maturity Date, no Interest Period with respect to any portion of the Tranche C Term Loans shall extend beyond the Tranche C Term Loan Maturity Date and no Interest Period with respect to any portion of the Revolving Loans shall extend beyond the Revolving Loan Commitment Termination Date; (vi) no Interest Period with respect to any portion of the Tranche A Term Loans, Tranche B Term Loans or Tranche C Term Loans shall extend beyond a date on which Company is required to make a scheduled payment of principal of the Tranche A Term Loans, Tranche B Term Loans or Tranche C Term Loans, as the case may be, unless the sum of (a) the aggregate principal amount of Tranche A Term Loans, Tranche B Term Loans or Tranche C Term Loans, as the case may be, that are Base Rate Loans plus (b) the ---- aggregate principal amount of Tranche A Term Loans, Tranche B Term Loans or Tranche C Term Loans, as the case may be, that are Eurodollar Rate Loans with Interest Periods expiring on or before such date equals or exceeds the principal amount required to be paid on the Tranche A Term Loans, Tranche B Term Loans or Tranche C Term Loans, as the case may be, on such date; (vii) there shall be no more than ten Interest Periods outstanding at any time; and (viii) in the event Company fails to specify an Interest Period for any Eurodollar Rate Loan or Domestic Sterling Rate Loan in the applicable Notice of Borrowing or Notice of Conversion/Continuation, Company shall be deemed to have selected an Interest Period of one month. C. Interest Payments. Subject to the provisions of subsection 2.2E, interest on each Loan shall be payable in arrears on and to each Interest Payment Date applicable to that Loan, upon any prepayment of that Loan (to the extent accrued on the amount being prepaid), upon any conversion of a Loan from a Loan bearing interest at a rate determined by reference to one basis to a Loan bearing interest at a rate determined by reference to an alternative basis and at maturity (including final maturity); provided that in the event any Revolving Dollar Loans that are Base Rate Loans are prepaid pursuant to subsection 2.4B(i), interest accrued on such Swing Line Loans or Revolving Dollar Loans through the date of prepayment shall be payable on the next succeeding Interest Payment Date applicable to Base Rate Loans (or, if earlier, at final maturity). D. Conversion or Continuation. Subject to the provisions of subsection 2.6, Company shall have the option (i) to convert at any time all or any part of its outstanding Term Loans equal to or in excess of $5,000,000 or all or any part of its outstanding Revolving Dollar Loans equal to $5,000,000 and integral multiples of $1,000,000 in excess of that amount from Loans bearing interest at a rate determined by reference to one basis to Loans bearing interest at a rate determined by reference to an alternative basis or (ii) upon the expiration of any Interest Period applicable to a Eurodollar Rate Loan or Domestic Sterling Rate Loan, to continue all or any portion of such Loan equal to (x) in the case of Eurodollar Rate Loans, any amount equal to or in excess of $5,000,000 as a Eurodollar Rate Loan or (y) in the case of Domestic Sterling Rate 46 Loans, (Pounds)2,500,000 and integral multiples of (Pounds)1,000,000 in excess of that amount as a Domestic Sterling Rate Loan; provided, however, that a -------- ------- Eurodollar Rate Loan may only be converted into a Base Rate Loan on the expiration date of an Interest Period applicable thereto. Revolving Dollar Loans may not be converted into Revolving Sterling Loans and Revolving Sterling Loans may not be converted into Revolving Dollar Loans. Company shall deliver a Notice of Conversion/Continuation to Administrative Agent no later than 9:00 A.M. (San Francisco time) at least (i) one Business Day in advance of the proposed conversion date (in the case of a conversion to a Base Rate Loan), (ii) three Business Days in advance of the proposed conversion/continuation date (in the case of a conversion to, or a continuation of, a Eurodollar Rate Loan) or (iii) four Business Days in advance of the proposed continuation date (in the case of a continuation of a Domestic Sterling Rate Loan). A Notice of Conversion/Continuation shall specify (i) the proposed conversion/continuation date (which shall be a Business Day), (ii) the amount and type of the Loan to be converted/continued, (iii) the nature of the proposed conversion/continuation, (iv) in the case of a conversion to, or a continuation of, a Eurodollar Rate Loan, or in the case of a continuation of a Domestic Sterling Rate Loan, the requested Interest Period, and (v) in the case of a conversion to, or a continuation of, a Eurodollar Rate Loan, or in the case of a continuation of a Domestic Sterling Rate Loan, that no Potential Event of Default or Event of Default has occurred and is continuing. In lieu of delivering the above-described Notice of Conversion/Continuation, Company may give Administrative Agent telephonic notice by the required time of any proposed conversion/continuation under this subsection 2.2D; provided that such notice -------- shall be promptly confirmed in writing by delivery of a Notice of Conversion/Continuation to Administrative Agent on or before the proposed conversion/continuation date. Upon receipt of written or telephonic notice of any proposed conversion/continuation under this subsection 2.2D, Administrative Agent shall promptly transmit such notice by telefacsimile or telephone to each Lender. Neither Administrative Agent nor any Lender shall incur any liability to Company in acting upon any telephonic notice referred to above that Administrative Agent believes in good faith to have been given by a duly authorized officer or other person authorized to act on behalf of Company or for otherwise acting in good faith under this subsection 2.2D, and upon conversion or continuation of the applicable basis for determining the interest rate with respect to any Loans in accordance with this Agreement pursuant to any such telephonic notice Company shall have effected a conversion or continuation, as the case may be, hereunder. Except as otherwise provided in subsections 2.6B, 2.6C and 2.6G, a Notice of Conversion/Continuation for conversion to, or continuation of, a Eurodollar Rate Loan or Domestic Sterling Rate Loan, as the case may be (or telephonic notice in lieu thereof) shall be irrevocable on and after the related Interest Rate Determination Date, and Company shall be bound to effect a conversion or continuation in accordance therewith. E. Default Rate. Upon the occurrence and during the continuation of any Event of Default, the outstanding principal amount of all Loans and, to the extent permitted by applicable law, any interest payments thereon not paid when due and any fees and other amounts then due and payable hereunder, shall thereafter bear interest (including post-petition interest in any proceeding under the Bankruptcy Code or other applicable bankruptcy laws) payable upon 47 demand at a rate that is 2% per annum in excess of the interest rate otherwise payable under this Agreement with respect to the applicable Loans (or, in the case of any such fees and other amounts, at a rate which is 2% per annum in excess of the interest rate otherwise payable under this Agreement for Base Rate Loans); provided that, in the case of Eurodollar Rate Loans, upon the expiration -------- of the Interest Period in effect at the time any such increase in interest rate is effective such Eurodollar Rate Loans shall thereupon become Base Rate Loans and shall thereafter bear interest payable upon demand at a rate which is 2% per annum in excess of the interest rate otherwise payable under this Agreement for Base Rate Loans. Payment or acceptance of the increased rates of interest provided for in this subsection 2.2E is not a permitted alternative to timely payment and shall not constitute a waiver of any Event of Default or otherwise prejudice or limit any rights or remedies of Administrative Agent or any Lender. F. Computation of Interest. Interest on the Loans shall be computed (i) in the case of Base Rate Loans, on the basis of a 365-day or 366-day year, as the case may be, (ii) in the case of Eurodollar Rate Loans, on the basis of a 360-day year, and (iii) in the case of Domestic Sterling Rate Loans, on the basis of a 365-day or 366-day year, as the case may be, in each case for the actual number of days elapsed in the period during which it accrues. In computing interest on any Loan, the date of the making of such Loan or the first day of an Interest Period applicable to such Loan or, with respect to a Base Rate Loan being converted from a Eurodollar Rate Loan, the date of conversion of such Eurodollar Rate Loan to such Base Rate Loan, as the case may be, shall be included, and the date of payment of such Loan or the expiration date of an Interest Period applicable to such Loan or, with respect to a Base Rate Loan being converted to a Eurodollar Rate Loan, the date of conversion of such Base Rate Loan to such Eurodollar Rate Loan, as the case may be, shall be excluded; provided that if a Loan is repaid on the same day on which it is made, one day's - -------- interest shall be paid on that Loan. 2.3 Fees. ---- A. Commitment Fees. Company agrees to pay to Administrative Agent in Dollars, for distribution to each Lender in proportion to that Lender's Pro Rata Share, (i) commitment fees for the period from and including the Closing Date to and excluding the Revolving Loan Commitment Termination Date equal to the average of the daily excess of the Revolving Loan Commitments over the sum of the Dollar Equivalent of (a) the aggregate principal amount of outstanding Revolving Loans and Swing Line Loans plus (b) the Letter of Credit Usage and ---- (ii) commitment fees for the period from and including the Closing Date to and excluding the Merger Date equal to the excess of the Tranche A Term Loan Commitment over the aggregate principal amount of outstanding Tranche A Term Loans, in each case, multiplied by (a) for the period from and including the ------------- Closing Date to and excluding the date on which Administrative Agent receives a Compliance Certificate pursuant to subsection 6.1(iii) for the Fiscal Quarter ended July 31, 2000, 0.50% and (b) thereafter, the appropriate Applicable Commitment Fee Percentage. Such commitment fees shall be calculated on the basis of a 365-day or 366-day year, as the case may be, and the actual number of days elapsed and shall be payable quarterly in arrears on the last Business Day of January, April, July and October of each year, commencing on the first such date to occur after the Closing Date, on the Merger Date and on the Revolving Loan Commitment Termination Date. For purposes of calculating the commitment fees, the aggregate principal amount of the Revolving Sterling Loans (but not any outstanding Swing Line 48 Loans) shall be recalculated in accordance with subsection 2.4D(i) on the last Business Day of each calendar month and on the Funding Date for any Revolving Sterling Loan. Except as provided in the immediately preceding paragraph, the Applicable Commitment Fee Percentage shall be determined on the first day of the calendar month following the delivery of each Compliance Certificate pursuant to subsection 6.1(iii), commencing with the Compliance Certificate for the Fiscal Quarter ended July 31, 2000, by reference to such Compliance Certificate (without regard to any subsequent corrections to reflect year-end audit adjustments). The Applicable Commitment Fee Percentage so determined shall apply for the period from and including the date of determination to and excluding the first day of the calendar month following the delivery of the next Compliance Certificate; provided, however, that (1) if the Company fails to -------- ------- deliver any Compliance Certificate in a timely manner pursuant to subsection 6.1(iii), or (2) upon the occurrence and during the continuation of any Event of Default, the highest percentage per annum set forth in the definition of the Applicable Commitment Fee Percentage shall apply for the period from and including the first day of the calendar month following the date on which such Compliance Certificate was required to be delivered to and excluding the date on which Administrative Agent receives such Compliance Certificate or during the continuation of such Event of Default, as the case may be. B. Other Fees. Company agrees to pay to Administrative Agent the fees described in the letter dated May 3, 1999 from Administrative Agent to Company in the amounts and at the times set forth in such letter or separately agreed upon in writing between Company and Administrative Agent. 2.4 Repayments, Prepayments and Reductions in Revolving Loan Commitments; -------------------------------------------------------------------- General Provisions Regarding Payments. - ------------------------------------- A. Scheduled Payments of Term Loans. (i) Scheduled Payments of Tranche A Term Loans. Company shall make ------------------------------------------ principal payments on the Tranche A Term Loans in quarterly installments on the dates and in the amounts set forth below: Scheduled Repayment Date of Tranche A Term Loans ---- ----------------------- October 31, 1999 $ 3,125,000 January 31, 2000 3,125,000 April 30, 2000 3,125,000 July 31, 2000 3,125,000 October 31, 2000 6,250,000 January 31, 2001 6,250,000 April 30, 2001 6,250,000 July 31, 2001 6,250,000 October 31, 2001 9,375,000 January 31, 2002 9,375,000 April 30, 2002 9,375,000 49 July 31, 2002 9,375,000 October 31, 2002 12,500,000 January 31, 2003 12,500,000 April 30, 2003 12,500,000 July 31, 2003 12,500,000 October 31, 2003 15,625,000 January 31, 2004 15,625,000 April 30, 2004 15,625,000 July 31, 2004 15,625,000 October 31, 2004 15,625,000 January 31, 2005 15,625,000 April 30, 2005 15,625,000 June 9, 2005 15,625,000 ; provided, however, that the scheduled installments of principal of the -------- ------- Tranche A Term Loans set forth above shall be reduced in connection with any voluntary or mandatory prepayments of the Tranche A Term Loans in accordance with subsection 2.4B(iv); and provided, further, that the -------- ------- Tranche A Term Loans and all other amounts owed hereunder with respect to the Tranche A Term Loans shall be paid in full no later than the Tranche A Term Loan Maturity Date, and the final installment payable by Company in respect of the Tranche A Term Loans on such date shall be in an amount, if such amount is different from that specified above, sufficient to repay all amounts owing by Company under this Agreement with respect to the Tranche A Term Loans. (ii) Scheduled Payments of Tranche B Term Loans. Company shall make ------------------------------------------ principal payments on the Tranche B Term Loans in quarterly installments on the dates and in the amounts set forth below: Scheduled Repayment Date of Tranche B Term Loans ---- ----------------------- October 31, 1999 $250,000 January 31, 2000 $250,000 April 30, 2000 $250,000 July 31, 2000 $250,000 October 31, 2000 $250,000 January 31, 2001 $250,000 April 30, 2001 $250,000 July 31, 2001 $250,000 October 31, 2001 $250,000 January 31, 2002 $250,000 April 30, 2002 $250,000 July 31, 2002 $250,000 October 31, 2002 $250,000 January 31, 2003 $250,000 April 30, 2003 $250,000 50 July 31, 2003 $ 250,000 October 31, 2003 $ 250,000 January 31, 2004 $ 250,000 April 30, 2004 $ 250,000 July 31, 2004 $ 250,000 October 31, 2004 $ 250,000 January 31, 2005 $ 250,000 April 30, 2005 $ 250,000 July 31, 2005 $ 250,000 October 31, 2005 $23,500,000 January 31, 2006 $23,500,000 April 30, 2006 $23,500,000 June 9, 2006 $23,500,000 ; provided that the scheduled installments of principal of the Tranche B -------- Term Loans set forth above shall be reduced in connection with any voluntary or mandatory prepayments of the Tranche B Term Loans in accordance with subsection 2.4B(iv); and provided, further that the Tranche -------- ------- B Term Loans and all other amounts owed hereunder with respect to the Tranche B Term Loans shall be paid in full no later than the Tranche B Term Loan Maturity Date, and the final installment payable by Company in respect of the Tranche B Term Loans on such date shall be in an amount, if such amount is different from that specified above, sufficient to repay all amounts owing by Company under this Agreement with respect to the Tranche B Term Loans. (iii) Scheduled Payments of Tranche C Term Loans. Company shall make ------------------------------------------ principal payments on the Tranche C Term Loans in quarterly installments on the dates and in the amounts set forth below: Scheduled Repayment Date of Tranche C Term Loans ---- ----------------------- October 31, 1999 $250,000 January 31, 2000 $250,000 April 30, 2000 $250,000 July 31, 2000 $250,000 October 31, 2000 $250,000 January 31, 2001 $250,000 April 30, 2001 $250,000 July 31, 2001 $250,000 October 31, 2001 $250,000 January 31, 2002 $250,000 April 30, 2002 $250,000 July 31, 2002 $250,000 October 31, 2002 $250,000 January 31, 2003 $250,000 April 30, 2003 $250,000 July 31, 2003 $250,000 51 October 31, 2003 $ 250,000 January 31, 2004 $ 250,000 April 30, 2004 $ 250,000 July 31, 2004 $ 250,000 October 31, 2004 $ 250,000 January 31, 2005 $ 250,000 April 30, 2005 $ 250,000 July 31, 2005 $ 250,000 October 31, 2005 $ 250,000 January 31, 2006 $ 250,000 April 30, 2006 $ 250,000 July 31, 2006 $ 250,000 October 31, 2006 $23,250,000 January 31, 2007 $23,250,000 April 30, 2007 $23,500,000 June 9, 2007 $23,500,000 ; provided that the scheduled installments of principal of the Tranche C -------- Term Loans set forth above shall be reduced in connection with any voluntary or mandatory prepayments of the Tranche C Term Loans in accordance with subsection 2.4B(iv); and provided, further that the Tranche -------- ------- C Term Loans and all other amounts owed hereunder with respect to the Tranche C Term Loans shall be paid in full no later than the Tranche C Term Loan Maturity Date, and the final installment payable by Company in respect of the Tranche C Term Loans on such date shall be in an amount, if such amount is different from that specified above, sufficient to repay all amounts owing by Company under this Agreement with respect to the Tranche C Term Loans. B. Prepayments and Unscheduled Reductions in Revolving Loan Commitments. (i) Voluntary Prepayments. Company may, upon not less than one --------------------- Business Day's prior written or telephonic notice, in the case of Base Rate Loans, and three Business Days' prior written or telephonic notice, in the case of Eurodollar Rate Loans and four Business Days' prior written or telephonic notice, in the case of Domestic Sterling Rate Loans, in each case given to Administrative Agent by 9:00 A.M. (San Francisco time) on the date required and, if given by telephone, promptly confirmed in writing to Administrative Agent (which original written or telephonic notice Administrative Agent will promptly transmit by telefacsimile or telephone to each Lender), at any time and from time to time prepay, without premium or penalty (except as provided in subsection 2.6D), any Term Loans, Revolving Loans or any Swing Line Loan on any Business Day in whole or in part in an aggregate minimum amount of $5,000,000 and integral multiples of $1,000,000 in excess of that amount (in the case of Term Loans and Revolving Dollar Loans) or in an aggregate minimum amount of (Pounds) 2,500,000 and integral multiples of (Pounds) 1,000,000 in excess of that amount (in the case of Revolving Sterling Loans). Notice of prepayment having been given as aforesaid, the principal amount of the Loans specified in such notice shall become due and payable on 52 the prepayment date specified therein. Any such voluntary prepayment shall be applied as specified in subsection 2.4B(iv). (ii) Voluntary Reductions of Revolving Loan Commitments. Company may, upon not less than five Business Days' prior written or telephonic notice confirmed in writing to Administrative Agent (which original written or telephonic notice Administrative Agent will promptly transmit by telefacsimile or telephone to each Lender), at any time and from time to time terminate in whole or permanently reduce in part, without premium or penalty, the Revolving Loan Commitments in an amount up to the amount by which the Revolving Loan Commitments exceed the Total Utilization of Revolving Loan Commitments at the time of such proposed termination or reduction; provided that any such partial reduction of the Revolving Loan -------- Commitments shall be in an aggregate minimum amount of $2,000,000 and integral multiples of $500,000 in excess of that amount (in the case of Revolving Dollar Loan Commitments) or in an aggregate minimum amount of (Pounds)2,500,000 and integral multiples of (Pounds)1,000,000 in excess of that amount (in the case of Revolving Sterling Loan Commitments). Company's notice to Administrative Agent shall designate the date (which shall be a Business Day) of such termination or reduction and the amount of any partial reduction, and such termination or reduction of the Revolving Loan Commitments shall be effective on the date specified in Company's notice and shall reduce the Revolving Loan Commitment of each Lender proportionately to its Pro Rata Share. (iii) Mandatory Prepayments and Mandatory Reductions of Revolving ----------------------------------------------------------- Loan Commitment. The Loans shall be prepaid and/or the Revolving Loan --------------- Commitments shall be permanently reduced in the amounts and under the circumstances set forth below, all such prepayments and/or reductions to be applied as set forth below or as more specifically provided in subsection 2.4B(iv): (a) Prepayments from Net Asset Sale Proceeds. ---------------------------------------- (1) No later than the date of receipt by Company of any Net Asset Sale Proceeds in respect of any sale by Company or Merger Sub of Tendered Shares, Company shall prepay the Term Loans in an aggregate amount equal to such Net Asset Sale Proceeds; provided, however, that nothing contained in this -------- ------- clause (1) shall be construed to permit any sale of assets prohibited by subsection 7.7. (2) No later than the date of receipt by Company or any of its Subsidiaries of any Net Asset Sale Proceeds in respect of any Asset Sale (other than any sale of assets subject to subclause (1) above), Company shall prepay the Loans and/or the Revolving Loan Commitments shall be permanently reduced in an aggregate amount equal to such Net Asset Sale Proceeds; provided; however, that in the event Company notifies -------- ------- Administrative Agent in writing on the date of receipt of such Net Asset Sale Proceeds that Company or such Subsidiary intends to replace any assets to be sold ("Exchange Assets") with assets that are of a nature or type that are used or useful in a business engaged in by Company and its 53 Subsidiaries at the time of any such replacement or any business or activity substantially similar or related thereto, Company shall prepay the Loans and/or the Revolving Loan Commitments shall be permanently reduced in an aggregate amount equal to the excess of (1) the aggregate amount of such Net Asset Sale Proceeds over (2) an amount equal to the amount of cash expected to be expended by Company and its Subsidiaries to acquire such assets during the 360-day period following the date of receipt by Company or any of its Subsidiaries of such Net Asset Sale Proceeds. Any amounts not expended by Company and its Subsidiaries within such 360-day period (or within 18 months following such date of receipt in the event that a binding commitment to acquire assets with such Net Asset Sale Proceeds has been entered into by Company or any of its Subsidiaries during such 360-day period) shall be prepaid pursuant to clause (g) below. Nothing contained in this clause (2) shall be construed to permit any sale of assets prohibited by subsection 7.7. (b) Prepayments and Reductions from Net Insurance/Condemnation ---------------------------------------------------------- Proceeds. No later than the first Business Day following the date of -------- receipt by Administrative Agent or by Company or any of its Subsidiaries of any Net Insurance/Condemnation Proceeds that are required to be applied to prepay the Loans and/or reduce the Revolving Loan Commitments pursuant to the provisions of subsection 6.4C, the Loans shall be prepaid and/or the Revolving Loan Commitments shall be permanently reduced in an aggregate amount equal to the amount of such Net Insurance/Condemnation Proceeds. (c) Prepayments Due to Reversion of Surplus Assets of Pension --------------------------------------------------------- Plans. On the date of return to Company or any of its Subsidiaries of ----- any surplus assets of any pension plan of Company or any of its Subsidiaries, Company shall prepay the Loans and/or reduce the Revolving Loan Commitments in an aggregate amount (such amount being the "Net Pension Proceeds") equal to 100% of such returned surplus assets, net of transaction costs and expenses incurred in obtaining such return, including incremental taxes payable as a result thereof. (d) Prepayments Due to Issuance of Debt Securities. On the ---------------------------------------------- date of receipt by Company of the Cash proceeds (any such Cash proceeds, net of underwriting discounts and commissions and other reasonable costs and expenses associated therewith, including without limitation reasonable legal fees and expenses, being "Net Debt Securities Proceeds") from the issuance of any debt Securities of Company or any of its Subsidiaries after the Closing Date (other than issuances of Indebtedness permitted under subsection 7.1), Company shall prepay the Loans in an aggregate amount equal to 100% of such Net Debt Securities Proceeds. (e) Prepayments Due to Issuance of Equity Securities. On the ------------------------------------------------ date of receipt by Company of the Cash proceeds (any such Cash proceeds, net of underwriting discounts and commissions and other reasonable costs and expenses associated therewith, including without limitation reasonable legal fees and 54 expenses, being "Net Equity Securities Proceeds") from the issuance of any equity Securities of Company or any of its Subsidiaries, or any equity contribution to Company or any of its Subsidiaries, after the Closing Date (other than (1) issuances of equity Securities of Company to directors and employees of Company and its Subsidiaries pursuant to a written employee benefit plan maintained by Company or any of its Subsidiaries, approved by Company's Board of Directors and issuances of equity Securities of Company pursuant to the exercise of options or warrants issued under any such plan, (2) the issuance of Company Series B Preferred Stock to RCBA in the manner contemplated by the Securities Purchase Agreement and (3) issuances of equity Securities of Company, the Net Equity Securities Proceeds of which are applied by Company or its Subsidiaries to the consideration paid by Company or such Subsidiary for Subsequent Acquisitions, provided, that Company shall apply such Net Equity Securities Proceeds to the consideration for such Subsequent Acquisitions during the three-month period following the date of receipt of such Net Equity Securities Proceeds by Company), Company shall prepay the Loans in an aggregate amount equal to 50% of such Net Equity Securities Proceeds. (f) Prepayments from Consolidated Excess Cash Flow. Company ---------------------------------------------- shall, no later than 105 days after the end of (1) any Fiscal Year (commencing with the Fiscal Year ending October 31, 2000) for which the Leverage Ratio as of the last day of such Fiscal Year is less than 4.00 to 1.00, prepay the Term Loans in an aggregate amount equal to 50% of Consolidated Excess Cash Flow, if any, for such Fiscal Year or (2) any other Fiscal Year, prepay the Term Loans in an aggregate amount equal to 75% of Consolidated Excess Cash Flow. (g) Calculations of Net Proceeds Amounts; Additional Prepayments ------------------------------------------------------------ Based on Subsequent Calculations. Concurrently with any prepayment of -------------------------------- the Loans pursuant to subsections 2.4B(iii)(a)-(f), Company shall deliver to Administrative Agent an Officer's Certificate demonstrating the calculation of the amount (the "Net Proceeds Amount") of the applicable Net Asset Sale Proceeds, Net Insurance/Condemnation Proceeds, Net Pension Proceeds, Net Debt Securities Proceeds, Net Equity Securities Proceeds or Consolidated Excess Cash Flow, as the case may be, that gave rise to such prepayment. In the event that Company shall subsequently determine that the actual Net Proceeds Amount was greater than the amount set forth in such Officer's Certificate, Company shall promptly make an additional prepayment of the Loans in an amount equal to the amount of such excess, and Company shall concurrently therewith deliver to Administrative Agent an Officer's Certificate demonstrating the derivation of the additional Net Proceeds Amount resulting in such excess. (h) Prepayments Due to Reductions or Restrictions of Revolving ---------------------------------------------------------- Dollar Loan Commitments. Company shall from time to time prepay the ----------------------- Revolving Loans to the extent necessary to give effect to the limitations set forth in subsection 2.1(A) (vii). 55 (i) Prepayments due to Fluctuations in Currency Exchange ---------------------------------------------------- Rates. Company shall, on the last Business Day of each calendar month ----- that the Dollar Equivalent of the aggregate principal amount of all outstanding Revolving Sterling Loans exceeds the Revolving Sterling Loan Commitments, either (1) prepay the Revolving Sterling Loans or (2) deposit funds into an account satisfactory to Administrative Agent and in which Administrative Agent (on behalf of Lenders) has a First Priority Lien for prepayment on the last day of the Interest Period for such Revolving Sterling Loans, in each case to the extent necessary so that the Total Utilization of Revolving Loan Commitments does not exceed the Revolving Loan Commitments then in effect (iv) Application of Prepayments. -------------------------- (a) Application of Voluntary Prepayments by Type of Loans and --------------------------------------------------------- Order of Maturity. Any voluntary prepayments pursuant to subsection ----------------- 2.4B(i) shall be applied as specified by Company in the applicable notice of prepayment; provided that in the event Company fails to -------- specify the Loans to which any such prepayment shall be applied, such prepayment shall be applied first, to repay outstanding Swing Line ----- Loans to the full extent thereof, second, to repay outstanding ------ Revolving Loans to the full extent thereof and third, to repay ----- outstanding Term Loans to the full extent thereof. Any voluntary prepayments of the Term Loans pursuant to subsection 2.4B(i) shall be applied to prepay the Tranche A Term Loans, Tranche B Term Loans and Tranche C Term Loans on a pro-rata basis (in accordance with the respective outstanding principal amounts thereof) and to reduce the scheduled installments of principal of the Tranche A Term Loans, Tranche B Term Loans and Tranche C Term Loans set forth in subsection 2.4A in order of maturity. (b) Application of Mandatory Prepayments by Type of Loans. Any ----------------------------------------------------- amount (the "Applied Amount") required to be applied as a mandatory prepayment of the Loans pursuant to subsections 2.4B(iii)(a)-(f) shall be applied first, to prepay the Term Loans to the full extent thereof, ----- second, to the extent of any remaining portion of the Applied Amount, ------ to prepay the Swing Line Loans to the full extent thereof and third, ----- to the extent of any remaining portion of the Applied Amount, to prepay the Revolving Loans to the full extent thereof and to permanently reduce the Revolving Loan Commitment by the amount of such prepayment. (c) Application of Mandatory Prepayments of Term Loans to ------------------------------------------------------ Tranche A Term Loans, Tranche B Term Loans and Tranche C Term Loans ------------------------------------------------------------------- and the Scheduled Installments of Principal Thereof. Any mandatory --------------------------------------------------- prepayments of the Term Loans pursuant to subsection 2.4B(iii) shall be applied to prepay the Tranche A Term Loans, the Tranche B Term Loans and the Tranche C Term Loans on a pro rata basis (in accordance with the respective outstanding principal amounts thereof) and to reduce on a pro rata basis the scheduled installments of principal of the Tranche A Term Loans, Tranche B Term Loans and Tranche C Term Loans set forth in subsection 2.4A that are unpaid at the time of such 56 prepayment; provided that, in the case of any such mandatory -------- prepayment of the Tranche B Term Loans or Tranche C Term Loans, Administrative Agent shall, upon receipt of such mandatory prepayment, notify each Tranche B Term Loan Lender and Tranche C Term Loan Lender of such receipt and of the amount of such mandatory prepayment to be applied to such Lender's Tranche B Term Loan or Tranche C Term Loan, as the case may be. In the event any Tranche B Term Loan Lender or Tranche C Term Loan Lender desires to waive such Lender's right to receive such mandatory prepayment, (1) such Lender shall so advise Administrative Agent in writing no later than the close of business on the date it receives such notice from Administrative Agent and (2) upon receipt of such written advice from such Lender, Administrative Agent shall apply the amount so waived by such Lender first, to prepay ----- the Tranche A Term Loans to the full extent thereof and to reduce on a pro rata basis the scheduled installments of principal of the Tranche A Term Loans set forth in subsection 2.4A(i) that are unpaid at the time of such prepayment, second, to prepay the Swing Line Loans to the ------ full extent thereof and third, to prepay the Revolving Loans to the ----- full extent thereof and to permanently reduce the Revolving Loan Commitments by the amount of such prepayment. (d) Application of Prepayments to Base Rate Loans and ------------------------------------------------- Eurodollar Rate Loans. Considering Term Loans and Revolving Dollar --------------------- Loans being prepaid separately, any prepayment thereof shall be applied first to Base Rate Loans to the full extent thereof before application to Eurodollar Rate Loans, in each case in a manner which minimizes the amount of any payments required to be made by Company pursuant to subsection 2.6D. (e) Application of Prepayments to Revolving Dollar Loans and -------------------------------------------------------- Revolving Sterling Loans. Considering Revolving Loans being prepaid at ------------------------ any time, any prepayment thereof shall be allocated between Revolving Dollar Loans and Revolving Sterling Loans as specified by Company or, if no specification is given, in such a manner as to effect ratable percentage reductions in the outstanding principal balances of Revolving Dollar Loans and Revolving Sterling Loans constituting Revolving Loans then outstanding. C. General Provisions Regarding Payments. (i) Manner and Time of Payment. All payments by Company of -------------------------- principal, interest, fees and other Obligations hereunder and under the Notes shall be made in the Applicable Currency in same day funds, without defense, setoff or counterclaim, free of any restriction or condition, and delivered to Administrative Agent not later than 11:00 A.M. (San Francisco time) on the date due at the Funding and Payment Office for the account of Lenders; funds received by Administrative Agent after that time on such due date shall be deemed to have been paid by Company on the next succeeding Business Day. Company hereby authorizes Administrative Agent to charge its accounts with Administrative Agent in order to cause timely payment to be made to Administrative Agent of all principal, interest, fees and expenses due hereunder (subject to sufficient funds being available in its accounts for that purpose). 57 (ii) Application of Payments to Principal and Interest. Except as ------------------------------------------------- provided in subsection 2.2C, payments in respect of the principal amount of any Loan shall include payment of accrued interest on the principal amount being repaid or prepaid, and all such payments (and, in any event, any payments in respect of any Loan on a date when interest is due and payable with respect to such Loan) shall be applied to the payment of interest before application to principal. (iii) Apportionment of Payments. Aggregate principal and interest ------------------------- payments in respect of Term Loans and Revolving Loans shall be apportioned among all outstanding Loans to which such payments relate, in each case proportionately to Lenders' respective Pro Rata Shares. Administrative Agent shall promptly distribute to each Lender, at its primary address set forth below its name on the appropriate signature page hereof or at such other address as such Lender may request, its Pro Rata Share of all such payments received by Administrative Agent and the commitment fees of such Lender when received by Administrative Agent pursuant to subsection 2.3. Notwithstanding the foregoing provisions of this subsection 2.4C(iii), if, pursuant to the provisions of subsection 2.6C, any Notice of Conversion/Continuation is withdrawn as to any Affected Lender or if any Affected Lender makes Base Rate Loans in lieu of its Pro Rata Share of any Eurodollar Rate Loans, Administrative Agent shall give effect thereto in apportioning payments received thereafter. (iv) Payments on Business Days. Whenever any payment to be made ------------------------- hereunder shall be stated to be due on a day that is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of the payment of interest hereunder or of the commitment fees hereunder, as the case may be. (v) Notation of Payment. Each Lender agrees that before disposing ------------------- of any Note held by it, or any part thereof (other than by granting participations therein), that Lender will make a notation thereon of all Loans evidenced by that Note and all principal payments previously made thereon and of the date to which interest thereon has been paid; provided that the failure to make (or any error in the making of) a notation of any Loan made under such Note shall not limit or otherwise affect the obligations of Company hereunder or under such Note with respect to any Loan or any payments of principal or interest on such Note. D. Application of Proceeds of Collateral and Payments Under Subsidiary Guaranty. (i) Application of Proceeds of Collateral. Except as provided in ------------------------------------- subsection 2.4B(iii)(a) with respect to prepayments from Net Asset Sale Proceeds, all proceeds received by Administrative Agent in respect of any sale of, collection from, or other realization upon all or any part of the Collateral under any Collateral Document may, in the discretion of Administrative Agent, be held by Administrative Agent as Collateral for, and/or (then or at any time thereafter) applied in full or in part by Administrative Agent against, the applicable Secured Obligations (as defined in such Collateral Document) in the following order of priority: 58 (a) To the payment of all costs and expenses of such sale, collection or other realization, including reasonable compensation to Administrative Agent and its agents and counsel, and all other expenses, liabilities and advances made or incurred by Administrative Agent in connection therewith, and all amounts for which Administrative Agent is entitled to indemnification under such Collateral Document and all advances made by Administrative Agent thereunder for the account of the applicable Loan Party, and to the payment of all costs and expenses paid or incurred by Administrative Agent in connection with the exercise of any right or remedy under such Collateral Document, all in accordance with the terms of this Agreement and such Collateral Document; (b) thereafter, to the extent of any excess such proceeds, to the payment of all other such Secured Obligations for the ratable benefit of the holders thereof; and (c) thereafter, to the extent of any excess such proceeds, to the payment to or upon the order of such Loan Party or to whosoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct. (ii) Application of Payments Under Subsidiary Guaranty. All ------------------------------------------------- payments received by Administrative Agent under the Subsidiary Guaranty shall be applied promptly from time to time by Administrative Agent in the following order of priority: (a) To the payment of the costs and expenses of any collection or other realization under the Subsidiary Guaranty, including reasonable compensation to Administrative Agent and its agents and counsel, and all expenses, liabilities and advances made or incurred by Administrative Agent in connection therewith, all in accordance with the terms of this Agreement and the Subsidiary Guaranty; (b) thereafter, to the extent of any excess such payments, to the payment of all other Guarantied Obligations (as defined in the Subsidiary Guaranty) for the ratable benefit of the holders thereof; and (c) thereafter, to the extent of any excess such payments, to the payment to the applicable Subsidiary Guarantor or to whosoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct. E. Matters Relating to Changes in Currency Exchange Rates and Conversion of Amounts to Applicable Currencies. (i) Fluctuations in Currency Exchange Rates. The Dollar Equivalent --------------------------------------- of any Revolving Sterling Loans shall be calculated (a) on the Funding Date for such Revolving Sterling Loans and (b) on the last Business Day of each calendar month and such calculation shall remain in effect for purposes of this Agreement until the next date on which an event described in the foregoing clauses (a) and (b) occurs and a recalculation is made. 59 (ii) Conversion of Amounts to Applicable Currencies. To the extent ---------------------------------------------- funds received by Administrative Agent from any Loan Party (or debited from any Loan Party's account with Administrative Agent) in Dollars or in Sterling must be converted into the Applicable Currency required for any payment hereunder, Administrative Agent shall effect such conversion on the applicable payment date on the basis of the rate at which Administrative Agent is able to purchase such Applicable Currency with such other currency on such payment date. 2.5 Use of Proceeds. --------------- A. Term Loans. The proceeds of the Term Loans, together with up to $25,000,000 in proceeds of the initial Revolving Loans (the "Acquisition Revolving Loans"), Letters of Credit in a face amount equal to the aggregate face amount of the Existing Company Letters of Credit and the Existing DMG Letters of Credit and the proceeds of the debt and equity capitalization of Company described in subsection 4.1 shall be applied to (i) purchase the Tendered Shares; (ii) pay Transaction Costs in an aggregate amount not to exceed $42,000,000; and (iii) repay amounts outstanding under the Existing Credit Agreements; provided that Company shall first apply the proceeds from the -------- Tranche C Terms Loans to the full extent thereof then the Tranche B Term Loans to the full extent thereof then the Tranche A Terms Loans to the full extent ---- thereof before application of the Acquisition Revolving Loans. B. Tranche A Term Loans. The proceeds of the Tranche A Term Loans not used pursuant to subsection 2.5A shall be applied to (i) pay that portion of the Acquisition Financing Requirements that becomes due and payable on the Merger Date and (ii) pay Transaction Costs on the Merger Date in an aggregate amount, together with Transaction Costs paid pursuant to subsection 2.5A, not to exceed $42,000,000. C. Revolving Loans; Swing Line Loans. The proceeds of the Acquisition Revolving Loans shall be applied by Company as provided in subsection 2.5A. The proceeds of any other Revolving Loans and any Swing Line Loans shall be applied by Company for working capital purposes, which may include the making of intercompany loans to its Subsidiaries in accordance with subsection 7.3 for their own working capital purposes, for general corporate purposes not prohibited hereby, for payments permitted under subsection 7.5 and for the payment of amounts payable in respect of appraisal rights perfected by any shareholder of DMG. D. Margin Regulations. Based upon the calculation of good faith loan value on the Form U-1 completed by Company and Lenders with respect to the Loans to be made on the Closing Date, no portion of the proceeds of any borrowing under this Agreement shall be used by Company or any of its Subsidiaries in any manner that might cause the borrowing or the application of such proceeds to violate Regulation T, Regulation U or Regulation X of the Board of Governors of the Federal Reserve System or any other regulation of such Board or to violate the Exchange Act, in each case as in effect on the date or dates of such borrowing and such use of proceeds. 2.6 Special Provisions Governing Eurodollar Rate Loans and Domestic Sterling ------------------------------------------------------------------------ Rate Loans. - ---------- 60 Notwithstanding any other provision of this Agreement to the contrary, the following provisions shall govern with respect to Eurodollar Rate Loans and Domestic Sterling Rate Loans as to the matters covered: A. Determination of Applicable Interest Rate. As soon as practicable after 9:00 A.M. (San Francisco time) or 11:00 A.M. (London time), as applicable, on each Interest Rate Determination Date, Administrative Agent shall determine (which determination shall, absent manifest error, be final, conclusive and binding upon all parties) the interest rate that shall apply to the Eurodollar Rate Loans or Domestic Sterling Rate Loans for which an interest rate is then being determined for the applicable Interest Period and shall promptly give notice thereof (in writing or by telephone confirmed in writing) to Company and each Lender. B. Inability to Determine Applicable Interest Rate. In the event that Administrative Agent shall have determined (which determination shall be final and conclusive and binding upon all parties hereto), on any Interest Rate Determination Date with respect to any Eurodollar Rate Loans or Domestic Sterling Rate Loans, that by reason of circumstances affecting the London interbank market adequate and fair means do not exist for ascertaining the interest rate applicable to such Loans on the basis provided for in the definition of Adjusted Eurodollar Rate or Adjusted Domestic Sterling Rate, as the case may be, Administrative Agent shall on such date give notice (by telefacsimile or by telephone confirmed in writing) to Company and each Lender of such determination, whereupon (i) no Loans may be made as, or converted to, Eurodollar Rate Loans or Domestic Sterling Rate Loans until such time as Administrative Agent notifies Company and Lenders that the circumstances giving rise to such notice no longer exist and (ii) any Notice of Borrowing or Notice of Conversion/Continuation given by Company with respect to the Loans in respect of which such determination was made shall be deemed to be rescinded by Company. C. Illegality or Impracticability of Eurodollar Rate Loans or Domestic Sterling Rate Loans. In the event that on any date any Lender shall have determined (which determination shall be final and conclusive and binding upon all parties hereto but shall be made only after consultation with Company and Administrative Agent) that the making, maintaining or continuation of its Eurodollar Rate Loans or Domestic Sterling Rate Loans (i) has become unlawful as a result of compliance by such Lender in good faith with any law, treaty, governmental rule, regulation, guideline or order (or would conflict with any such treaty, governmental rule, regulation, guideline or order not having the force of law even though the failure to comply therewith would not be unlawful) or (ii) has become impracticable, or would cause such Lender material hardship, as a result of contingencies occurring after the date of this Agreement which materially and adversely affect the London interbank market or the position of such Lender in that market, then, and in any such event, such Lender shall be an "Affected Lender" and it shall on that day give notice (by telefacsimile or by telephone confirmed in writing) to Company and Administrative Agent of such determination (which notice Administrative Agent shall promptly transmit to each other Lender). Thereafter (a) the obligation of the Affected Lender to make Loans as, or to convert Loans to, Eurodollar Rate Loans or Domestic Sterling Rate Loans shall be suspended until such notice shall be withdrawn by the Affected Lender, (b) to the extent such determination by the Affected Lender relates to a Eurodollar Rate Loan or Domestic Sterling Rate Loan then being requested by Company pursuant to a Notice of Borrowing or a Notice of Conversion/Continuation, the Affected Lender 61 shall make such Loan as (or convert such Loan to, as the case may be) a Base Rate Loan, (c) the Affected Lender's obligation to maintain its outstanding Eurodollar Rate Loans or Domestic Sterling Rate Loans (the "Affected Loans") shall be terminated at the earlier to occur of the expiration of the Interest Period then in effect with respect to the Affected Loans or when required by law, and (d) the Affected Loans shall automatically convert into Base Rate Loans on the date of such termination. Notwithstanding the foregoing, to the extent a determination by an Affected Lender as described above relates to a Eurodollar Rate Loan or Domestic Sterling Rate Loan then being requested by Company pursuant to a Notice of Borrowing or a Notice of Conversion/Continuation, Company shall have the option, subject to the provisions of subsection 2.6D, to rescind such Notice of Borrowing or Notice of Conversion/Continuation as to all Lenders by giving notice (by telefacsimile or by telephone confirmed in writing) to Administrative Agent of such rescission on the date on which the Affected Lender gives notice of its determination as described above (which notice of rescission Administrative Agent shall promptly transmit to each other Lender). Except as provided in the immediately preceding sentence, nothing in this subsection 2.6C shall affect the obligation of any Lender other than an Affected Lender to make or maintain Loans as, or to convert Loans to, Eurodollar Rate Loans or Domestic Sterling Rate Loans in accordance with the terms of this Agreement. D. Compensation For Breakage or Non-Commencement of Interest Periods. Company shall compensate each Lender, upon written request by that Lender (which request shall set forth the basis for requesting such amounts), for all reasonable losses, expenses and liabilities (including any interest paid by that Lender to lenders of funds borrowed by it to make or carry its Eurodollar Rate Loans and Domestic Sterling Rate Loans and any reasonable loss, expense or liability sustained by that Lender in connection with the liquidation or re- employment of such funds) which that Lender may sustain: (i) if for any reason (other than a default by that Lender) a borrowing of any Eurodollar Rate Loan or Domestic Sterling Rate Loan does not occur on a date specified therefor in a Notice of Borrowing or a telephonic request for borrowing, or a conversion to or continuation of any Eurodollar Rate Loan or Domestic Sterling Rate Loan, does not occur on a date specified therefor in a Notice of Conversion/Continuation or a telephonic request for conversion or continuation, (ii) if any prepayment (including any prepayment pursuant to subsection 2.4B(i) and including any prepayment of any Lender's Eurodollar Rate Loans as a result of the syndication of the Loans on or prior to the date that is 90 days after the Closing Date) or other principal payment or any conversion of any of its Eurodollar Rate Loans occurs on a date prior to the last day of an Interest Period applicable to that Loan, (iii) if any prepayment of any of its Eurodollar Rate Loans or Domestic Sterling Rate Loans is not made on any date specified in a notice of prepayment given by Company, or (iv) as a consequence of any other default by Company in the repayment of its Eurodollar Rate Loans and Domestic Sterling Rate Loans when required by the terms of this Agreement. In the case of Domestic Sterling Rate Loans, such reasonable losses, expenses and liabilities shall also include (i) any loss or reasonable expense sustained or incurred in liquidating or employing deposits from third Persons acquired to effect or maintain such Domestic Sterling Rate Loans, (ii) an amount equal to the excess, if any of (a) the cost sustained by any Lender of obtaining the funds for the Domestic Sterling Rate Loans being prepaid or converted prior to the expiration of the applicable Interest Period for such Domestic Sterling Rate Loans for the period from the date of such prepayment or conversion to the last day of the applicable Interest Period, over (b) the amount of interest (as reasonably determined by that Lender) that would be realized by such Lender in re-employing the funds so prepaid or converted for such Interest Period, (iii) any loss 62 incurred in liquidating or closing out any foreign currency contract undertaken by that Lender in funding or maintaining such Domestic Sterling Rate Loans in funding or maintaining such Domestic Sterling Rate Loans, and (iv) any loss arising from any change in the value of Dollars in relation to any such Domestic Sterling Rate Loans which was not paid on the date due between the date such payment was due and the date of payment, or which was not paid in Sterling, all as determined by such Lender in its good faith discretion, but otherwise without penalty. E. Booking of Eurodollar Rate Loans and Domestic Sterling Rate Loans. Any Lender may make, carry or transfer Eurodollar Rate Loans and Domestic Sterling Rate Loans at, to, or for the account of any of its branch offices or the office of an Affiliate of that Lender. F. Assumptions Concerning Funding of Eurodollar Rate Loans and Domestic Sterling Rate Loans. Calculation of all amounts payable to a Lender under this subsection 2.6 and under subsection 2.7A shall be made as though that Lender had actually funded each of its relevant Eurodollar Rate Loans and Domestic Sterling Rate Loans through the purchase of a Eurodollar deposit or a Sterling deposit, as the case may be, bearing interest at the rate obtained pursuant to clause (i) of the definition of Adjusted Eurodollar Rate or Adjusted Domestic Sterling Rate, as the case may be, in an amount equal to the amount of such Eurodollar Rate Loan or Domestic Sterling Rate Loan and having a maturity comparable to the relevant Interest Period and (y) in the case of a Term Loan or Revolving Dollar Loan, through the transfer of such Eurodollar deposit from an offshore office of that Lender to a domestic office of that Lender in the United States of America, and (z) in the case of a Revolving Sterling Loan, through the making of the relevant Loan at a branch in the United Kingdom; provided, however, that each -------- ------- Lender may fund each of its Eurodollar Rate Loans and Domestic Sterling Rate Loans in any manner it sees fit and the foregoing assumptions shall be utilized only for the purposes of calculating amounts payable under this subsection 2.6 and under subsection 2.7A. G. Eurodollar Rate Loans After Default. After the occurrence of and during the continuation of a Potential Event of Default or an Event of Default, (i) Company may not elect to have a Loan be made or maintained as, or converted to, a Eurodollar Rate Loan after the expiration of any Interest Period then in effect for that Loan and (ii) subject to the provisions of subsection 2.6D, any Notice of Borrowing or Notice of Conversion/Continuation given by Company with respect to a requested borrowing or conversion/continuation that has not yet occurred shall be deemed to be rescinded by Company. 2.7 Increased Costs; Taxes; Capital Adequacy. ---------------------------------------- A. Compensation for Increased Costs and Taxes. Subject to the provisions of subsection 2.7B (which shall be controlling with respect to the matters covered thereby), in the event that any Lender shall reasonably determine (which determination shall, absent manifest error, be final and conclusive and binding upon all parties hereto) that any law, treaty or governmental rule, regulation or order, or any change therein or in the interpretation, administration or application thereof (including the introduction of any new law, treaty or governmental rule, regulation or order), or any determination of a court or governmental authority, in each case that becomes effective after the date hereof, or compliance by such Lender with any guideline, request or directive issued or made after the date hereof by any 63 central bank or other governmental or quasi-governmental authority (whether or not having the force of law): (i) subjects such Lender (or its applicable lending office) to any additional Tax (other than any Tax on the overall net income of such Lender) with respect to this Agreement or any of its obligations hereunder or any payments to such Lender (or its applicable lending office) of principal, interest, fees or any other amount payable hereunder; (ii) imposes, modifies or holds applicable any reserve (including any marginal, emergency, supplemental, special or other reserve), special deposit, compulsory loan, FDIC insurance or similar requirement against assets held by, or deposits or other liabilities in or for the account of, or advances or loans by, or other credit extended by, or any other acquisition of funds by, any office of such Lender (other than any such reserve or other requirements with respect to Eurodollar Rate Loans and Domestic Sterling Rate Loans that are reflected in the definition of Adjusted Eurodollar Rate or Adjusted Domestic Sterling Rate, as the case may be); or (iii) imposes any other condition (other than with respect to a Tax matter) on or affecting such Lender (or its applicable lending office) or its obligations hereunder or the London interbank market; and the result of any of the foregoing is to increase the cost to such Lender of agreeing to make, making or maintaining Loans hereunder or to reduce any amount received or receivable by such Lender (or its applicable lending office) with respect thereto; then, in any such case, Company shall promptly pay to such Lender, upon receipt of the statement referred to in the next sentence, such additional amount or amounts (in the form of an increased rate of, or a different method of calculating, interest or otherwise as such Lender reasonably shall determine) as may be necessary to compensate such Lender for any such increased cost or reduction in amounts received or receivable hereunder; provided, however, that Company shall not be obligated to pay such Lender any - -------- ------- compensation attributable to any period prior to the date that is 90 days prior to the date on which such Lender gave notice to Company of the circumstances entitling such Lender to compensation. Such Lender shall promptly deliver to Company (with a copy to Administrative Agent) a written statement, setting forth in reasonable detail the basis for calculating the additional amounts owed to such Lender under this subsection 2.7A, which statement shall be conclusive and binding upon all parties hereto absent manifest error. B. Withholding of Taxes. (i) Payments to Be Free and Clear. All sums payable by Company ----------------------------- under this Agreement and the other Loan Documents shall (except to the extent required by law) be paid free and clear of, and without any deduction or withholding on account of, any Tax (other than a Tax on the overall net income of any Lender) imposed, levied, collected, withheld or assessed by or within the United States of America or any political subdivision in or of the United States of America or any other jurisdiction from or to which a payment is made by or on behalf of Company or by any federation or 64 organization of which the United States of America or any such jurisdiction is a member at the time of payment. (ii) Grossing-up of Payments. If Company or any other Person is ----------------------- required by law to make any deduction or withholding on account of any such Tax from any sum paid or payable by Company to Administrative Agent or any Lender under any of the Loan Documents: (a) Company shall notify Administrative Agent of any such requirement or any change in any such requirement as soon as Company becomes aware of it; (b) Company shall pay any such Tax before the date on which penalties attach thereto, such payment to be made (if the liability to pay is imposed on Company) for its own account or (if that liability is imposed on Administrative Agent or such Lender, as the case may be) on behalf of and in the name of Administrative Agent or such Lender; (c) the sum payable by Company in respect of which the relevant deduction, withholding or payment is required shall be increased to the extent necessary to ensure that, after the making of that deduction, withholding or payment, Administrative Agent or such Lender, as the case may be, receives on the due date a net sum equal to what it would have received had no such deduction, withholding or payment been required or made; and (d) within 30 days after paying any sum from which it is required by law to make any deduction or withholding, and within 30 days after the due date of payment of any Tax which it is required by clause (b) above to pay, Company shall deliver to Administrative Agent evidence satisfactory to Administrative Agent of such deduction, withholding or payment and of the remittance thereof to the relevant taxing or other authority; provided that no such additional amount shall be required to be paid to any -------- Lender under clause (c) above except to the extent that any change after the date hereof (in the case of each Lender listed on the signature pages hereof) or after the date of the Assignment Agreement pursuant to which such Lender became a Lender (in the case of each other Lender) in any such requirement for a deduction, withholding or payment as is mentioned therein shall result in an increase in the rate of such deduction, withholding or payment from that in effect at the date of this Agreement or at the date of such Assignment Agreement, as the case may be, in respect of payments to such Lender. (iii) Evidence of Exemption from U.S. Withholding Tax. ----------------------------------------------- (a) Each Lender that is organized under the laws of any jurisdiction other than the United States of America or any state or other political subdivision thereof (for purposes of this subsection 2.7B(iii), a "Non-US Lender") shall deliver to Administrative Agent for transmission to Company, on or prior to the Closing Date (in the case of each Lender listed on the signature pages hereof) or 65 on or prior to the date of the Assignment Agreement pursuant to which it becomes a Lender (in the case of each other Lender), and at such other times as may be necessary in the determination of Company or Administrative Agent (each in the reasonable exercise of its discretion), (1) two original copies of Internal Revenue Service Form 1001 or 4224 (or any successor forms), properly completed and duly executed by such Lender, together with any other certificate or statement of exemption required under the Internal Revenue Code or the regulations issued thereunder to establish that such Lender is not subject to deduction or withholding of United States federal income tax with respect to any payments to such Lender of principal, interest, fees or other amounts payable under any of the Loan Documents or (2) if such Lender is not a "bank" or other Person described in Section 881(c)(3) of the Internal Revenue Code and cannot deliver either Internal Revenue Service Form 1001 or 4224 pursuant to clause (1) above, a Certificate re Non-Bank Status substantially in the form of Exhibit XIV annexed hereto together with two original ----------- copies of Internal Revenue Service Form W-8 (or any successor form), properly completed and duly executed by such Lender, together with any other certificate or statement of exemption required under the Internal Revenue Code or the regulations issued thereunder to establish that such Lender is not subject to deduction or withholding of United States federal income tax with respect to any payments to such Lender of interest payable under any of the Loan Documents. (b) Each Lender required to deliver any forms, certificates or other evidence with respect to United States federal income tax withholding matters pursuant to subsection 2.7B(iii)(a) hereby agrees, from time to time after the initial delivery by such Lender of such forms, certificates or other evidence, whenever a lapse in time or change in circumstances renders such forms, certificates or other evidence obsolete or inaccurate in any material respect, that such Lender shall promptly (1) deliver to Administrative Agent for transmission to Company two new original copies of Internal Revenue Service Form 1001 or 4224, or a Certificate re Non-Bank Status and two original copies of Internal Revenue Service Form W-8, as the case may be, properly completed and duly executed by such Lender, together with any other certificate or statement of exemption required in order to confirm or establish that such Lender is not subject to deduction or withholding of United States federal income tax with respect to payments to such Lender under the Loan Documents or (2) notify Administrative Agent and Company of its inability to deliver any such forms, certificates or other evidence. (c) Company shall not be required to pay any additional amount to any Non-US Lender under clause (c) of subsection 2.7B(ii) if such Lender shall have failed to satisfy the requirements of clause (a) or (b)(1) of this subsection 2.7B(iii); provided that if such Lender -------- shall have satisfied the requirements of subsection 2.7B(iii)(a) on the Closing Date (in the case of each Lender listed on the signature pages hereof) or on the date of the Assignment Agreement pursuant to which it became a Lender (in the case of each other Lender), nothing in this subsection 2.7B(iii)(c) shall relieve Company of its 66 obligation to pay any additional amounts pursuant to clause (c) of subsection 2.7B(ii) in the event that, as a result of any change in any applicable law, treaty or governmental rule, regulation or order, or any change in the interpretation, administration or application thereof, such Lender is no longer properly entitled to deliver forms, certificates or other evidence at a subsequent date establishing the fact that such Lender is not subject to withholding as described in subsection 2.7B(iii)(a). C. Capital Adequacy Adjustment. If any Lender shall have determined that the adoption, effectiveness, phase-in or applicability after the date hereof of any law, rule or regulation (or any provision thereof) regarding capital adequacy, or any change therein or in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender (or its applicable lending office) with any guideline, request or directive regarding capital adequacy (whether or not having the force of law) of any such governmental authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on the capital of such Lender or any corporation controlling such Lender as a consequence of, or with reference to, such Lender's Loans or Commitments or Letters of Credit or participations therein or other obligations hereunder with respect to the Loans or the Letters of Credit to a level below that which such Lender or such controlling corporation could have achieved but for such adoption, effectiveness, phase-in, applicability, change or compliance (taking into consideration the policies of such Lender or such controlling corporation with regard to capital adequacy), then from time to time, within five Business Days after receipt by Company from such Lender of the statement referred to in the next sentence, Company shall pay to such Lender such additional amount or amounts as will compensate such Lender or such controlling corporation on an after-tax basis for such reduction; provided, however, that Company shall not be obligated to pay such Lender any - -------- ------- compensation attributable to any period prior to the date that is 90 days prior to the date on which such Lender gave notice to Company of the circumstances entitling such Lender to compensation. Such Lender shall deliver to Company (with a copy to Administrative Agent) a written statement, setting forth in reasonable detail the basis of the calculation of such additional amounts, which statement shall be conclusive and binding upon all parties hereto absent manifest error. 2.8 Obligation of Lenders and Issuing Lenders to Mitigate. ----------------------------------------------------- Each Lender and the Issuing Lender agrees that, as promptly as practicable after the officer of such Lender or Issuing Lender responsible for administering the Loans or Letters of Credit of such Lender or Issuing Lender, as the case may be, becomes aware of the occurrence of an event or the existence of a condition that would cause such Lender to become an Affected Lender or that would entitle such Lender or Issuing Lender to receive payments under subsection 2.7 or subsection 3.6, it will, to the extent not inconsistent with the internal policies of such Lender or Issuing Lender and any applicable legal or regulatory restrictions, use reasonable efforts (i) to make, issue, fund or maintain the Commitments of such Lender or the affected Loans or Letters of Credit of such Lender or Issuing Lender through another lending or letter of credit office of such Lender or Issuing Lender, or (ii) take such other measures as such Lender or Issuing Lender may deem reasonable, if as a result thereof the circumstances which would cause such Lender to be an Affected Lender would cease to exist or the additional amounts which 67 would otherwise be required to be paid to such Lender or Issuing Lender pursuant to subsection 2.7 or subsection 3.6 would be materially reduced and if, as determined by such Lender or Issuing Lender in its sole discretion, the making, issuing, funding or maintaining of such Commitments or Loans or Letters of Credit through such other lending or letter of credit office or in accordance with such other measures, as the case may be, would not otherwise materially adversely affect such Commitments or Loans or Letters of Credit or the interests of such Lender or Issuing Lender; provided that such Lender or Issuing Lender -------- will not be obligated to utilize such other lending or letter of credit office pursuant to this subsection 2.8 unless Company agrees to pay all incremental expenses incurred by such Lender or Issuing Lender as a result of utilizing such other lending or letter of credit office as described in clause (i) above. A certificate as to the amount of any such expenses payable by Company pursuant to this subsection 2.8 (setting forth in reasonable detail the basis for requesting such amount) submitted by such Lender or Issuing Lender to Company (with a copy to Administrative Agent) shall be conclusive absent manifest error. 2.9 Substitution of Lenders. ----------------------- If Company receives a notice from any Lender requesting payment pursuant to subsection 2.7 or 3.6, or the obligation of any Lender to make or maintain Eurodollar Rate Loans or Domestic Sterling Rate Loans has been suspended or terminated pursuant to subsection 2.6C, so long as (i) no Potential Event of Default or Event of Default shall have occurred and be continuing and (ii), in the case of a notice pursuant to subsection 2.7 or 3.6, such Lender is unwilling to withdraw the notice delivered to Company, upon 30 days prior written notice to such Lender and Administrative Agent, Company may require such Lender to assign all of its Loans, Commitments and other Obligations to another Lender or Eligible Assignee from whom Company obtains a commitment to purchase at par the Loans, Commitments and other Obligations of the Lender to be replaced and to assume all obligations of such Lender pursuant to the provisions of subsection 10.1B; provided that prior to or concurrently with such replacement -------- (a) Company has paid to such Lender all amounts, if any, under subsections 2.7 and 3.6 through such date of replacement, (b) Company or the applicable assignee has paid to Administrative Agent the recordation fee required to be paid by subsection 10.1B, and (c) all of the requirements for such assignment contained in subsection 10.1B have been fulfilled. 2.10 European Monetary Union. ----------------------- A. Effectiveness of Provisions. The provisions of subsections 2.10C to 2.10J (inclusive) are hereby effective, provided that, if and to the extent ------------- that any such provision relates to any state (or the currency of such state) which shall not be a Participating Member State on the Commencement of the Third Stage of EMU, such provision shall come into effect in relation to such state (and the currency of such state) on and with effect from the date on which such state becomes a Participating Member State. B. Redenomination and Alternative Currencies. Each obligation under this Agreement of a party to this Agreement which has been denominated in the National Currency Unit of a Participating Member State shall be redenominated into the euro Unit in accordance with EMU Legislation, provided that, if and to ------------- the extent that any EMU Legislation provides that following the Commencement of the Third Stage of EMU an amount denominated either in the 68 euro or in the National Currency Unit of a Participating Member State and payable within that Participating Member State by crediting an account of the creditor can be paid by the debtor either in the euro Unit or in that National Currency Unit, each party to this Agreement shall be entitled to pay or repay any such amount either in the euro Unit or in such National Currency Unit. C. Business Days. In relation to any amount denominated or to be denominated in the euro or a National Currency Unit, any reference to a business day shall be construed as a reference to a day (other than a Saturday or Sunday) on which banks are generally open for business in: (a) London and New York City, and (b) Frankfurt am Main, Germany (or such principal financial center or centers in such Participating Member State or states as the Administrative Agent may from time to time designate for this purpose). D. Advances. Any Revolving Sterling Loan in the currency of a Participating Member State shall be made in the euro Unit. E. Payments to the Administrative Agent. In relation to the payment of any amount of euro Units or National Currency Units to Administrative Agent, such amount shall be made available to the Administrative Agent in immediately available, freely transferable, cleared funds to such account with such bank in Frankfurt am Main, Germany (or such other principal financial center in such Participating Member State as the Administrative Agent may from time to time designate for this purpose) as the Administrative Agent shall from time to time designate for this purpose. F. Payments by the Administrative Agent to the Lenders. Any amount payable by the Administrative Agent to the Lenders under this Agreement in the currency of a Participating Member State shall be paid in the euro Unit. G. Payments by the Administrative Agent. In relation to the payment of any amount denominated in the euro or in a National Currency Unit, the Administrative Agent shall not be liable to Company or any of the Lenders in any way whatsoever for any delay, or the consequences of any delay, in the crediting to any account of any amount required by this Agreement to be paid by the Administrative Agent if the Administrative Agent shall have taken commercially reasonable steps to achieve, on the date required by this Agreement, the payment of such amount in immediately available, freely transferable, cleared funds (in the euro Unit or, as the case may be, in a National Currency Unit) to the account with the bank in the principal financial center in the Participating Member State which Company or, as the case may be, any Bank shall have specified for such purpose. In this subsection 2.10G, "commercially reasonable steps" means such reasonable steps as may be prescribed from time to time by the regulations or operating procedures of such clearing or settlement system as the Administrative Agent may from time to time determine for the purpose of clearing or settling payments of the euro. H. Basis of Accrual. If, in relation to the currency of any state which becomes a Participating Member State, the basis of accrual of interest expressed in this Agreement (i.e., a 69 365-day or 366-day year, as the case may be, or a 360-day year) in respect of such currency shall be inconsistent with any convention or practice in the London Interbank Market for the basis of accrual of interest in respect of the euro, such expressed basis shall be replaced by such convention or practice, effective on the date on which such state becomes a Participating Member State; provided that, if any Revolving Sterling Loan in the currency of such state is - ------------- outstanding immediately prior to such date, such replacement shall take effect, with respect to such Revolving Sterling Loan, at the end of the then current Interest Period. I. Rounding and Other Consequential Changes. In addition to any method of conversion or rounding prescribed by any EMU Legislation and without affecting the respective obligations of Company to the Lenders and the Lenders to Company under or pursuant to this Agreement: (a) each reference in this Agreement to a minimum amount (or an integral multiple thereof) in a National Currency Unit to be paid to or by the Administrative Agent shall be replaced by a reference to such reasonably comparable and convenient amount (or an integral multiple thereof) in the euro Unit as the Administrative Agent may from time to time specify; and (b) except as expressly provided in this subsection 2.10I, each provision of this Agreement shall be subject to such reasonable changes of construction as the Administrative Agent may from time to time determine to be necessary or appropriate to reflect the introduction of or changeover to the euro in the Participating Member States. J. Increased Costs. Company shall, from time to time, at the request of any of the Lenders, pay to the Administrative Agent for the account of such Lender the amount of any cost or increased cost incurred by, or of any reduction in any amount payable to or in the effective return on its capital to, or of interest or other return foregone by, a Lender or any holding company of such Lender that such Lender shall reasonably determine is incurred or sustained by such Lender as a result of the introduction of, changeover to or operation of the euro in any Participating Member State. A certificate of the calculation of such amount or amounts shall be delivered to Company and shall be conclusive absent manifest error. SECTION 3. LETTERS OF CREDIT 3.1 Issuance of Letters of Credit and Lenders' Purchase of Participations --------------------------------------------------------------------- Therein. - ------- A. Letters of Credit. In addition to Company requesting that Lenders make Revolving Loans pursuant to subsections 2.1A(iv) and 2.1A(v) and that Swing Line Lender make Swing Line Loans pursuant to subsection 2.1A(vi), Company may request, in accordance with the provisions of this subsection 3.1, from time to time during the period from the Closing Date to but excluding the Revolving Loan Commitment Termination Date, that the Issuing Lender issue Letters of Credit for the account of Company for the purposes specified in the definition of Letters of Credit. Subject to the terms and conditions of this Agreement and in reliance upon the representations and warranties of Company herein set forth, the Issuing Lender shall issue such Letters of Credit in accordance with the provisions of this subsection 3.1; 70 provided that Company shall not request that the Issuing Lender issue (and the - -------- Issuing Lender shall not issue): (i) any Letter of Credit if, after giving effect to such issuance, the sum of the aggregate principal amount of all outstanding Revolving Dollar Loans (other than Revolving Dollar Loans made for the purpose of reimbursing the Issuing Lender for any amount drawn under any Letter of Credit but not yet so applied) plus the Letter of Credit Usage would exceed ---- the Revolving Dollar Loan Commitments then in effect; (ii) any Letter of Credit if, after giving effect to such issuance, the Letter of Credit Usage would exceed $50,000,000; (iii) any Letter of Credit having an expiration date later than the earlier of (a) the Revolving Loan Commitment Termination Date and (b) the date which is one year from the date of issuance of such Letter of Credit; provided that the immediately preceding clause (b) shall not prevent the -------- Issuing Lender from agreeing that a Letter of Credit will automatically be extended for one or more successive periods not to exceed one year each unless the Issuing Lender elects not to extend for any such additional period; and provided, further that the Issuing Lender shall elect not to -------- ------- extend such Letter of Credit if it has knowledge that an Event of Default has occurred and is continuing (and has not been waived in accordance with subsection 10.6) at the time the Issuing Lender must elect whether or not to allow such extension; or (iv) any Letter of Credit denominated in a foreign currency which in the judgment of Administrative Agent is not readily and freely available. On and after the Closing Date, the Existing Company Letters of Credit shall be deemed for all purposes, including for purposes of the fees to be collected pursuant to subsection 3.2, and reimbursement of costs and expenses to the extent provided herein, to be Letters of Credit outstanding under this Agreement and entitled to the benefits of this Agreement and the other Loan Documents, and shall be governed by the applications and agreements pertaining thereto and by this Agreement; provided, however, that, notwithstanding any -------- ------- other provision of this Agreement, no fees with respect to the issuance of the Existing Company Letters of Credit shall be due hereunder. B. Mechanics of Issuance. (i) Notice of Issuance. Whenever Company desires the issuance of ------------------ a Letter of Credit, it shall deliver to Administrative Agent a Notice of Issuance of Letter of Credit substantially in the form of Exhibit III ----------- annexed hereto no later than 10:00 A.M. (San Francisco time) at least three Business Days, or such shorter period as may be agreed to by the Issuing Lender in any particular instance, in advance of the proposed date of issuance. The Notice of Issuance of Letter of Credit shall specify (a) the proposed date of issuance (which shall be a Business Day), (b) the face amount of the Letter of Credit, (c) in the case of a Letter of Credit which Company requests to be denominated in a currency other than Dollars, the currency in which Company requests such Letter of Credit to be issued, (d) the expiration date of the Letter of Credit, (e) the name and 71 address of the beneficiary, and (f) the verbatim text of the proposed Letter of Credit or the proposed terms and conditions thereof; provided -------- that the Issuing Lender, in its reasonable discretion, may require changes in the text of the proposed Letter of Credit; and provided, further that no -------- ------- Letter of Credit shall require payment against a conforming draft to be made thereunder on the same business day (under the laws of the jurisdiction in which the office of the Issuing Lender to which such draft is required to be presented is located) that such draft is presented if such presentation is made after 10:00 A.M. (in the time zone of such office of the Issuing Lender) on such business day. Company shall notify the Administrative Agent prior to the issuance of any Letter of Credit in the event that any of the matters to which Company is required to certify in the applicable Notice of Issuance of Letter of Credit is no longer true and correct in all material respects as of the proposed date of issuance of such Letter of Credit, and upon the issuance of any Letter of Credit Company shall be deemed to have re- certified, as of the date of such issuance, as to the matters to which Company is required to certify in the applicable Notice of Issuance of Letter of Credit. (ii) Issuance of Letter of Credit. Upon satisfaction or waiver ---------------------------- (in accordance with subsection 10.6) of the conditions set forth in subsection 4.3, the Issuing Lender shall issue the requested Letter of Credit in accordance with the Issuing Lender's standard operating procedures. (iii) Notification to Lenders. Upon the issuance of any Letter of ----------------------- Credit the Administrative Agent shall promptly notify each other Lender of such issuance, which notice shall be accompanied by a copy of such Letter of Credit and shall notify each Lender of the amount of such Lender's respective participation in such Letter of Credit, determined in accordance with subsection 3.1C. C. Lenders' Purchase of Participations in Letters of Credit. Immediately upon the issuance of each Letter of Credit, each Lender shall be deemed to, and hereby agrees to, have irrevocably purchased from the Issuing Lender a participation in such Letter of Credit and any drawings honored thereunder in an amount equal to such Lender's Pro Rata Share of the maximum amount which is or at any time may become available to be drawn thereunder. 3.2 Letter of Credit Fees. --------------------- Company agrees to pay the following amounts with respect to Letters of Credit issued hereunder: (i) with respect to each Letter of Credit, (a) a fronting fee, payable directly to the Issuing Lender for its own account, equal to 0.125% per annum of the amount available to be drawn under such Letter of Credit and (b) a nonrefundable letter of credit fee, payable to Administrative Agent for the account of Lenders, equal to the amount available to be drawn under such Letter of Credit multiplied by (1) for the period from and ---------- including the Closing Date to and excluding the date on which Administrative Agent receives a Compliance Certificate pursuant to subsection 6.1(iii) for the Fiscal Quarter ended July 31, 2000, 2.75% and (2) thereafter, the Applicable Margin with respect to 72 Revolving Dollar Loans that are Eurodollar Rate Loans, each such fronting fee or letter of credit fee to be payable quarterly in advance at issuance and on the last Business Day of each January, April, July and October of each year and computed on the basis of a 360-day year; and (ii) with respect to the issuance, amendment, negotiation or transfer of each Letter of Credit and each payment of a drawing made thereunder (without duplication of the fees payable under clause (i) above), documentary and processing charges payable directly to the Issuing Lender for its own account in accordance with the Issuing Lender's standard schedule for such charges in effect at the time of such issuance, amendment, transfer or payment, as the case may be. For purposes of calculating any fees payable under this subsection 3.2, any amount described in such clauses which is denominated in a currency other than Dollars shall be valued based on the applicable Exchange Rate for such currency as of the applicable date of determination. The Applicable Margin shall be determined on the first day of the calendar month following the delivery of each Compliance Certificate pursuant to subsection 6.1(iii), commencing with the Compliance Certificate for the Fiscal Quarter ended July 31, 2000, by reference to such Compliance Certificate (without regard to any subsequent corrections to reflect year-end audit adjustments). The appropriate Applicable Margin so determined shall apply to all Letters of Credit for the period from and including the date of determination to and excluding the first day of the calendar month following the delivery of the next Compliance Certificate; provided, however, that (1) if the Company fails to deliver any Compliance - -------- ------- Certificate in a timely manner pursuant to subsection 6.1(iii), or (2) upon the occurrence and during the continuation of any Event of Default, the highest percentage per annum set forth in the definition of the appropriate Applicable Margin shall apply for the period from and including the first day of the calendar month following the date on which such Compliance Certificate was required to be delivered to and excluding the date on which Administrative Agent receives such Compliance Certificate or during the continuation of such Event of Default, as the case may be. Promptly upon receipt by Administrative Agent of any amount described in clause (i)(b) of this subsection 3.2, Administrative Agent shall distribute to each Lender its Pro Rata Share of such amount. 3.3 Drawings and Reimbursement of Amounts Paid Under Letters of Credit. ------------------------------------------------------------------ A. Responsibility of Issuing Lender With Respect to Drawings. In determining whether to honor any drawing under any Letter of Credit by the beneficiary thereof, the Issuing Lender shall be responsible only to examine the documents delivered under such Letter of Credit with reasonable care so as to ascertain whether they appear on their face to be in accordance with the terms and conditions of such Letter of Credit. B. Reimbursement by Company of Amounts Paid Under Letters of Credit. In the event the Issuing Lender has determined to honor a drawing under a Letter of Credit issued by it, the Issuing Lender shall immediately notify Company, and Company shall reimburse the Issuing Lender on or before the Business Day immediately following the date on which such drawing is honored (the "Reimbursement Date") in an amount in Dollars (which amount, in the case of a drawing under a Letter of Credit which is denominated in a currency other than Dollars, shall be calculated by reference to the applicable Exchange Rate) and in same day funds equal to 73 the amount of such honored drawing; provided that, anything contained in this Agreement to the contrary notwithstanding, (i) unless Company shall have notified the Issuing Lender prior to 10:00 A.M. (San Francisco time) on the date such drawing is honored that Company intends to reimburse the Issuing Lender for the amount of such honored drawing with funds other than the proceeds of Revolving Dollar Loans, Company shall be deemed to have given a timely Notice of Borrowing to Administrative Agent requesting Lenders to make Revolving Dollar Loans that are Base Rate Loans on the Reimbursement Date in an amount in Dollars (which amount, in the case of a drawing under a Letter of Credit which is denominated in a currency other than Dollars, shall be calculated by reference to the applicable Exchange Rate) equal to the amount of such honored drawing and (ii) subject to satisfaction or waiver of the conditions specified in subsection 4.2B, Lenders shall, on the Reimbursement Date, make Revolving Dollar Loans that are Base Rate Loans in the amount of such honored drawing, the proceeds of which shall be applied directly by Administrative Agent to reimburse the Issuing Lender for the amount of such honored drawing; and provided, further that if for any reason proceeds of Revolving Dollar Loans are not received by the Issuing Lender on the Reimbursement Date in an amount equal to the amount of such honored drawing, Company shall reimburse the Issuing Lender, on demand, in an amount in same day funds equal to the excess of the amount of such honored drawing over the aggregate amount of such Revolving Dollar Loans, if any, which are so received. Nothing in this subsection 3.3B shall be deemed to relieve any Lender from its obligation to make Revolving Dollar Loans on the terms and conditions set forth in this Agreement, and Company shall retain any and all rights it may have against any Lender resulting from the failure of such Lender to make such Revolving Dollar Loans under this subsection 3.3B. C. Payment by Lenders of Unreimbursed Amounts Paid Under Letters of Credit. (i) Payment by Lenders. In the event that Company shall fail for any ------------------ reason to reimburse the Issuing Lender as provided in subsection 3.3B in an amount (calculated, in the case of a drawing under a Letter of Credit denominated in a currency other than Dollars, by reference to the applicable Exchange Rate) equal to the amount of any drawing honored by the Issuing Lender under a Letter of Credit issued by it, the Issuing Lender shall promptly notify each other Lender of the unreimbursed amount of such honored drawing and of such other Lender's respective participation therein based on such Lender's Pro Rata Share. Each Lender shall make available to the Issuing Lender an amount equal to its respective participation, in Dollars and in same day funds, at the office of the Issuing Lender specified in such notice, not later than 11:00 A.M. (San Francisco time) on the first business day (under the laws of the jurisdiction in which such office of the Issuing Lender is located) after the date notified by the Issuing Lender. In the event that any Lender fails to make available to the Issuing Lender on such business day the amount of such Lender's participation in such Letter of Credit as provided in this subsection 3.3C, the Issuing Lender shall be entitled to recover such amount on demand from the Lender together with interest thereon at the rate customarily used by the Issuing Lender for the correction of errors among banks for three Business Days and thereafter at the Dollar Base Rate. Nothing in this subsection 3.3C shall be deemed to prejudice the right of any Lender to recover from the Issuing Lender any amounts made available by such Lender to the Issuing Lender pursuant to this subsection 3.3C in the event that it is determined by the final judgment of a court of competent 74 jurisdiction that the payment with respect to a Letter of Credit by the Issuing Lender in respect of which payment was made by such Lender constituted gross negligence or willful misconduct on the part of the Issuing Lender. (ii) Distribution to Lenders of Reimbursements Received From Company. --------------------------------------------------------------- In the event the Issuing Lender shall have been reimbursed by other Lenders pursuant to subsection 3.3C(i) for all or any portion of any drawing honored by the Issuing Lender under a Letter of Credit issued by it, the Issuing Lender shall distribute to each other Lender which has paid all amounts payable by it under subsection 3.3C(i) with respect to such honored drawing such other Lender's Pro Rata Share of all payments subsequently received by the Issuing Lender from Company in reimbursement of such honored drawing when such payments are received. Any such distribution shall be made to a Lender at its primary address set forth below its name on the appropriate signature page hereof or at such other address as such Lender may request. D. Interest on Amounts Paid Under Letters of Credit. ------------------------------------------------ (i) Payment of Interest by Company. Company agrees to pay to the ------------------------------ Issuing Lender, with respect to drawings honored under any Letters of Credit issued by it, interest on the amount paid by the Issuing Lender in respect of each such honored drawing from the date such drawing is honored to but excluding the date such amount is reimbursed by Company (including any such reimbursement out of the proceeds of Revolving Dollar Loans pursuant to subsection 3.3B) at a rate equal to (a) for the period from the date such drawing is honored to but excluding the Reimbursement Date, the rate then in effect under this Agreement with respect to Revolving Dollar Loans that are Base Rate Loans and (b) thereafter, if and to the extent not fully reimbursed, a rate which is 2% per annum in excess of the rate of interest otherwise payable under this Agreement with respect to Revolving Dollar Loans that are Base Rate Loans. Interest payable pursuant to this subsection 3.3D(i) shall be computed on the basis of a 365-day or 366-day year, as the case may be, for the actual number of days elapsed in the period during which it accrues and shall be payable on demand or, if no demand is made, on the date on which the related drawing under a Letter of Credit is reimbursed in full. (ii) Distribution of Interest Payments by Issuing Lender. Promptly --------------------------------------------------- upon receipt by the Issuing Lender of any payment of interest pursuant to subsection 3.3D(i) with respect to a drawing honored under a Letter of Credit issued by it, (a) the Issuing Lender shall distribute to each other Lender, out of the interest received by the Issuing Lender in respect of the period from the date such drawing is honored to but excluding the date on which the Issuing Lender is reimbursed for the amount of such drawing (including any such reimbursement out of the proceeds of Revolving Dollar Loans pursuant to subsection 3.3B), the amount that such other Lender would have been entitled to receive in respect of the letter of credit fee that would have been payable in respect of such Letter of Credit for such period pursuant to subsection 3.2 if no drawing had been honored under such Letter of Credit, and (b) in the event the Issuing Lender shall have been reimbursed by other Lenders pursuant to subsection 3.3C(i) for all or any portion of such honored drawing, the Issuing Lender shall distribute to each other Lender which has paid all amounts payable by it under subsection 3.3C(i) with respect to such honored 75 drawing such other Lender's Pro Rata Share of any interest received by the Issuing Lender in respect of that portion of such honored drawing so reimbursed by other Lenders for the period from the date on which the Issuing Lender was so reimbursed by other Lenders to but excluding the date on which such portion of such honored drawing is reimbursed by Company. Any such distribution shall be made to a Lender at its primary address set forth below its name on the appropriate signature page hereof or at such other address as such Lender may request. 3.4 Obligations Absolute. -------------------- The obligation of Company to reimburse the Issuing Lender for drawings honored under the Letters of Credit issued by it and to repay any Revolving Dollar Loans made by Lenders pursuant to subsection 3.3B and the obligations of Lenders under subsection 3.3C(i) shall be unconditional and irrevocable and shall be paid strictly in accordance with the terms of this Agreement under all circumstances including any of the following circumstances: (i) any lack of validity or enforceability of any Letter of Credit; (ii) the existence of any claim, set-off, defense or other right which Company or any Lender may have at any time against a beneficiary or any transferee of any Letter of Credit (or any Persons for whom any such transferee may be acting), the Issuing Lender or other Lender or any other Person or, in the case of a Lender, against Company, whether in connection with this Agreement, the transactions contemplated herein or any unrelated transaction (including any underlying transaction between Company or one of its Subsidiaries and the beneficiary for which any Letter of Credit was procured); (iii) 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; (iv) payment by the Issuing Lender under any Letter of Credit against presentation of a draft or other document which does not substantially comply with the terms of such Letter of Credit; (v) any adverse change in the business, operations, properties, assets, condition (financial or otherwise) or prospects of Company or any of its Subsidiaries; (vi) any breach of this Agreement or any other Loan Document by any party thereto; (vii) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing; or (viii) the fact that an Event of Default or a Potential Event of Default shall have occurred and be continuing; provided, in each case, that payment by the Issuing Lender under the applicable - -------- Letter of Credit shall not have constituted gross negligence or willful misconduct of the Issuing Lender under the 76 circumstances in question (as determined by a final judgment of a court of competent jurisdiction). 3.5 Indemnification; Nature of Issuing Lenders' Duties. -------------------------------------------------- A. Indemnification. In addition to amounts payable as provided in subsection 3.6, Company hereby agrees to protect, indemnify, pay and save harmless the Issuing Lender from and against any and all claims, demands, liabilities, damages, losses, costs, charges and expenses (including reasonable fees, expenses and disbursements of counsel and allocated costs of internal counsel) which the Issuing Lender may incur or be subject to as a consequence, direct or indirect, of (i) the issuance of any Letter of Credit by the Issuing Lender, other than as a result of (a) the gross negligence or willful misconduct of the Issuing Lender as determined by a final judgment of a court of competent jurisdiction or (b) subject to the following clause (ii), the wrongful dishonor by the Issuing Lender of a proper demand for payment made under any Letter of Credit issued by it or (ii) the failure of the Issuing Lender to honor a drawing under any such Letter of Credit as a result of any act or omission, whether rightful or wrongful, of any present or future de jure or de facto government or governmental authority (all such acts or omissions herein called "Governmental Acts"). B. Nature of Issuing Lenders' Duties. As between Company and the Issuing Lender, Company assumes all risks of the acts and omissions of, or misuse of the Letters of Credit issued by the Issuing Lender by, the respective beneficiaries of such Letters of Credit. In furtherance and not in limitation of the foregoing, the Issuing Lender shall not be responsible for: (i) the form, validity, sufficiency, accuracy, genuineness or legal effect of any document submitted by any party in connection with the application for and issuance of any such Letter of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any such Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason; (iii) failure of the beneficiary of any such Letter of Credit to comply fully with any conditions required in order to draw upon such Letter of Credit; (iv) errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether or not they be in cipher; (v) errors in interpretation of technical terms; (vi) any loss or delay in the transmission or otherwise of any document required in order to make a drawing under any such Letter of Credit or of the proceeds thereof; (vii) the misapplication by the beneficiary of any such Letter of Credit of the proceeds of any drawing under such Letter of Credit; or (viii) any consequences arising from causes beyond the control of the Issuing Lender, including any Governmental Acts, and none of the above shall affect or impair, or prevent the vesting of, any of the Issuing Lender's rights or powers hereunder. In furtherance and extension and not in limitation of the specific provisions set forth in the first paragraph of this subsection 3.5B, any action taken or omitted by the Issuing Lender under or in connection with the Letters of Credit issued by it or any documents and certificates delivered thereunder, if taken or omitted in good faith, shall not put the Issuing Lender under any resulting liability to Company. 77 Notwithstanding anything to the contrary contained in this subsection 3.5, Company shall retain any and all rights it may have against any Issuing Lender for any liability arising solely out of the gross negligence or willful misconduct of the Issuing Lender, as determined by a final judgment of a court of competent jurisdiction. 3.6 Increased Costs and Taxes Relating to Letters of Credit. ------------------------------------------------------- Subject to the provisions of subsection 2.7B (which shall be controlling with respect to the matters covered thereby), in the event that the Issuing Lender or any Lender shall reasonably determine (which determination shall, absent manifest error, be final and conclusive and binding upon all parties hereto) that any law, treaty or governmental rule, regulation or order, or any change therein or in the interpretation, administration or application thereof (including the introduction of any new law, treaty or governmental rule, regulation or order), or any determination of a court or governmental authority, in each case that becomes effective after the date hereof, or compliance by the Issuing Lender or any Lender with any guideline, request or directive issued or made after the date hereof by any central bank or other governmental or quasi- governmental authority (whether or not having the force of law): (i) subjects the Issuing Lender or any Lender (or its applicable lending or letter of credit office) to any additional Tax (other than any Tax on the overall net income of the Issuing Lender or such Lender) with respect to the issuing or maintaining of any Letters of Credit or the purchasing or maintaining of any participations therein or any other obligations under this Section 3, whether directly or by such being imposed on or suffered by the Issuing Lender; (ii) imposes, modifies or holds applicable any reserve (including any marginal, emergency, supplemental, special or other reserve), special deposit, compulsory loan, FDIC insurance or similar requirement in respect of any Letters of Credit issued by the Issuing Lender or participations therein purchased by any Lender; or (iii) imposes any other condition (other than with respect to a Tax matter) on or affecting the Issuing Lender or any Lender (or its applicable lending or letter of credit office) regarding this Section 3 or any Letter of Credit or any participation therein; and the result of any of the foregoing is to increase the cost to the Issuing Lender or any Lender of agreeing to issue, issuing or maintaining any Letter of Credit or agreeing to purchase, purchasing or maintaining any participation therein or to reduce any amount received or receivable by the Issuing Lender or any Lender (or its applicable lending or letter of credit office) with respect thereto; then, in any case, Company shall promptly pay to the Issuing Lender or any Lender, upon receipt of the statement referred to in the next sentence, such additional amount or amounts as may be necessary to compensate the Issuing Lender or any Lender for any such increased cost or reduction in amounts received or receivable hereunder; provided, however, that Company shall not be -------- ------- obligated to pay the Issuing Lender or such Lender any compensation attributable to any period prior to the date that is 90 days prior to the date on which the Issuing Lender or such Lender gave notice to Company of the circumstance entitling the Issuing Lender or such Lender to compensation. The Issuing Lender or any Lender shall deliver to Company a written statement, setting forth in reasonable detail the basis for calculating 78 the additional amounts owed to the Issuing Lender or any Lender under this subsection 3.6, which statement shall be conclusive and binding upon all parties hereto absent manifest error. SECTION 4. CONDITIONS TO LOANS AND LETTERS OF CREDIT 4.1 Conditions to Initial Term Loans and the Acquisition Revolving Loans. --------------------------------------------------------------------- The obligations of Lenders to make the initial Term Loans and the Acquisition Revolving Loans to be made on the Closing Date are, in addition to the conditions precedent specified in subsection 4.3, subject to prior or concurrent satisfaction of the following conditions: A. Closing Date Loan Party Documents. On or before the Closing Date, Company shall, and shall cause each Closing Date Loan Party to, deliver to Administrative Agent with sufficient originally executed copies, where appropriate, for each Lender and its counsel the following with respect to Company or each such Closing Date Loan Party, as the case may be, each, unless otherwise noted, dated the Closing Date: (i) Certified copies of the Organizational Documents of such Person, together with a good standing certificate from the Secretary of State of its jurisdiction of organization and, to the extent generally available, a certificate or other evidence of good standing as to payment of any applicable franchise or similar taxes from the appropriate taxing authority of such jurisdiction, each dated a recent date prior to the Closing Date; (ii) Copies of the Bylaws of such Person, certified as of the Closing Date by such Person's corporate secretary or an assistant secretary; (iii) Resolutions of the Board of Directors of such Person approving and authorizing the execution, delivery and performance of the Closing Date Loan Documents and Related Agreements to which it is a party, and approving and authorizing the consummation of the Tender Offer and the Merger in the manner contemplated by the Tender Offer Materials, certified as of the Closing Date by the corporate secretary or an assistant secretary of such Person as being in full force and effect without modification or amendment; (iv) Signature and incumbency certificates of the officers of such Person executing the Closing Date Loan Documents and the Related Agreements to which it is a party; (v) Executed originals of the Closing Date Loan Documents to which such Person is a party; and (vi) Such other documents as Administrative Agent may reasonably request. B. Foreign Subsidiary Documents. On or before the Closing Date, Company shall cause each of the Foreign Subsidiaries of URS the Capital Stock of which constitutes Pledged Collateral to deliver to Administrative Agent (with sufficient originally executed copies, where appropriate, for each Lender and its counsel) copies of the charter documents of such Subsidiary, certified as of the Closing Date by such Subsidiary's corporate secretary or an assistant secretary. 79 C. Corporate and Capital Structure. (i) Corporate Structure. The corporate organizational structure of ------------------- Company and its Subsidiaries, immediately after giving effect to the Tender Offer, shall be as set forth on Schedule 4.1C of the Closing Date Company ------------- Disclosure Letter. (ii) Capital Structure and Ownership. The capital structure and ------------------------------- ownership of Company and its Subsidiaries, immediately after giving effect to the Tender Offer, shall be as set forth on Schedule 4.1C of the Closing ------------- Date Company Disclosure Letter. D. Proceeds of Debt and Equity Capitalization of Company. (i) Debt and Equity Capitalization of Company. On or before the ----------------------------------------- Closing Date, (a) RCBA shall have purchased all of the outstanding Company Series A Preferred Stock and Company Series C Preferred Stock for cash consideration of $100,000,000 and (b) Company shall have issued and sold not less than $200,000,000 in aggregate principal amount of Senior Subordinated Notes or Bridge Notes. (ii) Use of Proceeds by Company. Company shall have provided evidence -------------------------- satisfactory to Administrative Agent that the proceeds of the debt and equity capitalization of Company described in the immediately preceding clause (i) have been applied, prior to or simultaneously with the application of the proceeds of the Term Loans and the Acquisition Revolving Loans, to the purchase of the Tendered Shares. E. Tendered Shares. The Tendered Shares purchased on the Closing Date shall represent the Minimum Shares, and Company and DMG shall have delivered to Administrative Agent an Officers' Certificate to such effect. F. Maximum Consideration for Tendered Shares. The aggregate consideration for the Tendered Shares to be acquired on the Closing Date shall not exceed $305,000,000. G. Maximum Transaction Costs. Administrative Agent shall have received evidence satisfactory to it that the Transaction Costs will not exceed $42,000,000. H. Related Agreements and Tender Offer Materials. (i) Form of Bridge Loan Agreement or Senior Subordinated Note --------------------------------------------------------- Indenture. The Bridge Loan Agreement shall incorporate the terms contained --------- in that certain commitment letter dated May 3, 1999 by and between Company and Morgan Stanley & Co. Incorporated with such changes thereto, if any, that have been approved by Administrative Agent and Requisite Lenders or that would otherwise have been permitted to be made pursuant to subsection 7.13B if the Bridge Notes were issued and outstanding at the time of any such change or the Senior Subordinated Note Indenture shall be in form and substance satisfactory to Requisite Lenders. (ii) Tender Offer Materials. Administrative Agent shall have received ---------------------- a copy of all Tender Offer Materials and other documents filed by Company and DMG with the Securities and Exchange Commission. 80 (iii) Related Agreements in Full Force and Effect. Each Related ------------------------------------------- Agreement shall be in full force and effect and no provision thereof shall have been modified or waived in any respect determined by Administrative Agent to be material, in each case without the consent of Administrative Agent and Requisite Lenders. Administrative Agent shall have received an executed copy of all Related Agreements, certified as of the Closing Date by the corporate secretary or an assistant secretary. (iv) Officer's Certificates. Administrative Agent shall have ---------------------- received an Officers' Certificate from DMG to the effect that the representations and warranties pertaining to DMG in the Merger Agreement are true, correct and complete in all material respects on and as of the Closing Date to the same extent as though made on and as of that date (or, to the extent such representations and warranties specifically relate to an earlier date, that such representations and warranties were true, correct and complete in all material respects on and as of such earlier date). Administrative Agent shall have received Officers' Certificates from each of the parties to the Merger Agreement to the effect that (a) the Merger Agreement is in full force and effect and no provision thereof shall have been modified or waived in any respect determined by Administrative Agent to be material without the consent of Administrative Agent and Requisite Lenders and (b) each such party has complied with all agreements and conditions contained in the Merger Agreement and any agreements or documents referred to therein required to be performed or complied with by each of them on or before the Closing Date and none of such corporations shall be in default in the performance or compliance with any of the terms or provisions thereof. I. Annualized Combined EBITDA. The sum of (a) Consolidated EBITDA for URS and its Subsidiaries (determined in accordance with the definition of Consolidated EBITDA substituting "URS and its Subsidiaries" for "Company and its Subsidiaries" in the component definitions used therein) for the twelve-month period ended April 30, 1999 plus (b) Consolidated EBITDA for DMG and its ---- Subsidiaries (determined in accordance with the definition of Consolidated EBITDA substituting "DMG and its Subsidiaries" for "Company and its Subsidiaries" in the component definitions used therein) for the six-month period ended March 26, 1999 multiplied by 2 shall not be less than $143,000,000 ---------- and Company shall deliver to Administrative Agent the Closing Date Compliance Certificate demonstrating in reasonable detail compliance with such restriction. J. Security Interests in Tendered Shares. Administrative Agent shall have received evidence reasonably satisfactory to it that Company and Merger Sub shall have taken or caused to be taken all such actions, executed and delivered or caused to be executed and delivered all such agreements, documents and instruments, and made or caused to be made all such filings and recordings that may be necessary or, in the opinion of Administrative Agent, desirable in order to create in favor of Administrative Agent, for the benefit of Lenders, a valid and perfected First Priority Lien on the Tendered Shares. Such actions shall include the following: (i) Schedules to Collateral Documents. Delivery to Administrative --------------------------------- Agent of accurate and complete schedules to the Pledge and Security Agreement executed by Merger Sub; 81 (ii) Stock Certificates. Delivery to Administrative Agent of ------------------ evidence of the purchase of the Tendered Shares and an acknowledgment executed by the depositary with respect to the Lien of Administrative Agent on the Tendered Shares; and (iii) Form U-1. Delivery to Administrative Agent of a properly -------- completed Form U-1 executed by Merger Sub. K. Security Interests in Personal Property. On or prior to the Closing Date, Administrative Agent shall have received evidence satisfactory to it that Company and Subsidiary Guarantors constituting Closing Date Loan Parties shall have taken or caused to be taken all such actions, executed and delivered or caused to be executed and delivered all such agreements, documents and instruments, and made or caused to be made all such filings and recordings (other than the filing or recording of items described in clause (iii), (iv) and (v) below) that may be necessary or, in the opinion of Administrative Agent, desirable in order to create in favor of Administrative Agent, for the benefit of Lenders, a valid and (upon such filing and recording) perfected First Priority security interest in all Collateral. Such actions shall include the following: (i) Schedules to Collateral Documents. Delivery to Administrative --------------------------------- Agent of accurate and complete schedules to all of the applicable Collateral Documents; (ii) Stock Certificates and Instruments. Delivery to Administrative ---------------------------------- Agent of (a) certificates (which certificates shall be accompanied by irrevocable undated stock powers, duly endorsed in blank and otherwise satisfactory in form and substance to Administrative Agent) representing all Capital Stock required to be pledged pursuant to the Pledge and Security Agreement and the Tender Pledge Agreement on the Closing Date and (b) all promissory notes (duly endorsed, where appropriate, in a manner satisfactory to Administrative Agent) evidencing any intercompany debt required to be pledged pursuant to subsections 7.1(iii) and (iv) on the Closing Date (including the DMG Loan Proceeds Notes); (iii) Lien Searches and UCC Termination Statements. Delivery to -------------------------------------------- Administrative Agent of (a) the results of a recent search, by a Person satisfactory to Administrative Agent, of all effective UCC financing statements and fixture filings and all judgment and tax lien filings which may have been made with respect to any personal or mixed property of any Loan Party, together with copies of all such filings disclosed by such search, and (b) UCC termination statements duly executed by all applicable Persons for filing in all applicable jurisdictions as may be necessary to terminate any effective UCC financing statements or fixture filings disclosed in such search (other than any such financing statements or fixture filings in respect of Liens permitted to remain outstanding pursuant to the terms of this Agreement); (iv) UCC Financing Statements. Delivery to Administrative Agent of ------------------------ UCC financing statements, duly executed by each applicable Closing Date Loan Party with respect to all personal property Collateral of such Closing Date Loan Party, for filing in all jurisdictions as may be necessary or, in the opinion of Administrative Agent, desirable 82 to perfect the security interests created in such Collateral pursuant to the Collateral Documents; and (v) PTO Cover Sheets, Etc. Delivery to Administrative Agent of all --------------------- cover sheets or other documents or instruments required to be filed with the PTO in order to create or perfect Liens in respect of any Intellectual Property Collateral. L. Termination of Existing Credit Agreements and Related Liens; Existing DMG Letters of Credit. (i) As of the Closing Date, Company, DMG and their respective Subsidiaries shall have (a) repaid in full all Indebtedness outstanding under the Existing Credit Agreements, (b) terminated any commitments to lend or make other extensions of credit thereunder, (c) delivered to Administrative Agent all documents or instruments necessary to release all Liens securing Indebtedness or other obligations of DMG and its Subsidiaries thereunder and (d) made arrangements satisfactory to Administrative Agent with respect to the Existing DMG Letters of Credit. (ii) As of the Closing Date, DMG shall execute and deliver the DMG Loan Proceeds Note. M. Matters Relating to Existing Subordinated Indebtedness. On or prior to the Closing Date, Company shall have delivered to Administrative Agent a fully executed or conformed copy of the Existing Subordinated Agreements or an Officer's Certificate stating that since November 14, 1997 there have been no amendments to the Existing Subordinated Agreements. N. Necessary Governmental Authorizations and Consents; Expiration of Waiting Periods, Etc. Company shall have obtained all Governmental Authorizations and all consents of other Persons, in each case that are necessary or advisable in connection with the Tender Offer and the Merger, the other transactions contemplated by the Loan Documents and the Related Agreements, and the continued operation of the business conducted by DMG and its Subsidiaries in substantially the same manner as conducted prior to the consummation of the Tender Offer, and each of the foregoing shall be in full force and effect, in each case other than those the failure to obtain or maintain which, either individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect with respect to Company or DMG. All applicable waiting periods shall have expired without any action being taken or threatened by any competent authority which would restrain, prevent or otherwise impose adverse conditions on the Tender Offer or the Merger or the financing thereof. No action, request for stay, petition for review or rehearing, reconsideration, or appeal with respect to any of the foregoing shall be pending, and the time for any applicable agency to take action to set aside its consent on its own motion shall have expired. O. Financial Statements; Pro Forma Balance Sheet; Projections. On or before the Closing Date, Lenders shall have received from Company (i) audited financial statements of Company and its Subsidiaries for Fiscal Year 1998 and DMG and its Subsidiaries for Fiscal Years 1998 and 1999, in each case consisting of a consolidated balance sheet and the related 83 consolidated statements of income, stockholders' equity and cash flows for such Fiscal Years, (ii) unaudited financial statements of Company and its Subsidiaries for each of the Fiscal Quarters prior to the Closing Date and for which financial statements are available, consisting of a consolidated balance sheet and the related consolidated statements of income and cash flows for the period ending on each such date, all in reasonable detail and certified by the chief financial officer of Company that they fairly present, in all material respects, the financial condition of Company and its Subsidiaries as at the dates indicated and the results of their operations and their cash flows for the periods indicated, subject to changes resulting from audit and normal year-end adjustments, (iii) unaudited financial statements of DMG and its Subsidiaries for each of the Fiscal Quarters ended June 26, 1998, September 25, 1998, December 25, 1998 and each of the Fiscal Quarters ended following March 26, 1999 and prior to the Closing Date and for which financial statements are available, consisting of a consolidated balance sheet and the related consolidated statements of income and cash flows for the period ending on each such date, all in reasonable detail and certified by the chief financial officer of DMG that they fairly present, in all material respects, the financial condition of DMG and its Subsidiaries as at the dates indicated and the results of their operations and their cash flows for the periods indicated, subject to changes resulting from audit and normal year-end adjustments, (iv) a pro forma consolidated balance sheet of Company and its Subsidiaries as at the Closing Date, prepared in accordance with GAAP and reflecting the consummation of the Tender Offer and the Merger, the related financings and the other transactions contemplated by the Loan Documents and the Related Agreements, which pro forma financial statement shall be in form and substance satisfactory to Lenders, and (v) a statement of sources and uses of funds with respect to the Tender Offer and Merger. There shall have been no change in the Projections. P. No Material Adverse Effect. Since October 31, 1998, no Material Adverse Effect with respect to URS shall have occurred. Since December 25, 1998 no Material Adverse Effect with respect to DMG shall have occurred. Q. Solvency Assurances. A Financial Condition Certificate dated the Closing Date, substantially in the form of Exhibit XVIII annexed hereto and with appropriate attachments, in each case demonstrating that, after giving effect to the consummation of the Tender Offer and the Merger, the related financings and the other transactions contemplated by the Loan Documents and the Related Agreements, Company and DMG will be Solvent. R. Opinions of Counsel to Loan Parties. Lenders shall have received originally executed copies of one or more favorable written opinions of Cooley Godward LLP, Skadden, Arps, Slate, Meagher & Flom LLP, Vorys, Sater, Seymore and Pease LLP and Marshall Hill Cassis & deLipkau, counsel to Loan Parties, addressed to Administrative Agent and Lenders and dated as of the Closing Date substantially in the form of Exhibit XI annexed hereto and as to such other ---------- matters as Administrative Agent may reasonably request. S. Opinions of Administrative Agent's Counsel. Lenders shall have received originally executed copies of one or more favorable written opinions of O'Melveny & Myers LLP, counsel to Administrative Agent, addressed to Administrative Agent and Lenders and dated as of the Closing Date, substantially in the form of Exhibit XII annexed hereto and as to such other matters as ----------- Administrative Agent may reasonably request. 84 T. Fees. Company shall have paid to Administrative Agent, for distribution (as appropriate) to Administrative Agent Lenders, the fees payable on the Closing Date referred to in subsection 2.3. U. Representations and Warranties; Performance of Agreements. Company shall have delivered to Administrative Agent an Officers' Certificate, in form and substance reasonably satisfactory to Administrative Agent, to the effect that the representations and warranties in Section 5 are true, correct and complete in all material respects on and as of the Closing Date to the same extent as though made on and as of that date (or, to the extent such representations and warranties specifically relate to an earlier date, that such representations and warranties were true, correct and complete in all material respects on and as of such earlier date) and that Company shall have performed in all material respects all agreements and satisfied all conditions which this Agreement provides shall be performed or satisfied by it on or before the Closing Date except as otherwise disclosed to and agreed to in writing by Administrative Agent and Requisite Lenders. V. Closing Date Company Disclosure Letter. Company shall have delivered to Administrative Agent the Closing Date Company Disclosure Letter. W. Officer's Certificate Regarding Subsidiaries. The aggregate gross revenues for the Fiscal Year ended October 31, 1998 of the Subsidiary Guarantors that constitute the Closing Date Loan Parties shall be equal to at least 90% of the aggregate gross revenues of URS and its Domestic Subsidiaries on a consolidated basis for such Fiscal Year. All of the Domestic Subsidiaries of URS whose gross revenues for the Fiscal Year ended October 31, 1998 are greater than or equal to $5,000,000 are Closing Date Loan Parties and the Capital Stock of all such Domestic Subsidiaries constitutes Pledged Collateral as of the Closing Date. The Capital Stock of all of the first tier Domestic Subsidiaries of DMG constitutes Pledged Collateral as of the Closing Date. On the Closing Date, Company shall deliver to Administrative Agent an Officer's Certificate, in form and substance satisfactory to Administrative Agent, demonstrating compliance with this requirement. X. Evidence of Insurance. Administrative Agent shall have received a certificate from Company's insurance broker or other evidence satisfactory to it that Administrative Agent has been named loss payee or additional insured, as the case may be, as required by subsection 6.4. Y. No Disruption of Financial and Capital Markets. Since May 3, 1999, there shall not have occurred and be continuing a material disruption of or change in the financial, banking or capital markets or in the regulatory environment that in the good faith judgment of Administrative Agent could materially and adversely affect the syndication of this Agreement. Z. Completion of Proceedings. All corporate and other proceedings taken or to be taken in connection with the transactions contemplated hereby and all documents incidental thereto not previously found acceptable by Administrative Agent, acting on behalf of Lenders, and its counsel shall be reasonably satisfactory in form and substance to Administrative Agent and such counsel, and Administrative Agent and such counsel shall have received all such 85 counterpart originals or certified copies of such documents as Administrative Agent may reasonably request. 4.2 Conditions to Merger Date Loans. ------------------------------- The obligations of Lenders to make additional Tranche A Term Loans on the Merger Date and, if not already made, the initial Revolving Loans are, in addition to the conditions precedent specified in subsection 4.2, subject to prior or concurrent satisfaction of the following conditions: A. Merger Date Loan Party Documents. On or before the Merger Date, Company shall, and shall cause each Merger Date Loan Party to, deliver to Administrative Agent (with sufficient originally executed copies, where appropriate, for each Lender and its counsel) the following with respect to each such Merger Date Loan Party, each, unless otherwise noted, dated the Merger Date: (i) Certified copies of the Organizational Documents of such Person, together with a good standing certificate from the Secretary of State of its jurisdiction of organization and, to the extent generally available, a certificate or other evidence of good standing as to payment of any applicable franchise or similar taxes from the appropriate taxing authority of such jurisdiction; (ii) Copies of the Bylaws of such Person, certified as of the Merger Date by such Person's corporate secretary or an assistant secretary; (iii) Resolutions of the Board of Directors of such Person approving and authorizing the execution, delivery and performance of the Merger Date Loan Documents, certified as of the Merger Date by the corporate secretary or an assistant secretary of such Person as being in full force and effect without modification or amendment; (iv) Signature and incumbency certificates of the officers of such Person executing the Merger Date Loan Documents to which it is a party; (v) Executed originals of the Merger Date Loan Documents to which such Person is a party; and (vi) Such other documents as Administrative Agent may reasonably request. B. Foreign Subsidiary Documents. On or before the Merger Date, Company shall cause each of the Foreign Subsidiaries of DMG, the Capital Stock of which constitutes Pledged Collateral, to deliver to Administrative Agent (with sufficient originally executed copies, where appropriate, for each Lender and its counsel) copies of the charter documents of such Subsidiary, certified as of the Merger Date by such Subsidiary's corporate secretary or an assistant secretary. C. Corporate and Capital Structure, Ownership, Etc. 86 (i) Corporate Structure. The corporate organizational structure of ------------------- Company, DMG and their respective Subsidiaries, after giving effect to the Merger, shall be as set forth on Schedule 4.2C of the Closing Date Company ------------- Disclosure Letter. (ii) Capital Structure and Ownership. The capital structure and ------------------------------- ownership of Company, DMG and their respective Subsidiaries, after giving effect to the Merger, shall be as set forth on Schedule 4.2C of the Closing ------------- Date Company Disclosure Letter. (iii) Merger Agreement. The Merger Agreement shall be in full force ---------------- and effect and no provision thereof shall have been modified or waived in any respect determined by Administrative Agent to be material, in each case without the consent of Administrative Agent and Requisite Lenders. D. Consummation of Merger. (i) All material conditions to the Merger shall have been satisfied or the fulfillment of any such conditions shall have been waived, in the case of a material condition to the performance of the obligations of URS, with the consent of Administrative Agent and Requisite Lenders; (ii) The Merger shall become effective concurrently with the making of the Loans in accordance with the terms of the Merger Agreement, and the laws of the State of Delaware; (iii) Administrative Agent shall have received satisfactory evidence of the filing of the documents with the Delaware Secretary of State effecting the Merger on the Merger Date; (iv) The aggregate consideration for the DMG Common Stock shall not exceed $305,000,000; an d (v) Administrative Agent shall have received evidence satisfactory to it that the Transaction Costs will not exceed $42,000,000. E. Security Interests in Personal Property. On or prior to the Merger Date, Administrative Agent shall have received evidence satisfactory to it that DMG and Subsidiary Guarantors constituting Merger Date Loan Parties shall have taken or caused to be taken all such actions, executed and delivered or caused to be executed and delivered all such agreements, documents and instruments, and made or caused to be made all such filings and recordings (other than the filing or recording of items described in clause (iii) and (iv) below) that may be necessary or, in the opinion of Administrative Agent, desirable in order to create in favor of Administrative Agent, for the benefit of Lenders, a valid and (upon such filing and recording) perfected First Priority security interest in the entire Collateral. Such actions shall include the following: (i) Schedules to Collateral Documents. Delivery to Administrative --------------------------------- Agent of accurate and complete schedules to all of the applicable Collateral Documents; 87 (ii) Stock Certificates and Instruments. Delivery to Administrative ---------------------------------- Agent of (a) certificates and instruments (which certificates and instruments shall be accompanied by irrevocable undated stock powers, duly endorsed in blank and otherwise satisfactory in form and substance to Administrative Agent) representing all Capital Stock required to be pledged pursuant to the Pledge and Security Agreement on the Merger Date and (b) all promissory notes (duly endorsed, where appropriate, in a manner satisfactory to Administrative Agent) evidencing any intercompany debt required to be pledged pursuant to subsections 7.1(iii) and (iv) on the Merger Date; (iii) UCC Financing Statements. Delivery to Administrative Agent of ------------------------ UCC financing statements and, where appropriate, fixture filings, duly executed by each applicable Merger Date Loan Party with respect to all personal property Collateral of such Merger Date Loan Party, for filing in all jurisdictions as may be necessary or, in the opinion of Administrative Agent, desirable to perfect the security interests created in such Collateral pursuant to the Collateral Documents; and (iv) PTO Cover Sheets, Etc. Delivery to Administrative Agent of all --------------------- cover sheets or other documents or instruments required to be filed with the PTO in order to create or perfect Liens in respect of any Intellectual Property Collateral. F. Evidence of Insurance. Administrative Agent shall have received a certificate from Company's insurance broker or other evidence satisfactory to it that Administrative Agent has been named loss payee or additional insured, as the case may be, as required by subsection 6.4. G. Opinions of Counsel to Loan Parties. Lenders shall have received originally executed copies of one or more favorable written opinions of counsel to the Loan Parties, addressed to Administrative Agent and Lenders, dated as of the Merger Date in form and substance satisfactory to Administrative Agent. H. Fees. Company shall have paid to Administrative Agent the fees payable on the Merger Date referred to herein. I. Officer's Certificate Regarding Subsidiaries. The sum of (i) the aggregate gross revenues for the DMG Fiscal Year ended March 26, 1999 of the Subsidiary Guarantors that constitute Merger Date Loan Parties plus (ii) the aggregate gross revenues for the Fiscal Year ended October 31, 1998 of the Subsidiary Guarantors that constitute Closing Date Loan Parties shall be equal to at least 90% of the sum of (i) the aggregate gross revenues of URS and its Domestic Subsidiaries for such Fiscal Year and (ii) the aggregate gross revenues of DMG and its Domestic Subsidiaries for such DMG Fiscal Year. All of the Domestic Subsidiaries of Company whose gross revenues for the Fiscal Year ended October 31, 1998 or the DMG Fiscal Year ended March 26, 1999, as the case may be, are greater than or equal to $5,000,000 are Subsidiary Guarantors. On the Merger Date, Company shall deliver to Administrative Agent an Officer's Certificate, in form and substance satisfactory to Administrative Agent, demonstrating compliance with this requirement. 88 J. Representations and Warranties; Performance of Agreements. Company shall have delivered to Administrative Agent an Officer's Certificate, in form and substance satisfactory to Administrative Agent, to the effect that the representations and warranties in Section 5 are true, correct and complete in all material respects on and as of the Merger Date to the same extent as though made on and as of the Merger Date (or, to the extent such representations and warranties specifically relate to an earlier date, that such representations and warranties were true, correct and complete in all material respects on and as of such earlier date) and that Company shall have performed in all material respects all agreements and satisfied all conditions which this Agreement provides shall be performed or satisfied by it on or before the Merger Date except as otherwise disclosed to and agreed to in writing by Administrative Agent and Requisite Lenders and to the effect set forth in clauses (i)-(v) of subsection 4.2D, and stating that Company will proceed to consummate the Merger concurrently with the making of the Loans. K. Completion of Proceedings. All corporate and other proceedings taken or to be taken in connection with the transactions contemplated hereby and all documents incidental thereto not previously found acceptable by Administrative Agent and its counsel shall be reasonably satisfactory in form and substance to Administrative Agent and such counsel, and Administrative Agent and such counsel shall have received all such counterpart originals or certified copies of such documents as Administrative Agent may reasonably request. 4.3 Conditions to All Loans. ----------------------- The obligations of Lenders to make Loans on each Funding Date are subject to the following further conditions precedent: A. Administrative Agent shall have received before that Funding Date, in accordance with the provisions of subsection 2.1B, an originally executed Notice of Borrowing, in each case signed by the chief executive officer, the chief financial officer or the treasurer of Company or by any executive officer of Company designated by any of the above-described officers on behalf of Company in a writing delivered to Administrative Agent. B. As of that Funding Date: (i) The representations and warranties contained herein and in the other Loan Documents shall be true, correct and complete in all material respects on and as of that Funding Date to the same extent as though made on and as of that date, except to the extent such representations and warranties specifically relate to an earlier date, in which case such representations and warranties shall have been true, correct and complete in all material respects on and as of such earlier date; (ii) No event shall have occurred and be continuing or would result from the consummation of the borrowing contemplated by such Notice of Borrowing that would constitute an Event of Default or a Potential Event of Default; (iii) Each Loan Party shall have performed in all material respects all agreements and satisfied all conditions which this Agreement provides shall be performed or satisfied by it on or before that Funding Date; 89 (iv) No order, judgment or decree of any court, arbitrator or governmental authority shall purport to enjoin or restrain any Lender from making the Loans to be made by it on that Funding Date; (v) The making of the Loans requested on such Funding Date shall not violate any law including Regulation T, Regulation U or Regulation X of the Board of Governors of the Federal Reserve System; and (vi) (a) There shall not be pending or, to the actual knowledge of a Responsible Officer of Company, threatened, any action, suit, proceeding, governmental investigation or arbitration against or affecting Company or any of its Subsidiaries or any property of Company or any of its Subsidiaries that has not been disclosed by Company in writing pursuant to subsection 5.6 or 6.1(ix) prior to the making of the last preceding Loans (or, in the case of the initial Loans, prior to the execution of this Agreement), and (b) there shall have occurred no development not so disclosed in any such action, suit, proceeding, governmental investigation or arbitration so disclosed, that, in either event, in the reasonable opinion of Administrative Agent or of Requisite Lenders, would be likely to result in a Material Adverse Effect with respect to Company; and no injunction or other restraining order shall have been issued and no hearing to cause an injunction or other restraining order to be issued shall be pending or noticed with respect to any action, suit or proceeding seeking to enjoin or otherwise prevent the consummation of, or to recover any damages or obtain relief as a result of, the transactions contemplated by this Agreement or the making of Loans hereunder. 4.4 Conditions to Letters of Credit. ------------------------------- The issuance of any Letter of Credit hereunder (whether or not the Issuing Lender is obligated to issue such Letter of Credit) is subject to the following conditions precedent: A. On or before the date of issuance of the initial Letter of Credit pursuant to this Agreement, the initial Loans shall have been made. B. On or before the date of issuance of such Letter of Credit, Administrative Agent shall have received, in accordance with the provisions of subsection 3.1B(i), an originally executed Notice of Issuance of Letter of Credit, in each case signed by the chief executive officer, the chief financial officer or the treasurer of Company or by any executive officer of Company designated by any of the above-described officers on behalf of Company in a writing delivered to Administrative Agent, together with all other information specified in subsection 3.1B(i) and such other documents or information as the Issuing Lender may reasonably require in connection with the issuance of such Letter of Credit. C. On the date of issuance of such Letter of Credit, all conditions precedent described in subsection 4.3B shall be satisfied to the same extent as if the issuance of such Letter of Credit were the making of a Loan and the date of issuance of such Letter of Credit were a Funding Date. SECTION 5. COMPANY'S REPRESENTATIONS AND WARRANTIES 90 In order to induce Lenders to enter into this Agreement and to make the Loans, to induce the Issuing Lender to issue Letters of Credit and to induce other Lenders to purchase participations therein, Company represents and warrants to each Lender, on the Closing Date, on the Merger Date, on each Funding Date and on the date of issuance of each Letter of Credit, that the following statements are true, correct and complete: 5.1 Organization, Powers, Qualification, Good Standing, Business and ---------------------------------------------------------------- Subsidiaries. - ------------ A. Organization and Powers. Each Loan Party is duly organized and formed, validly existing and in good standing under the laws of its jurisdiction of organization. Each Loan Party has all requisite partnership, company or corporate power and authority to own and operate its properties, to carry on its business as now conducted and as proposed to be conducted, to enter into the Loan Documents and the Related Agreements to which it is a party and to carry out the transactions contemplated thereby. B. Qualification and Good Standing. Each Loan Party is qualified to do business and in good standing in every jurisdiction where its assets are located and wherever necessary to carry out its business and operations, except in jurisdictions where the failure to be so qualified or in good standing has not had and would not be likely to result in a Material Adverse Effect with respect to such Loan Party. C. Conduct of Business. Company and its Subsidiaries are engaged only in the businesses permitted to be engaged in pursuant to subsection 7.10. D. Subsidiaries. As of the Closing Date and the Merger Date, all of the Subsidiaries of Company, DMG and all of the Subsidiaries of DMG are identified on Schedule 4.1C of the Closing Date Company Disclosure Letter. Each Subsidiary ------------- of Company, DMG and each Subsidiary of DMG is duly organized and formed, validly existing and in good standing under the laws of its respective jurisdiction of organization, has all requisite corporate power and authority to own and operate its properties and to carry on its business as now conducted and as proposed to be conducted, and is qualified to do business and in good standing in every jurisdiction where its assets are located and wherever necessary to carry out its business and operations, in each case except where failure to be so qualified or in good standing or a lack of such corporate power and authority has not had and would not be likely to result in a Material Adverse Effect with respect to Company. Except as set forth on Schedule 5.1D of the Closing Date ------------- Company Disclosure Letter, Company, DMG or a Subsidiary of Company or DMG has executed an agreement with respect to the Capital Stock of each non-wholly owned Subsidiary of Company or DMG that gives Company, DMG or a Subsidiary of Company or DMG the right to purchase any shares of Capital Stock of such non-wholly owned Subsidiary held by any Person other than Company, DMG or a Subsidiary of Company or DMG in the event of any proposed transfer thereof unless the failure to execute such an agreement would not be likely to result in a Material Adverse Effect with respect to Company. E. Inactive Subsidiaries. None of the Subsidiaries of Company or DMG identified on Schedule 5.1E of the Closing Date Company Disclosure Letter under ------------- the heading "Inactive Subsidiaries" ("Inactive Subsidiaries"), as said Schedule -------- 5.1E may be supplemented from time - ---- 91 to time pursuant to the provisions of subsection 6.1(xv), is conducting any material business, owns any material property or is generating any material revenue. F. Capitalization. As of the Closing Date, Schedule 4.1C of the Closing ------------- Date Company Disclosure Letter correctly sets forth the ownership interest of Company and each of its Subsidiaries in each of the Subsidiaries of Company identified therein and of DMG and each of its Subsidiaries in each of the Subsidiaries of DMG identified therein. Schedule 4.1C of the Closing Date ------------- Company Disclosure Letter correctly sets forth, as of the Closing Date, the total number of outstanding shares of such Subsidiaries' Capital Stock. As of the Closing Date, no other class of Capital Stock of Company or DMG is outstanding. The Capital Stock of Company and DMG and each of their respective Subsidiaries is duly authorized, validly issued, fully paid and nonassessable. G. Options and Other Rights. As of the Closing Date, except as set forth on Schedule 5.1G of the Closing Date Company Disclosure Letter and except for ------------- issuances of options to directors and employees of Company and its Subsidiaries pursuant to a written employee benefit plan maintained by Company or any of its Subsidiaries, there are no outstanding subscriptions, warrants, calls, options, rights (including unsatisfied preemptive rights), commitments or agreements to which Company or any of its Subsidiaries or DMG or any of its Subsidiaries is bound that permit or entitle any Person to purchase or otherwise to receive from or to be issued any shares of Capital Stock of Company or any of its Subsidiaries or DMG or any of its Subsidiaries or any security or obligation of any kind convertible into any class of Capital Stock of Company or any of its Subsidiaries or DMG or any of its Subsidiaries. 5.2 Authorization of Borrowing, etc. -------------------------------- A. Authorization of Borrowing. The execution, delivery and performance of the Loan Documents and the Related Agreements have been duly authorized by all necessary corporate action on the part of each Loan Party that is a party thereto. B. No Conflict. The execution, delivery and performance by each Loan Party of the Loan Documents and the Related Agreements to which it is a party and the consummation of the transactions contemplated by the Loan Documents and such Related Agreements do not and will not (i) violate any provision of any law or any governmental rule or regulation applicable to Company or any of its Subsidiaries, the Organizational Documents of Company or any of its Subsidiaries or any order, judgment or decree of any court or other agency of government binding on Company or any of its Subsidiaries, (ii) conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any Contractual Obligation of Company or any of its Subsidiaries in any manner that would be likely to result in a Material Adverse Effect with respect to such Loan Party; (iii) result in or require the creation or imposition of any Lien upon any of the properties or assets of Company or any of its Subsidiaries (other than any Liens created under any of the Loan Documents in favor of Administrative Agent on behalf of Lenders or Permitted Encumbrances); or (iv) require any approval of stockholders or any approval or consent of any Person under any Contractual Obligation of Company or any of its Subsidiaries, except for such approvals or consents which will be obtained on or before the Closing Date and disclosed in writing to Lenders. 92 C. Governmental Consents. The execution, delivery and performance by each Loan Party of the Loan Documents and the Related Agreements to which it is a party and the consummation of the transactions contemplated by the Loan Documents and such Related Agreements do not and will not require any registration with, consent or approval of, or notice to, or other action to, with or by, any federal, state or other governmental authority or regulatory body. D. Binding Obligation. Each of the Loan Documents and the Related Agreements has been duly executed and delivered by each Loan Party that is a party thereto and is the legally valid and binding obligation of such Loan Party, enforceable against such Loan Party in accordance with its respective terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles relating to enforceability. E. Valid Issuance of Company Preferred Stock and Senior Subordinated Notes. (i) Company Preferred Stock. The Company Series A Preferred Stock and ----------------------- Company Series C Preferred Stock to be sold on or before the Closing Date, and the Company Series B Preferred Stock, in each case when issued and delivered, will be duly and validly issued, fully paid and nonassessable. The issuance and sale of such Company Series A Preferred Stock, Company Series B Preferred Stock and Company Series C Preferred Stock, upon such issuance and sale, will either (a) have been registered or qualified under applicable federal and state securities laws or (b) be exempt therefrom. (ii) Senior Subordinated Notes, Bridge Notes and Rollover Notes. ---------------------------------------------------------- Company has the corporate power and authority to issue the Senior Subordinated Notes, the Bridge Notes and the Rollover Notes. The Senior Subordinated Notes, the Bridge Notes, and the Rollover Notes when issued and paid for, will be the legally valid and binding obligations of Company, enforceable against Company in accordance with their respective terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles relating to enforceability. The subordination provisions of the Senior Subordinated Notes, the Bridge Notes and the Rollover Notes will be enforceable against the holders thereof and the Loans and all other monetary Obligations hereunder are and will be within the definition of "Senior Indebtedness" included in such provisions. The Senior Subordinated Notes, the Bridge Notes and the Rollover Notes when issued and sold, will either (a) have been registered or qualified under applicable federal and state securities laws or (b) be exempt therefrom. 5.3 Financial Condition. ------------------- Company has heretofore delivered to Lenders, at Lenders' request, (i) the audited consolidated balance sheet of Company and its Subsidiaries as at October 31, 1998 and the related consolidated statements of income, stockholders' equity and cash flows of Company and its Subsidiaries for the Fiscal Year then ended and (ii) the unaudited consolidated balance sheets of Company and its Subsidiaries as at January 31, 1999 and April 30, 1999 and the related unaudited consolidated statements of income, stockholders' equity and cash flows of Company 93 and its Subsidiaries for the periods then ended. All such statements were prepared in conformity with GAAP and fairly present, in all material respects, the financial position (on a consolidated basis) of the entities described in such financial statements as at the respective dates thereof and the results of operations and cash flows (on a consolidated basis) of the entities described therein for each of the periods then ended, subject, in the case of any such unaudited financial statements, to changes resulting from audit and normal year- end adjustments. Company does not (and will not following the funding of the initial Loans) have any Contingent Obligation, contingent liability or liability for taxes, long-term lease or unusual forward or long-term commitment that is not reflected in the foregoing financial statements or the notes thereto and which in any such case is material in relation to the business, operations, properties, assets, financial condition or prospects of Company or any of its Subsidiaries. Company has heretofore delivered to Lenders, at Lenders' request, the audited consolidated balance sheet of DMG and its Subsidiaries as at March 27, 1998 and March 26, 1999 and the related consolidated statements of income, stockholders' equity and cash flows of DMG and its Subsidiaries for the DMG Fiscal Year then ended. All such statements were prepared in conformity with GAAP and fairly present, in all material respects, the financial position (on a consolidated basis) of the entities described in such financial statements as at the respective dates thereof and the results of operations and cash flows (on a consolidated basis) of the entities described therein for each of the periods then ended, subject, in the case of any such unaudited financial statements, to changes resulting from audit and normal year-end adjustments. DMG does not (and will not following the funding of the initial Loans) have any Contingent Obligation, contingent liability or liability for taxes, long-term lease or unusual forward or long-term commitment that is not reflected in the foregoing financial statements or the notes thereto and which in any such case is material in relation to the business, operations, properties, assets, financial condition or prospects of DMG or any of its Subsidiaries. 5.4 No Material Adverse Change; No Restricted Junior Payments. --------------------------------------------------------- Since October 31, 1998, no event or change has occurred that has caused or evidences, either in any case or in the aggregate, a Material Adverse Effect with respect to Company. Neither Company nor any of its Subsidiaries has directly or indirectly declared, ordered, paid or made, or set apart any sum or property for, any Restricted Junior Payment or agreed to do so except as permitted by subsection 7.5. 5.5 Title to Properties; Liens; Real Property; Licenses, Trademarks; etc. --------------------------------------------------------------------- A. Title to Properties; Liens. Company and its Subsidiaries and DMG and its Subsidiaries have (i) good, sufficient and legal title to (in the case of fee interests in real property), (ii) valid leasehold interests in (in the case of leasehold interests in real or personal property), or (iii) good title to (in the case of all other personal property), all of their respective properties and assets reflected in the financial statements referred to in subsection 5.3 or in the most recent financial statements delivered pursuant to subsection 6.1, in each case except for assets disposed of since the date of such financial statements in the ordinary course of business or as otherwise permitted under subsection 7.7. Except as permitted by this Agreement, all such properties and assets are free and clear of Liens. 94 B. Real Property. As of the Closing Date, Schedule 5.5C of the Closing ------------- Date Company Disclosure Letter contains a true, accurate and complete list of all fee interests in any Real Property Asset of Company or any of its Subsidiaries or of DMG or any of its Subsidiaries. C. Licenses, Trademarks, etc. Company and each of its Subsidiaries and DMG and each of its Subsidiaries have all patents, licenses, trademarks, trademark rights, trade names, trade name rights, copyrights, permits and franchises which are required in order for it to conduct its business and to operate its properties as now or proposed to be conducted without known conflict with the rights of others, except to the extent that the failure by Company or such Subsidiary to have any such right would not be likely to result in a Material Adverse Effect with respect to Company. As of the Closing Date and the Merger Date, Schedule 5.5C of the Closing Date Company Disclosure Letter ------------- contains a complete and correct list of all patents, copyrights, trade marks, licenses, service marks, trade names and other similar rights owned or used by Company, DMG or any of their respective Subsidiaries, showing for each item the owner thereof and each public body with which such ownership is registered, other than those the failure by Company, DMG or such Subsidiary to own or have the right to use would not be likely to result in a Material Adverse Effect with respect to Company. 5.6 Litigation; Adverse Facts. ------------------------- There are no actions, suits, proceedings, arbitrations or governmental investigations (whether or not purportedly on behalf of Company, DMG or any of their respective Subsidiaries) at law or in equity, or before or by any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign (including any Environmental Claims) that are pending or, to the knowledge of any Responsible Officer of Company, threatened against or affecting Company, DMG or any of their respective Subsidiaries or any property of Company, DMG or any of their respective Subsidiaries and that, individually or in the aggregate, would be likely to result in a Material Adverse Effect with respect to Company. None of Company, DMG nor any of their respective Subsidiaries (i) is in violation of any applicable laws (including Environmental Laws) that, individually or in the aggregate, would be likely to result in a Material Adverse Effect with respect to Company, or (ii) is subject to or in default with respect to any final judgments, writs, injunctions, decrees, rules or regulations of any court or any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, that, individually or in the aggregate, would be likely to result in a Material Adverse Effect with respect to Company. 5.7 Payment of Taxes. ---------------- Except to the extent permitted by subsection 6.3 or to the extent that failure to perform would not be likely to result in a Material Adverse Effect with respect to Company, all tax returns and reports of Company and its Subsidiaries required to be filed by any of them have been timely filed, and all taxes shown on such tax returns to be due and payable and all assessments, fees and other governmental charges upon Company and its Subsidiaries and upon their respective properties, assets, income, businesses and franchises which are due and payable have been paid when due and payable. Company knows of no proposed tax assessment against Company or any of its Subsidiaries which is not being actively contested by Company or such 95 Subsidiary in good faith and by appropriate proceedings; provided that such -------- reserves or other appropriate provisions, if any, as shall be required in conformity with GAAP shall have been made or provided therefor. 5.8 Performance of Agreements; Materially Adverse Agreements; Material ------------------------------------------------------------------ Contracts. - --------- A. Neither Company nor any of its Subsidiaries is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any of its Contractual Obligations, and no condition exists that, with the giving of notice or the lapse of time or both, would constitute such a default, except where the consequences, direct or indirect, of such default or defaults, if any, would not be likely to result in a Material Adverse Effect with respect to Company. B. Neither Company nor any of its Subsidiaries is a party to or is otherwise subject to any agreements or instruments or any charter or other internal restrictions which, individually or in the aggregate, would be likely to result in a Material Adverse Effect with respect to Company. 5.9 Governmental Regulation. ----------------------- Neither Company nor any of its Subsidiaries is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act or the Investment Company Act of 1940 or under any other federal or state statute or regulation which may limit its ability to incur Indebtedness or which may otherwise render all or any portion of the Obligations unenforceable. 5.10 Securities Activities. --------------------- A. Neither Company nor any of its Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying any Margin Stock. B. Following application of the proceeds of each Loan, not more than 25% of the value of the assets (either of Company only or of Company and its Subsidiaries on a consolidated basis) subject to the provisions of subsection 7.2 or 7.7 or subject to any restriction contained in any agreement or instrument, between Company and any Lender or any Affiliate of any Lender, relating to Indebtedness and within the scope of subsection 8.2, will be Margin Stock. 5.11 Employee Benefit Plans. ---------------------- A. Company, each of its Subsidiaries and each of their respective ERISA Affiliates are in compliance with all applicable provisions and requirements of ERISA and the regulations and published interpretations thereunder with respect to each Employee Benefit Plan of Company and its Subsidiaries, and have performed all their obligations under each such Employee Benefit Plan, except where such failure to comply or failure to perform would not be likely to result in a Material Adverse Effect with respect to Company. Each such Employee Benefit Plan which is intended to qualify under Section 401(a) of the Internal Revenue Code is so qualified. 96 B. No ERISA Event has occurred or is reasonably expected to occur. C. Except to the extent required under Section 4980B of the Internal Revenue Code or except as set forth on Schedule 5.11 of the Closing Date Company ------------- Disclosure Letter, no such Employee Benefit Plan provides health or welfare benefits (through the purchase of insurance or otherwise) for any retired or former employee of Company, any of its Subsidiaries or any of their respective ERISA Affiliates. D. As of the most recent valuation date for any Pension Plan of Company and its Subsidiaries, the amount of unfunded benefit liabilities (as defined in Section 4001(a)(18) of ERISA), individually or in the aggregate for all such Pension Plans (excluding for purposes of such computation any such Pension Plans with respect to which assets exceed benefit liabilities), does not exceed $1,000,000. E. As of the most recent valuation date for each Multiemployer Plan for which the actuarial report is available, the potential liability of Company, its Subsidiaries and their respective ERISA Affiliates for a complete withdrawal from such Multiemployer Plan (within the meaning of Section 4203 of ERISA), when aggregated with such potential liability for a complete withdrawal from all such Multiemployer Plans, based on information available pursuant to Section 4221(e) of ERISA, does not exceed $5,000,000. 5.12 Certain Fees. ------------ No broker's or finder's fee or commission will be payable with respect to this Agreement or any of the transactions contemplated hereby, other than those payable in connection with the Tender Offer and Merger, and Company hereby indemnifies Lenders against, and agrees that it will hold Lenders harmless from, any claim, demand or liability for any such broker's or finder's fees alleged to have been incurred in connection herewith or therewith and any expenses (including reasonable fees, expenses and disbursements of counsel) arising in connection with any such claim, demand or liability. 5.13 Environmental Protection. ------------------------ Except as set forth on Schedule 5.13 of the Closing Date Company ------------- Disclosure Letter: (i) neither Company nor any of its Subsidiaries nor any of their respective Facilities or operations are subject to any outstanding written order, consent decree or settlement agreement with any Person relating to (a) any Environmental Law, (b) any Environmental Claim, or (c) any Hazardous Materials Activity that, individually or in the aggregate, would be likely to result in a Material Adverse Effect with respect to Company; (ii) neither Company nor any of its Subsidiaries has received on its own behalf any letter or request for information under Section 104 of the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. (S) 9604) or any comparable state law; 97 (iii) there are and, to the knowledge of each Responsible Officer of Company, have been no conditions, occurrences, or Hazardous Materials Activities which could reasonably be expected to form the basis of an Environmental Claim against Company or any of its Subsidiaries that, individually or in the aggregate, would be likely to result in a Material Adverse Effect with respect to Company; (iv) neither Company nor any of its Subsidiaries nor, to the knowledge of each Responsible Officer of Company, any predecessor of Company or any of its Subsidiaries has filed on its own behalf any notice under any Environmental Law indicating past or present treatment of Hazardous Materials at any Facility, and none of Company's or any of its Subsidiaries' operations involves (other than in a solely advisory capacity) the generation, transportation, treatment, storage or disposal of hazardous waste, as defined under 40 C.F.R. Parts 260-270 or any state equivalent; and (v) compliance by Company and its Subsidiaries with all current or reasonably foreseeable future requirements pursuant to or under Environmental Laws will not, individually or in the aggregate, be likely to result in a Material Adverse Effect with respect to Company. Notwithstanding anything in this subsection 5.13 to the contrary, no event or condition is occurring with respect to Company or any of its Subsidiaries or, to the knowledge of any Responsible Officer of Company, has occurred with respect to Company or any of its Subsidiaries relating to any Environmental Law, any Release of Hazardous Materials, or any Hazardous Materials Activity, including any matter disclosed on Schedule 5.13 of the ------------- Closing Date Company Disclosure Letter, which individually or in the aggregate has had or would be likely to result in a Material Adverse Effect with respect to Company. 5.14 Employee Matters. ---------------- There is no strike or work stoppage in existence or threatened involving Company or any of its Subsidiaries that would be likely to result in a Material Adverse Effect with respect to Company. 5.15 Solvency. -------- Each of Company and each other Loan Party, upon the incurrence of any Obligations by such Loan Party on any date on which this representation is made, will be Solvent. 5.16 Matters Relating to Collateral. ------------------------------ A. Creation, Perfection and Priority of Liens. The execution and delivery of the Collateral Documents by Loan Parties, together with (i) the actions taken on or prior to the Closing Date pursuant to subsections 4.1K and 6.7, (ii) the actions taken on or prior to the Merger Date pursuant to subsections 4.2E and 6.7 and (iii) the delivery to Administrative Agent of any Pledged Collateral not delivered to Administrative Agent at the time of execution and delivery of the applicable Collateral Document (all of which Pledged Collateral has been so delivered) are effective to create in favor of Administrative Agent for the benefit of Lenders, as 98 security for the respective Secured Obligations (as defined in the applicable Collateral Document in respect of any Collateral), a valid and perfected First Priority Lien on all of the Collateral, and all filings and other actions necessary or desirable to perfect and maintain the perfection and First Priority status of such Liens have been duly made or taken and remain in full force and effect, other than the filing of any UCC financing statements delivered to Administrative Agent for filing (but not yet filed) and the periodic filing of UCC continuation statements in respect of UCC financing statements filed by or on behalf of Administrative Agent. B. Governmental Authorizations. No authorization, approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for either (i) the pledge or grant by any Loan Party of the Liens purported to be created in favor of Administrative Agent pursuant to any of the Collateral Documents or (ii) the exercise by Administrative Agent of any rights or remedies in respect of any Collateral (whether specifically granted or created pursuant to any of the Collateral Documents or created or provided for by applicable law), except for filings or recordings contemplated by subsection 5.16A and except as may be required, in connection with the disposition of any Pledged Collateral, by laws generally affecting the offering and sale of securities. C. Absence of Third-Party Filings. Except such as may have been filed in favor of Administrative Agent as contemplated by subsection 5.16A, (i) no effective UCC financing statement, fixture filing or other instrument similar in effect covering all or any part of the Collateral is on file in any filing or recording office and (ii) no document granting any rights to any third party with respect to any Intellectual Property that constitutes Collateral has been recorded with the PTO. D. Margin Regulations. Based upon the calculation of good faith loan value on the Form U-1 completed by Company and Lenders with respect to the Loans to be made on the Closing Date, on the Closing Date, the pledge of the Pledged Collateral pursuant to the Collateral Documents does not violate Regulation T, U or X of the Board of Governors of the Federal Reserve System. E. Information Regarding Collateral. All information supplied to Administrative Agent by or on behalf of any Loan Party with respect to any of the Collateral (in each case taken as a whole with respect to any particular Collateral) is accurate and complete in all material respects. 5.17 Related Agreements. ------------------ A. Delivery of Related Agreements. Company has delivered to Lenders complete and correct copies of each Related Agreement and of all exhibits and schedules thereto. B. DMG's Warranties. Except to the extent otherwise set forth herein or in the schedules to the Closing Date Company Disclosure Letter, each of the representations and warranties given by DMG to Company and Merger Sub in the Merger Agreement is true and correct in all material 99 respects as of the date hereof (or as of any earlier date to which such representation and warranty specifically relates) and will be true and correct in all material respects as of the Closing Date and the Merger Date (or as of such earlier date, as the case may be), in each case subject to the qualifications set forth in the schedules to the Merger Agreement. C. Warranties of Company. Subject to the qualifications set forth therein, each of the representations and warranties given by Company to DMG in the Merger Agreement is true and correct in all material respects as of the date hereof and will be true and correct in all material respects as of the Closing Date. D. Survival. Notwithstanding anything in the Merger Agreement to the contrary, the representations and warranties of Company set forth in subsections 5.17B and 5.17C shall, solely for purposes of this Agreement, survive the Closing Date for the benefit of Lenders. 5.18 Disclosure. ---------- No representation or warranty of Company or any of its Subsidiaries contained in any Loan Document or Related Agreement or in any other document, certificate or written statement furnished to Lenders by or on behalf of Company or any of its Subsidiaries for use in connection with the transactions contemplated by this Agreement, including the Closing Date Company Disclosure Letter, contains any untrue statement of a material fact or omits to state a material fact (known to Company, in the case of any document not furnished by it) necessary in order to make the statements contained herein or therein not misleading in light of the circumstances in which the same were made. Any projections and pro forma financial information contained in such materials are based upon good faith estimates and assumptions believed by Company to be reasonable at the time made, it being recognized by Lenders that such projections as to future events are not to be viewed as facts and that actual results during the period or periods covered by any such projections may differ from the projected results. There are no facts known (or which should upon the reasonable exercise of diligence be known) to Company (other than matters of a general economic nature) that, individually or in the aggregate, would be likely to result in a Material Adverse Effect with respect to Company and that have not been disclosed herein or in such other documents, certificates and statements furnished to Lenders for use in connection with the transactions contemplated hereby. SECTION 6. COMPANY'S AFFIRMATIVE COVENANTS Company covenants and agrees that, so long as any of the Commitments hereunder shall remain in effect and until payment in full of all of the Loans and other Obligations and the cancellation or expiration of all Letters of Credit, unless Requisite Lenders shall otherwise give prior written consent, Company shall perform, and shall cause each of its Subsidiaries to perform, all covenants in this Section 6. 6.1 Financial Statements and Other Reports. -------------------------------------- Company will maintain, and cause each of its Subsidiaries to maintain, a system of accounting established and administered in accordance with sound business practices to permit preparation of consolidated financial statements in conformity with GAAP. Company will deliver to Administrative Agent and Lenders: 100 (i) Company Quarterly Financials: (a) as soon as available and in ---------------------------- any event within 55 days after the end of each of the first three Fiscal Quarters of each Fiscal Year, the consolidated balance sheet of Company and its Subsidiaries as at the end of such Fiscal Quarter and the related consolidated statements of income and cash flows of Company and its Subsidiaries for such Fiscal Quarter and for the period from the beginning of the then current Fiscal Year to the end of such Fiscal Quarter, setting forth in each case in comparative form the corresponding figures for the corresponding periods of the previous Fiscal Year, all in reasonable detail and certified by the chief financial officer of Company that they fairly present, in all material respects, the financial condition of Company and its Subsidiaries as at the dates indicated and the results of their operations and their cash flows for the periods indicated, subject to changes resulting from audit and normal year-end adjustments, and (b) as soon as available and in any event within 90 days after the end of each Fiscal Quarter, a summary of such consolidated statements setting forth in comparative form the corresponding figures from the Financial Plan for the current Fiscal Year and a narrative report describing the operations of Company and its Subsidiaries in each case in the form prepared for presentation to the Board of Directors for such Fiscal Quarter and for the period from the beginning of the then current Fiscal Year to the end of such Fiscal Quarter; (ii) Company Year-End Financials: as soon as available and in any --------------------------- event within 100 days after the end of each Fiscal Year, (a) the consolidated balance sheet of Company and its Subsidiaries as at the end of such Fiscal Year and the related consolidated statements of income, stockholders' equity and cash flows of Company and its Subsidiaries for such Fiscal Year, setting forth in each case in comparative form the corresponding figures for the previous Fiscal Year, all in reasonable detail and certified by the chief financial officer of Company that they fairly present, in all material respects, the financial condition of Company and its Subsidiaries as at the dates indicated and the results of their operations and their cash flows for the periods indicated, (b) a summary of such consolidated statements setting forth in comparative form the corresponding figures from the Financial Plan for the current Fiscal Year and a narrative report describing the operations of Company and its Subsidiaries in each case in the form prepared for presentation to the Board of Directors for such Fiscal Year, (c) an office performance summary for the Fiscal Year then ended and (d) in the case of such consolidated financial statements, a report thereon of Pricewaterhouse Coopers or other independent certified public accountants of recognized national standing selected by Company, which report shall be unqualified, shall express no doubts about the ability of Company and its Subsidiaries to continue as a going concern, and shall state that such consolidated financial statements fairly present, in all material respects, the consolidated financial position of Company and its Subsidiaries as at the dates indicated and the results of their operations and their cash flows for the periods indicated in conformity with GAAP applied on a basis consistent with prior years (except as otherwise disclosed in such financial statements) and that the examination by such accountants in connection with such consolidated financial statements has been made in accordance with generally accepted auditing standards; (iii) Officer's and Compliance Certificates: together with each ------------------------------------- delivery of financial statements of Company and its Subsidiaries pursuant to subdivisions (i) and (ii) 101 above, (a) an Officer's Certificate of Company stating that the signers have reviewed the terms of this Agreement and have made, or caused to be made under their supervision, a review in reasonable detail of the transactions and condition of Company and its Subsidiaries during the accounting period covered by such financial statements and that such review has not disclosed the existence during or at the end of such accounting period, and that the signers do not have knowledge of the existence as at the date of such Officer's Certificate, of any condition or event that constitutes an Event of Default or Potential Event of Default, or, if any such condition or event existed or exists, specifying the nature and period of existence thereof and what action Company has taken, is taking and proposes to take with respect thereto; and (b) a Compliance Certificate demonstrating in reasonable detail compliance during and at the end of the applicable accounting periods with the restrictions contained in subsections 7.1(x) and (xi), 7.2(viii), 7.3(viii) and (xiii), 7.4(ix), 7.6, 7.7(vi) and 7.8, in each case to the extent compliance with such restrictions is required to be tested at the end of the applicable accounting period; (iv) Reconciliation Statements: if, as a result of any change in ------------------------- accounting principles and policies from those used in the preparation of the audited financial statements referred to in subsection 5.3, the consolidated financial statements delivered pursuant to subdivisions (i), (ii) or (xii) of this subsection 6.1 will differ in any material respect from the consolidated financial statements that would have been delivered pursuant to such subdivisions had no such change in accounting principles and policies been made, then (a) together with the first delivery of financial statements pursuant to subdivision (i), (ii) or (xii) of this subsection 6.1 following such change, consolidated financial statements of Company and its Subsidiaries for (y) the current Fiscal Year to the effective date of such change and (z) the two full Fiscal Years immediately preceding the Fiscal Year in which such change is made, in each case prepared on a pro forma basis as if such change had been in effect during such periods, and (b) together with each delivery of financial statements pursuant to subdivision (i), (ii) or (xii) of this subsection 6.1 following such change, a written statement of the chief accounting officer or chief financial officer of Company setting forth the differences (including any differences that would affect any calculations relating to the financial covenants set forth in subsection 7.6) which would have resulted if such financial statements had been prepared without giving effect to such change; (v) Accountants' Certification: together with each delivery of -------------------------- consolidated financial statements of Company and its Subsidiaries pursuant to subdivision (ii) above, a written statement by the independent certified public accountants giving the report thereon stating that their audit examination has included a review of the terms of this Agreement and the other Loan Documents as they relate to accounting matters and that, based on their audit examination, nothing has come to their attention that causes them to believe that the information relating to subsection 7.6 contained in the certificates delivered therewith pursuant to subdivision (iii) above is not correct or that the matters set forth in the Compliance Certificates delivered therewith pursuant to clause (b) of subdivision (iii) above for the applicable Fiscal Year are not stated in accordance with the terms of this Agreement; 102 (vi) Accountants' Reports: promptly upon receipt thereof (unless -------------------- restricted by applicable professional standards), copies of all reports submitted to Company by independent certified public accountants in connection with each annual, interim or special audit of the financial statements of Company and its Subsidiaries made by such accountants, including any comment letter submitted by such accountants to management in connection with their annual audit; (vii) SEC Filings and Press Releases: promptly upon their becoming ------------------------------ available, copies of (a) all financial statements, reports, notices and proxy statements sent or made available generally by Company to its security holders or by any Subsidiary of Company to its security holders other than Company or another Subsidiary of Company, (b) all regular and periodic reports and all registration statements (other than on Form S-8 or a similar form) and prospectuses, if any, filed by Company or any of its Subsidiaries with any securities exchange or with the Securities and Exchange Commission or any governmental or private regulatory authority, and (c) all press releases and other statements made available generally by Company or any of its Subsidiaries to the public concerning material developments in the business of Company or any of its Subsidiaries; (viii) Events of Default, etc.: promptly upon any Responsible Officer ---------------------- of Company obtaining knowledge (a) of any condition or event that constitutes an Event of Default or Potential Event of Default, or becoming aware that any Lender has given any notice (other than to Administrative Agent) or taken any other action with respect to a claimed Event of Default or Potential Event of Default, (b) that any Person has given any notice to Company or any of its Subsidiaries or taken any other action with respect to a claimed default or event or condition of the type referred to in subsection 8.2, (c) of any condition or event that would be required to be disclosed in a current report filed by Company with the Securities and Exchange Commission on Form 8-K (Items 1, 2, 4, 5 and 6 of such Form as in effect on the date hereof) if Company were required to file such reports under the Exchange Act, or (d) of the occurrence of any event or change that has caused or evidences, either in any case or in the aggregate, a Material Adverse Effect with respect to Company, an Officer's Certificate specifying the nature and period of existence of such condition, event or change, or specifying the notice given or action taken by any such Person and the nature of such claimed Event of Default, Potential Event of Default, default, event or condition, and what action Company has taken, is taking and proposes to take with respect thereto; (ix) Litigation or Other Proceedings: (a) promptly upon any ------------------------------- Responsible Officer of Company obtaining knowledge of (x) the institution of, or non-frivolous threat of, any action, suit, proceeding (whether administrative, judicial or otherwise), governmental investigation or arbitration against or affecting Company or any of its Subsidiaries or any property of Company or any of its Subsidiaries (collectively, "Proceedings") not previously disclosed in writing by Company to Lenders or (y) any material development in any Proceeding that, in any case: (1) is reasonably likely to result in a Material Adverse Effect with respect to Company; or 103 (2) seeks to enjoin or otherwise prevent the consummation of, or to recover any damages or obtain relief as a result of, the transactions contemplated hereby; written notice thereof together with such other information as may be reasonably available to Company to enable Lenders and their counsel to evaluate such matters; and (b) promptly upon request by Administrative Agent, a copy of the list of Proceedings delivered by Company to its independent certified public accountants in connection with the report prepared by them on the consolidated financial statements of Company and its Subsidiaries for each Fiscal Year, and promptly after request by Administrative Agent such other information as may be reasonably requested by Administrative Agent to enable Administrative Agent and its counsel to evaluate any of such Proceedings; (x) ERISA Events: promptly upon becoming aware of the occurrence of ------------ or forthcoming occurrence of any ERISA Event, a written notice specifying the nature thereof, what action Company, any of its Subsidiaries or any of their respective ERISA Affiliates has taken, is taking or proposes to take with respect thereto and, when known, any action taken or threatened by the Internal Revenue Service, the Department of Labor or the PBGC with respect thereto; (xi) ERISA Notices: with reasonable promptness upon request by ------------- Administrative Agent, copies of (a) each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) filed by Company, any of its Subsidiaries or any of their respective ERISA Affiliates with the Internal Revenue Service with respect to each Pension Plan of Company or any of its Subsidiaries; (b) all notices received by Company, any of its Subsidiaries or any of their respective ERISA Affiliates from a Multiemployer Plan sponsor concerning an ERISA Event; and (c) copies of such other documents or governmental reports or filings relating to any Employee Benefit Plan of Company or any of its Subsidiaries as Administrative Agent shall reasonably request; (xii) Financial Plans: as soon as practicable and in any event no --------------- later than 60 days following the end of each Fiscal Year, a consolidated plan and financial forecast for the then current Fiscal Year (the "Financial Plan" for such Fiscal Year), including, (a) forecasted consolidated balance sheets and forecasted consolidated statements of income and cash flows of Company and its Subsidiaries for such Fiscal Year, together with a projected Compliance Certificate for such Fiscal Year and an explanation of the assumptions on which such forecasts are based, (b) forecasted consolidated statements of income and cash flows of Company and its Subsidiaries for each Fiscal Quarter of such Fiscal Year, together with an explanation of the assumptions on which such forecasts are based, and (c) such other information and projections as any Lender may reasonably request; (xiii) Insurance: as soon as practicable and in any event by the last --------- day of each Fiscal Year, a report in form and substance reasonably satisfactory to Administrative Agent outlining any change since the proceeding Fiscal Year in any material insurance coverage maintained by Company and its Subsidiaries; 104 (xiv) Board of Directors: with reasonable promptness, written ------------------ notice of any change in the Board of Directors of Company; (xv) New Subsidiaries or Change in Status of Subsidiaries: ---------------------------------------------------- annually within 100 days of the end of each Fiscal Year, all of the data required to be set forth on Schedule 4.2C of the Closing Date Company ------------- Disclosure Letter with respect to all Subsidiaries of Company and an Officer's Certificate, together with supporting documentation in form and substance satisfactory to Requisite Lenders, setting forth the aggregate gross revenues for the immediately preceding Fiscal Year of the Subsidiary Guarantors and the aggregate gross revenues for the immediately preceding Fiscal Year of all Subsidiaries of Company, the Capital Stock of which constitutes Pledged Collateral; (xvi) Subordinated Debt Notices: promptly upon receipt by Company ------------------------- or any of its Subsidiaries of any notice with respect to any Subordinated Indebtedness, and promptly upon the giving of notice by Company or any of its Subsidiaries with respect to any Subordinated Indebtedness, in each case relating to any default or payment or prepayment of principal of, premium, if any, redemption, purchase, retirement, defeasance (including in-substance or legal defeasance), sinking fund or similar payment with respect to such Subordinated Indebtedness, a copy of such notice; (xvii) UCC Search Report: As promptly as practicable after the date ----------------- of delivery to Administrative Agent of any UCC financing statement executed by any Loan Party pursuant to subsection 4.1K(iv), 4.2E(iii) or 6.7, copies of completed UCC searches evidencing the proper filing, recording and indexing of all such UCC financing statement and listing all other effective financing statements that name such Loan Party as debtor, together with copies of all such other financing statements not previously delivered to Administrative Agent by or on behalf of Company or such Loan Party; and (xviii) Other Information: with reasonable promptness, such other ----------------- information and data with respect to Company or any of its Subsidiaries as from time to time may be reasonably requested by any Lender. 6.2 Corporate Existence, etc. ------------------------- Except as permitted under subsection 7.7, Company will, and will cause each of its Subsidiaries to, at all times preserve and keep in full force and effect its corporate existence and all rights and franchises material to its business; provided, however that neither Company nor any of its Subsidiaries -------- ------- shall be required to preserve any such right or franchise if the Board of Directors of Company or such Subsidiary shall determine that the preservation thereof is no longer desirable in the conduct of the business of Company or such Subsidiary, as the case may be, and that the loss thereof is not disadvantageous in any material respect to Company, such Subsidiary or Lenders. 6.3 Payment of Taxes and Claims; Tax Consolidation. ---------------------------------------------- A. Company will, and will cause each of its Subsidiaries to, pay all taxes, assessments and other governmental charges imposed upon it or any of its properties or assets or 105 in respect of any of its income, businesses or franchises before any penalty accrues thereon, and all claims (including, claims for labor, services, materials and supplies) for sums that have become due and payable and that by law have or may become a Lien upon any of its properties or assets, prior to the time when any penalty or fine shall be incurred with respect thereto, except where the failure to pay such taxes, assessments and governmental charges would not be likely to result in a Material Adverse Effect with respect to Company; provided that no such charge or claim need be paid if it is being contested in - -------- good faith by appropriate proceedings promptly instituted and diligently conducted, so long as (i) such reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made therefor and (ii) in the case of a charge or claim which has or may become a Lien against any of the Collateral, such contest proceedings conclusively operate to stay the sale of any portion of the Collateral to satisfy such charge or claim. B. Company will not, nor will it permit any of its Subsidiaries to, file or consent to the filing of any consolidated income tax return with any Person (other than Company or any of its Subsidiaries). 6.4 Maintenance of Properties; Insurance; Application of Net Insurance/ ------------------------------------------------------------------- Condemnation Proceeds. - --------------------- A. Maintenance of Properties. Company will, and will cause each of its Subsidiaries to, maintain or cause to be maintained in good repair, working order and condition, ordinary wear and tear excepted, all material properties used or useful in the business of Company and its Subsidiaries (including all Intellectual Property) and from time to time will make or cause to be made all appropriate repairs, renewals and replacements thereof the failure of which would be likely to result in a Material Adverse Effect with respect to Company. B. Insurance. Company will maintain or cause to be maintained, with financially sound and reputable insurers, such public liability insurance, third party property damage insurance, business interruption insurance and casualty insurance with respect to liabilities, losses or damage in respect of the assets, properties and businesses of Company and its Subsidiaries as may customarily be carried or maintained under similar circumstances by corporations of established reputation engaged in similar businesses, in each case in such amounts (giving effect to self-insurance), with such deductibles, covering such risks and otherwise on such terms and conditions as shall be customary for corporations similarly situated in the industry. Without limiting the generality of the foregoing, Company will maintain or cause to be maintained (i) flood insurance with respect to each Flood Hazard Property that is located in a community that participates in the National Flood Insurance Program, in each case in compliance with any applicable regulations of the Board of Governors of the Federal Reserve System, and (ii) replacement value casualty insurance on the Collateral under such policies of insurance, with such insurance companies, in such amounts, with such deductibles, and covering such risks as are at all times satisfactory to Administrative Agent in its commercially reasonable judgment. Each such policy of insurance shall (a) name Administrative Agent for the benefit of Lenders as an additional insured thereunder as its interests may appear and (b) in the case of each business interruption and casualty insurance policy, contain a loss payable clause or endorsement, satisfactory in form and substance to Administrative Agent, that names Administrative Agent for the benefit of Lenders as the loss payee thereunder and provides for at 106 least 30 days prior written notice to Administrative Agent of any modification or cancellation of such policy. C. Application of Net Insurance/Condemnation Proceeds. (i) Business Interruption Insurance. Upon receipt by Company or any ------------------------------- of its Subsidiaries of any Net Insurance/Condemnation Proceeds from business interruption insurance, (a) so long as no Event of Default or Potential Event of Default shall have occurred and be continuing, Company or such Subsidiary may retain and apply such Net Insurance/Condemnation Proceeds for working capital purposes, and (b) if an Event of Default or Potential Event of Default shall have occurred and be continuing, Company shall apply an amount equal to such Net Insurance/Condemnation Proceeds to prepay the Loans (and/or the Revolving Loan Commitments shall be reduced) as provided in subsection 2.4B(iii)(b); (ii) Casualty Insurance/Condemnation Proceeds. Upon receipt by ---------------------------------------- Company or any of its Subsidiaries of any Net Insurance/Condemnation Proceeds other than from business interruption insurance, (a) so long as no Event of Default or Potential Event of Default shall have occurred and be continuing, Company shall, or shall cause one or more of its Subsidiaries to, promptly and diligently (and in any event within 360 days of the date of receipt of such Net Insurance/Condemnation Proceeds) apply such Net Insurance/Condemnation Proceeds to pay or reimburse the costs of repairing, restoring or replacing the assets in respect of which such Net Insurance/Condemnation Proceeds were received or, to the extent not so applied within such 360-day period), to prepay the Loans (and/or the Revolving Loan Commitments shall be reduced) as provided in subsection 2.4B(iii)(b), and (b) if an Event of Default or Potential Event of Default shall have occurred and be continuing, Company shall apply an amount equal to such Net Insurance/Condemnation Proceeds to prepay the Loans (and/or the Revolving Loan Commitments shall be reduced) as provided in subsection 2.4B(iii)(b); and (iii) Net Insurance/Condemnation Proceeds Received by Administrative -------------------------------------------------------------- Agent. Upon receipt by Administrative Agent of any Net ----- Insurance/Condemnation Proceeds as loss payee, (a) if and to the extent Company would have been required to apply such Net Insurance/Condemnation Proceeds (if it had received them directly) to prepay the Loans and/or reduce the Revolving Loan Commitments, Administrative Agent shall, and Company hereby authorizes Administrative Agent to, apply such Net Insurance/Condemnation Proceeds to prepay the Loans (and/or the Revolving Loan Commitments shall be reduced) as provided in subsection 2.4B(iii)(b), and (b) to the extent the foregoing clause (a) does not apply, Administrative Agent shall deliver such Net Insurance/Condemnation Proceeds to Company, and Company shall, or shall cause one or more of its Subsidiaries to, promptly apply such Net Insurance/Condemnation Proceeds to the costs of repairing, restoring, or replacing the assets in respect of which such Net Insurance/Condemnation Proceeds were received, or, to the extent not so applied, to prepay the Loans (and/or the Revolving Loan Commitments shall be reduced as provided in subsection 2.4B(iii)(b). 107 6.5 Inspection Rights. ----------------- Company shall, and shall cause each of its Subsidiaries to, permit any authorized representatives designated by any Lender to visit and inspect any of the properties of Company or of any of its Subsidiaries, to inspect, copy and take extracts from its and their financial and accounting records, and to discuss its and their affairs, finances and accounts with its and their officers and independent public accountants (provided that Company may, if it so chooses, be present at or participate in any such discussion), all upon reasonable notice and at such reasonable times during normal business hours and as often as may reasonably be requested. 6.6 Compliance with Laws, etc. -------------------------- Company shall comply, and shall cause each of its Subsidiaries to comply, with the requirements of all applicable laws, rules, regulations and orders of any governmental authority (including all Environmental Laws), noncompliance with which would be likely to cause, individually or in the aggregate, a Material Adverse Effect with respect to Company. 6.7 Execution of Subsidiary Guaranty and Personal Property Collateral Documents --------------------------------------------------------------------------- by Certain Additional Subsidiaries. - ---------------------------------- A. Execution of Subsidiary Guaranty and Personal Property Collateral Documents. In the event that the aggregate gross revenues of the Subsidiary Guarantors for any Fiscal Year, commencing with the Fiscal Year ending October 31, 1999, is less than 90% of the aggregate gross revenues of Company and its Domestic Subsidiaries on a consolidated basis for such Fiscal Year, Company will, within 100 days after the end of such Fiscal Year, (i) cause one or more additional Domestic Subsidiaries after consultation with Requisite Lenders to execute and deliver to Administrative Agent a counterpart of the Subsidiary Guaranty and the Pledge and Security Agreement such that the aggregate gross revenues of all Subsidiary Guarantors for such Fiscal Year shall be equal to at least 90% of the aggregate gross revenues of Company and its Domestic Subsidiaries on a consolidated basis for such Fiscal Year, and (ii) take, or cause each such Domestic Subsidiary to take, all such further actions and execute all such further documents and instruments (including actions, documents and instruments comparable to those described in subsection 4.1K) as may be necessary or, in the opinion of Administrative Agent, desirable to create in favor of Administrative Agent, for the benefit of Lenders, a valid and perfected First Priority Lien on all Material Real Property and all personal property of each such Domestic Subsidiary described in the applicable forms of Collateral Documents. In addition, in the event that any Domestic Subsidiary of Company that has not previously executed the Subsidiary Guaranty has gross revenues for any Fiscal Year, commencing with the Fiscal Year ending October 31, 1999, greater than equal to $5,000,000 Company will, within 100 days after the end of such Fiscal Year, (i) cause such Domestic Subsidiary to execute and deliver to Administrative Agent a counterpart of the Subsidiary Guaranty and the Pledge and Security Agreement and (ii) take, or cause such Domestic Subsidiary to take, all such further actions and execute all such further documents and instruments (including actions, documents and instruments comparable to those described in subsection 4.1K) as may be necessary or, in the opinion of Administrative Agent, desirable to create in favor of Administrative Agent, for the benefit of Lenders, a valid and perfected First Priority Lien on all Material Real Property and all personal property of each such Domestic Subsidiary described in the applicable forms of Collateral Documents. 108 B. Subsidiary Organizational Documents, Legal Opinions, Etc. Company shall deliver to Administrative Agent, together with such Loan Documents, (i) certified copies of the Organizational Documents of each Subsidiary described in subsections 6.7A and 6.7D, together with a good standing certificate from the Secretary of State of the jurisdiction of its incorporation and, to the extent generally available, a certificate or other evidence of good standing as to payment of any applicable franchise or similar taxes from the appropriate taxing authority of such jurisdiction, each to be dated a recent date prior to their delivery to Administrative Agent, (ii) a copy of such Subsidiary's Bylaws, certified by its corporate secretary or an assistant secretary as of a recent date prior to their delivery to Administrative Agent, (iii) a certificate executed by the secretary or an assistant secretary of such Subsidiary as to (a) the fact that the attached resolutions of the Board of Directors of such Subsidiary approving and authorizing the execution, delivery and performance of such Loan Documents are in full force and effect and have not been modified or amended and (b) the incumbency and signatures of the officers of such Subsidiary executing such Loan Documents, and (iv) a favorable opinion of counsel to such Subsidiary, in form and substance reasonably satisfactory to Administrative Agent and its counsel, as to (a) the due organization and good standing of such Subsidiary, (b) the due authorization, execution and delivery by such Subsidiary of such Loan Documents, (c) the enforceability of such Loan Documents against such Subsidiary and (d) such other matters (including matters relating to the creation and perfection of Liens in any Collateral pursuant to such Loan Documents) as Administrative Agent may reasonably request, all of the foregoing to be in form and substance reasonably satisfactory to Administrative Agent and its counsel. C. Pledged Collateral. In the event that the aggregate gross revenues of the Subsidiaries of Company, the Capital Stock of which constitutes Pledged Collateral, for any Fiscal Year, commencing with the Fiscal Year ending October 31, 1999, is less than 90% of the aggregate gross revenues of Company and its Subsidiaries on a consolidated basis for such Fiscal Year, Company will, or will cause its Domestic Subsidiaries to, within 100 days after the end of such Fiscal Year, execute all such Collateral Documents and/or all such other documents and instruments (including actions, documents and instruments comparable to those described in subsection 4.1K) as may be necessary or, in the opinion of Administrative Agent, desirable to create, in favor of Administrative Agent, for the benefit of Lenders, a valid and perfected First Priority Lien on all the Capital Stock of one or more additional Subsidiaries after consultation with Requisite Lenders to the extent set forth in the applicable forms of Collateral Documents such that the aggregate gross revenues of all Subsidiaries, the Capital Stock of which constitutes Pledged Collateral, shall be equal to at least 90% of the aggregate gross revenues of Company and its Subsidiaries on a consolidated basis for such Fiscal Year; provided, however, that notwithstanding -------- ------- the foregoing, no action shall be required to be taken with respect to the Capital Stock of any Foreign Subsidiary pursuant to this subsection in the event that Company and Administrative Agent agree in good faith that the pledge of such stock would result in a significant tax liability to Company or any of its Subsidiaries or is restricted by the laws of the jurisdiction under which such Foreign Subsidiary is organized so long as the Capital Stock of all Subsidiaries whose aggregate gross revenues for such Fiscal Year are greater than or equal to $5,000,000 constitute Pledged Collateral unless Company and Administrative Agent agree in good faith that the pledge of such stock of any Foreign Subsidiary would result in a significant tax liability to Company or any of its Subsidiaries or is restricted by the laws of the jurisdiction under which such Foreign Subsidiary is organized; provided further that notwithstanding the -------- ------- 109 foregoing, no action shall be required to be taken with respect to the Capital Stock of any Subsidiary whose gross revenues for such Fiscal Year are $250,000 or less. D. Optional Guaranty. In the event that any Subsidiary of Company executes a guaranty of the Bridge Notes, Rollover Notes or Senior Subordinated Notes, Company will (i) cause such Subsidiary to execute and deliver to Administrative Agent a counterpart of the Subsidiary Guaranty and (ii) take, or cause each such Subsidiary to take, all such further actions and execute all such further documents and instruments (including actions, documents and instruments comparable to those described in subsection 4.1K) as may be necessary or, in the opinion of Administrative Agent, desirable to create in favor of Administrative Agent, for the benefit of Lenders, a valid and perfected First Priority Lien on all Material Real Property and all personal property of each such Subsidiary described in the applicable forms of Collateral Documents. 6.8 Matters Relating to Real Property Collateral. -------------------------------------------- From and after the Closing Date, in the event that (i) Company or any Subsidiary Guarantor acquires any Material Real Property or (ii) at the time any Person becomes a Subsidiary Guarantor, such Person owns or holds any Material Real Property, in either case excluding any such Real Property Asset the encumbrancing of which requires the consent of any then-existing senior lienholder, where Company and its Subsidiaries are unable to obtain such lessor's or senior lienholder's consent (any such non-excluded Real Property Asset described in the foregoing clause (i) or (ii) being a "Mortgaged Property"), Company or such Subsidiary Guarantor, if requested by Administrative Agent shall deliver to Administrative Agent, as soon as practicable after such Person acquires such Mortgaged Property or becomes a Subsidiary Guarantor, as the case may be, (a) a fully executed and notarized Mortgage in proper form for recording in all appropriate places in all applicable jurisdictions, encumbering the interest of such Loan Party in such Mortgaged Property; (b) a favorable opinion of counsel; (c) if required by Administrative Agent, an ALTA mortgagee title insurance policy or an unconditional commitment therefor issued by title company acceptable to Administrative Agent in form and substance and in an amount satisfactory to Administrative Agent, insuring fee simple title to such Mortgaged Property vested in such Loan Party and assuring Administrative Agent that such Mortgage creates a valid and enforceable First Priority Lien on such Mortgaged Property, and (d) such other documents, reports and information as would be usual and customary in transactions of this type. 6.9 Interest Rate Protection. ------------------------ At all times during the period from and including the date which is 90 days after the Closing Date to and excluding the third anniversary of the Closing Date, Company shall maintain in effect one or more Interest Rate Agreements with respect to the Term Loans, in an aggregate notional principal amount of not less than 50% of the aggregate principal amount of all outstanding Term Loans, each such Interest Rate Agreement to be in form and substance reasonably satisfactory to Administrative Agent. 110 6.10 Year 2000. --------- Company shall perform all acts reasonably necessary to ensure that Company and its Subsidiaries become Year 2000 Compliant in a timely manner. Such acts shall include performing a comprehensive review and assessment of all of Company's systems and adopting a detailed plan, with itemized budget, for the remediation, monitoring and testing of such systems. As used in this subsection, "Year 2000 Compliant" shall mean, in regard to any entity, that all software, hardware, firmware, equipment, goods or systems utilized by or material to the business operations or financial condition of such entity, will properly perform date sensitive functions before, during and after the year 2000. Company shall, immediately upon request, provide to Administrative Agent such certifications or other evidence of Company's compliance with the terms of this paragraph as Administrative Agent may from time to time require. 6.11 Syndication. ----------- Company and DMG shall cooperate with Administrative Agent in the syndication of the Commitments (such cooperation to include participating in meetings with the Lenders and assisting in the preparation of a Confidential Information Memorandum and other materials to be used in connection with such syndication) and shall provide and cause their respective advisors to provide all information reasonably deemed necessary by Administrative Agent to such syndication. Company and DMG shall also coordinate any other financings by Company and DMG with Administrative Agent's primary syndication efforts relating to the Commitments. 6.12 Consummation of Merger.. ---------------------- Company shall proceed to consummate the Merger as soon as practical following the consummation of the Tender Offer. 6.13 Post Closing Deliveries. ----------------------- On or prior to September 9, 1999, Company will, or will cause its Domestic Subsidiaries to, execute all such Collateral Documents and/or all such documents and instruments (including actions, documents and instruments comparable to those described in subsection 4.1K) as may be necessary or, in the reasonable opinion of Administrative Agent, desirable to create, in favor of Administrative Agent, for the benefit of Lenders, a valid and perfected First Priority Lien on all Capital Stock required to be pledged pursuant to subsection 6.7C using, for the purposes of such calculation, the sum of (i) the aggregate gross revenues of URS and its Subsidiaries for the Fiscal Year ended October 31, 1998 and (ii) the aggregate gross revenues of DMG and its Subsidiaries for the DMG Fiscal Year ended March 26, 1999. On or prior to September 9, 1999, Administrative Agent shall have received, with respect to all Intellectual Property listed on Schedule 5.5C to ------------- the Closing Date Company Disclosure Letter that Administrative Agent and Company agree in good faith has significant value to Company or any of its Subsidiaries, such documents as shall be necessary to create and perfect a security interest in such Intellectual Property. 111 SECTION 7. COMPANY'S NEGATIVE COVENANTS Company covenants and agrees that, so long as any of the Commitments hereunder shall remain in effect and until payment in full of all of the Loans and other Obligations and the cancellation or expiration of all Letters of Credit, unless Requisite Lenders shall otherwise give prior written consent, Company shall perform, and shall cause each of its Subsidiaries to perform, all covenants in this Section 7. 7.1 Indebtedness. ------------ Company shall not, and shall not permit any of its Subsidiaries or any Joint Venture in which Company or any of its Subsidiaries has any interest to, directly or indirectly, create, incur, assume or guaranty, or otherwise become or remain directly or indirectly liable with respect to, any Indebtedness, except: (i) Company and its Subsidiaries may become and remain liable with respect to the Obligations; (ii) Company, its Subsidiaries and Joint Ventures may become and remain liable with respect to Contingent Obligations permitted by subsection 7.4 and, upon any matured obligations actually arising pursuant thereto, the Indebtedness corresponding to the Contingent Obligations so extinguished; (iii) Company may become and remain liable with respect to Indebtedness to any Subsidiary Guarantor, and any Subsidiary Guarantor may become and remain liable with respect to Indebtedness to Company or any other Subsidiary Guarantor, provided that (a) such loan is evidenced by a -------- promissory note pledged to Administrative Agent on behalf of Lenders pursuant to the Pledge and Security Agreement, (b) all intercompany Indebtedness owed by Company to any Subsidiary Guarantor and by any Subsidiary Guarantor to Company shall be subordinated in right of payment to the payment in full of the Obligations, and (c) any payment by any Subsidiary Guarantor under any guaranty of the Obligations shall result in a pro tanto reduction of the amount of any intercompany Indebtedness --- ----- owed by such Subsidiary Guarantor to Company or to any Subsidiary Guarantor for whose benefit such payment is made; (iv) any Subsidiary of Company (other than a Subsidiary Guarantor or an Inactive Subsidiary) may become and remain liable with respect to Indebtedness to Company or any Subsidiary Guarantor to the extent such corresponding Investment by Company or any such Subsidiary Guarantor is permitted under subsection 7.3(xiii), provided that (a) such loan is -------- evidenced by a promissory note pledged to Administrative Agent on behalf of Lenders pursuant to the Pledge and Security Agreement, (b) all intercompany Indebtedness owed by any Subsidiary Guarantor to Company shall be subordinated in right of payment to the payment in full of the Obligations, and (c) any payment by any Subsidiary Guarantor under any guaranty of the Obligations shall result in a pro tanto reduction of the amount of any --- ----- intercompany Indebtedness owed by such Subsidiary Guarantor to Company or to any Subsidiary Guarantor for whose benefit such payment is made; 112 (v) any Foreign Subsidiary of Company may become and remain liable with respect to Indebtedness to any other Foreign Subsidiary of Company; (vi) Company may become and remain liable with respect to Indebtedness evidenced by (a) the Bridge Notes in an aggregate principal amount not to exceed $200,000,000 plus the amount of all interest thereon paid in the form of additional Bridge Notes, (b) the Rollover Notes in an aggregate principal amount not to exceed $205,500,000 plus (1) an amount equal to the aggregate amount of all interest on the Bridge Notes paid in the form of additional Bridge Notes, and (2) the amount of all interest thereon paid in the form of additional Rollover Notes, and (c) the Senior Subordinated Notes in an aggregate principal amount not to exceed $205,500,000 plus (1) an amount equal to the aggregate amount of all interest on the Bridge Notes or Rollover Notes paid in the form of additional Bridge Notes or Rollover Notes, as the case may be, and (2) the amount of any premium payable in respect of the Rollover Notes upon the refinancing thereof; (vii) any Joint Venture may become and remain liable with respect to Indebtedness to Persons other than Company or any of its Subsidiaries, provided that such Indebtedness is nonrecourse to Company, its Subsidiaries -------- and their respective assets; (viii) any Joint Venture may become and remain liable with respect to Indebtedness to Company or any Subsidiary of Company (other than an Inactive Subsidiary) to the extent such corresponding Investment by Company or any such Subsidiary is permitted under subsection 7.3(viii); (ix) Indebtedness (including the amount of any committed lines of credit) listed on Schedule 7.1 of the Closing Date Company Disclosure ------------ Letter; (x) Company and its Domestic Subsidiaries (other than Inactive Subsidiaries) may become and remain liable with respect to Indebtedness to Persons other than Company or any of its Subsidiaries in an aggregate principal amount (not including the amount of any such Indebtedness and committed lines of credit listed on Schedule 7.1 of the Closing Date ------------ Company Disclosure Letter) not to exceed $50,000,000 (less the aggregate amount of all Contingent Obligations permitted by subsection 7.4(ix)) at any time outstanding; (xi) Foreign Subsidiaries of Company may become and remain liable with respect to Indebtedness to Persons other than Company or any of its Subsidiaries in an aggregate principal amount (including the amount of any such Indebtedness listed on Schedule 7.1 of the Closing Date Company ------------ Disclosure Letter) not to exceed $30,000,000 at any time outstanding; and (xii) any Target who becomes a Subsidiary or who is merged or consolidated into a Subsidiary after the date hereof pursuant to a Subsequent Acquisition permitted by subsection 7.7(vi) may remain liable with respect to Indebtedness existing immediately prior to the date of such Subsequent Acquisition; provided that (a) such Indebtedness was 113 not incurred in connection with, or anticipation or contemplation of, such Subsequent Acquisition, (b) no Event of Default or Potential Event of Default shall have occurred and be continuing or would occur and be continuing or would occur as a result of such Subsequent Acquisition, and (c) neither Company nor any of its Subsidiaries (other than such Target or the Subsidiary into which such Target is merged or consolidated) shall become liable with respect to such Indebtedness. 7.2 Liens and Related Matters. ------------------------- A. Prohibition on Liens. Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, create, incur, assume or permit to exist any Lien on or with respect to any property or asset of any kind (including any document or instrument in respect of goods or accounts receivable) of Company or any of its Subsidiaries, whether now owned or hereafter acquired, or any income or profits therefrom, or file or permit the filing of, or permit to remain in effect, any financing statement or other similar notice of any Lien with respect to any such property, asset, income or profits under the UCC or under any similar recording or notice statute, except: (i) Permitted Encumbrances; (ii) Liens granted pursuant to the Collateral Documents; (iii) Liens described on Schedule 7.2 of the Closing Date Company ------------ Disclosure Letter; (iv) Liens on property or assets acquired by Company or any of its Subsidiaries (other than Inactive Subsidiaries) after the date of this Agreement or on property or assets of any Person which becomes a Subsidiary of Company after the date of this Agreement, provided that (a) such Liens -------- exist at the time such property or assets or the stock of such Person is acquired, (b) such Liens were not created in contemplation of such acquisition and (c) any such Lien shall attach only to the property or assets so acquired; (v) Liens created to secure the purchase price of property or assets, provided that (a) any such Lien shall attach only to the property -------- or assets so purchased, (b) the Indebtedness secured by any such Lien shall not exceed 100% of the purchase price of the property or assets purchased, and (c) any such Lien shall be created within 180 days following the acquisition of such property or assets; (vi) Liens on property or assets of any Foreign Subsidiary of Company created to secure Indebtedness permitted under subsection 7.1(xi); (vii) Liens incurred in connection with the extension, renewal or refinancing of the Indebtedness secured by the Liens described in clauses (iv) and (v) above; and (viii) other Liens in an aggregate amount not to exceed $500,000 at any time. 114 B. Equitable Lien in Favor of Lenders. If Company or any of its Subsidiaries shall create or assume any Lien upon any of its properties or assets, whether now owned or hereafter acquired, other than Liens excepted by the provisions of subsection 7.2A, it shall make or cause to be made effective provision whereby the Obligations will be secured by such Lien equally and ratably with any and all other Indebtedness secured thereby as long as any such Indebtedness shall be so secured; provided that, notwithstanding the foregoing, -------- this covenant shall not be construed as a consent by Requisite Lenders to the creation or assumption of any such Lien not permitted by the provisions of subsection 7.2A. C. No Further Negative Pledges. Neither Company nor any of its Subsidiaries shall enter into any agreement prohibiting the creation or assumption of any Lien upon any of its properties or assets, whether now owned or hereafter acquired, except (i) restrictions contained in the Related Agreements as in effect on the Closing Date, (ii) restrictions on the encumbrance of specific property encumbered to secure payment of particular Indebtedness or to be sold pursuant to an executed agreement with respect to an Asset Sale, and (iii) customary non-assignment provisions contained in leases, subleases, licenses and sublicenses permitted by this Agreement. D. No Restrictions on Subsidiary Distributions to Company or Other Subsidiaries. Except as provided herein and except for restrictions contained in the terms of any Indebtedness of Foreign Subsidiaries of Company permitted by subsection 7.1(xi) if such restriction applies only in the event of a payment default or a default with respect to a financial covenant in such Indebtedness or Company determines that any such restriction will not materially affect Company's ability to make principal or interest payments on the Loans and the restriction is not materially more disadvantageous to Lenders than is customary in comparable financings, Company will not, and will not permit any of its Subsidiaries to, create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction of any kind on the ability of any such Subsidiary to (i) pay dividends or make any other distributions on any of such Subsidiary's Capital Stock owned by Company or any other Subsidiary of Company, (ii) repay or prepay any Indebtedness owed by such Subsidiary to Company or any other Subsidiary of Company, (iii) make loans or advances to Company or any other Subsidiary of Company, except as provided in the Bridge Loan Agreement as in effect on the Closing Date and the Senior Note Indenture in a form consistent with the "Description of Notes" contained in the Offering Memorandum dated June 7, 1999 or such other form as may be approved by Requisite Lenders, or (iv) transfer any of its property or assets to Company or any other Subsidiary of Company, except for (a) restrictions contained in the Bridge Loan Agreement as in effect on the Closing Date and the Senior Note Indenture in the form approved by Requisite Lenders, (b) customary non-assignment provisions contained in leases, subleases, licenses and sublicenses, (c) restrictions on the transfer of Joint Venture interests contained in the organizational documents of any Joint Venture, and (d) restrictions in an executed agreement with respect to an Asset Sale. 7.3 Investments; Joint Ventures. --------------------------- Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, make or own any Investment in any Person, including any Joint Venture, except: 115 (i) Company and its Subsidiaries (other than Inactive Subsidiaries) may make and own Investments in Cash Equivalents; (ii) Company and any Subsidiary Guarantor may make intercompany loans to the extent permitted under subsections 7.1(iii) and (iv); (iii) Company and its Subsidiaries (other than Inactive Subsidiaries) may make Consolidated Capital Expenditures permitted by subsection 7.8; (iv) Company and Merger Sub may consummate the Merger; (v) Company and its Subsidiaries may continue to own the Investments owned by them and described on Schedule 7.3 of the Closing Date ------------ Company Disclosure Letter; (vi) Company and its Subsidiaries (other than Inactive Subsidiaries) may make and own Investments in wholly-owned Subsidiary Guarantors; (vii) Company and its Subsidiaries (other than Inactive Subsidiaries) may own Investments received in connection with the restructuring or work- out of the obligations of or the bankruptcy of suppliers and customers or received pursuant to a plan of reorganization of any supplier or customer, in each case in settlement of delinquent obligations or disputes with such suppliers or customers; (viii) Company and its Subsidiaries (other than Inactive Subsidiaries) may make and own Investments in Joint Ventures in an aggregate amount not to exceed $5,000,000 at any time; (ix) Company or any of its Subsidiaries (other than Inactive Subsidiaries) may make and own Investments consisting of non-cash consideration received in the form of securities, notes or similar obligations in connection with an Asset Sale permitted pursuant to subsection 7.7; provided that (a) the aggregate amount of such non-cash -------- consideration received in connection with such Asset Sale shall not exceed 10% of the total consideration received in connection with such Asset Sale and (b) such non-cash consideration is pledged pursuant to the Pledge and Security Agreement; (x) any Foreign Subsidiary of Company may make and own Investments in any other Foreign Subsidiary of Company; (xi) Company and its Subsidiaries (other than Inactive Subsidiaries) may make Subsequent Acquisitions permitted under subsection 7.7(vi); (xii) any Target who becomes a Subsidiary or who is merged or consolidated into a Subsidiary after the date hereof pursuant to a Subsequent Acquisition permitted by subsection 7.7(vi) may continue to own Investments owned by such Target on the date of such Subsequent Acquisition; provided that (a) such Investment was not incurred in connection with, or anticipation or contemplation of, such Subsequent Acquisition, (b) no Event of Default or Potential Event of Default shall have occurred and be continuing or 116 would occur as a result of such Subsequent Acquisition, and (c) neither Company nor any of its Subsidiaries (other than such Target or the Subsidiary into which such Target is merged or consolidated) shall become liable with respect to such Investment; and (xiii) Company and Subsidiary Guarantors may make and own Investments in Subsidiaries (other than wholly-owned Subsidiary Guarantors and Inactive Subsidiaries) in an aggregate amount (including the amount of any such Investments listed on Schedule 7.3 of the Closing Date Company Disclosure ------------ Letter) not to exceed $25,000,000 at any time. 7.4 Contingent Obligations. ---------------------- Company shall not, and shall not permit any of its Subsidiaries or any Joint Venture in which Company or any of its Subsidiaries has an interest to, directly or indirectly, create or become or remain liable with respect to any Contingent Obligation, except: (i) Subsidiaries of Company may become and remain liable with respect to Contingent Obligations in respect of the Subsidiary Guaranty; (ii) Company may become and remain liable with respect to Contingent Obligations in respect of the Letters of Credit; (iii) Company and its Subsidiaries may become and remain liable with respect to Contingent Obligations described on Schedule 7.4 of the Closing ------------ Date Company Disclosure Letter; (iv) Company may become and remain liable with respect to Contingent Obligations under Currency Agreements and Interest Rate Agreements constituting Hedge Agreements in the ordinary course of business; (v) Company and its Subsidiaries (other than Inactive Subsidiaries) may become and remain liable with respect to Contingent Obligations in respect of any Indebtedness of any of its Domestic Subsidiaries (other than Inactive Subsidiaries) permitted by subsection 7.1; (vi) Joint Ventures may become and remain liable with respect to Contingent Obligations; provided that such Contingent Obligations are -------- nonrecourse to Company, its Subsidiaries and their respective assets; (vii) Company, its Subsidiaries (other than Inactive Subsidiaries) and Joint Ventures may become and remain liable with respect to Contingent Obligations in respect of performance bonds, bid bonds, appeal bonds, surety bonds and similar obligations provided in the ordinary course of business to support the obligations of such Subsidiaries and Joint Ventures; (viii) Subsidiary Guarantors may become and remain liable with respect to Contingent Obligations in respect of the Bridge Notes, the Rollover Notes or the Senior 117 Subordinated Notes; provided that such Contingent Obligations are -------- subordinated to the Subsidiary Guaranty on terms satisfactory to Requisite Lenders; and (ix) Company and its Subsidiaries (other than Inactive Subsidiaries) may become and remain liable with respect to Contingent Obligations in an amount not to exceed $10,000,000 at any time. 7.5 Restricted Junior Payments. -------------------------- Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, declare, order, pay, make or set apart any sum for any Restricted Junior Payment; provided that (i) Company may make regularly -------- scheduled payments of interest in respect of the Existing Subordinated Indebtedness in accordance with the terms of, and only to the extent required by, and subject to the subordination provisions contained in, the Existing Subordinated Agreements, (ii) Company may make regularly scheduled payments of interest in respect of the Senior Subordinated Notes in accordance with the terms of, and only to the extent required by, and subject to the subordination provisions contained in, the Senior Subordinated Note Indenture, (iii) Company may make regularly scheduled payments of interest in respect of the Bridge Notes and the Rollover Notes, in an amount not to exceed 15% per annum in cash and an additional 2% per annum in the form of additional Bridge Notes or Rollover Notes, in accordance with the terms of, and only to the extent required by, and subject to the subordination provisions contained in, the Bridge Loan Agreement, (iv) Company may make regularly scheduled sinking fund payments in accordance with the terms of, and only to the extent required by, the Existing Subordinated Note Indenture and may repay the outstanding principal amount of the Existing Senior Subordinated Notes on the scheduled maturity thereof, (v) Company may exchange the Bridge Notes for the Rollover Notes and may repay the principal amount and premium, if any, of the Bridge Notes or the Rollover Notes with the proceeds of the Senior Subordinated Notes, (vi) Company may exchange Company Series A Preferred Stock and Company Series C Preferred Stock for Company Series B Preferred Stock and may exchange Company Series A Preferred Stock, Company Series B Preferred Stock or Company Series C Preferred Stock for common stock of Company, in each case as contemplated in the Securities Purchase Agreement, (vii) Company may repurchase common stock of Company that constitutes odd lots pursuant to a program established by Company for the repurchase of such odd lots in an aggregate amount not to exceed $100,000, (viii) Company may purchase shares of DMG Common Stock from holders who have perfected their statutory appraisal rights, (ix) any Subsidiary may declare and pay dividends to Company or any wholly-owned Subsidiary of Company, and (x) Company and its Subsidiaries may purchase shares of Capital Stock of any Subsidiary owned by professional engineers in connection with licensing requirements in an aggregate amount not to exceed $500,000. 7.6 Financial Covenants. ------------------- A. Minimum Current Ratio. Company shall not permit the ratio of (i) Consolidated Current Assets to (ii) Consolidated Current Liabilities as of the last day of any Fiscal Quarter to be less than 1.20 to 1.00 118 B. Minimum Fixed Charge Coverage Ratio. Company shall not permit the ratio of (i) Consolidated EBITDA minus Consolidated Capital Expenditures (net of any proceeds of any related financings with respect to such expenditures) to (ii) Consolidated Fixed Charges for (a)(1) the one-Fiscal Quarter period ending October 31, 1999, (2) the two-Fiscal Quarter period ending January 31, 2000, (3) the three-Fiscal Quarter period ending April 30, 2000, (4) the four-Fiscal Quarter period ending July 31, 2000, or (5) any four-Fiscal Quarter period ending thereafter prior to January 31, 2006 to be less than 1.10 to 1.00, or (b) any four-Fiscal Quarter period ending on or after January 31, 2006 to be less than 1.0 to 1.0. C. Maximum Leverage Ratio. As of the last day of any Fiscal Quarter ending during any of the periods set forth below, Company shall not permit the Leverage Ratio to exceed the correlative ratio indicated. Period Maximum Leverage Ratio ------ ---------------------- Closing through 10/31/99 4.75:1.00 11/01/99 through 04/30/00 4.50:1.00 05/01/00 through 10/31/00 4.25:1.00 11/01/00 through 04/30/01 4.00:1.00 05/01/01 through 10/31/01 3.50:1.00 11/01/01 through 04/30/02 3.25:1.00 05/01/02 through 10/31/02 3.00:1.00 11/01/02 through 04/30/03 2.75:1.00 05/01/03 through 10/31/03 2.50:1.00 11/01/03 through 04/30/04 2.50:1.00 thereafter 2.25:1.00 D. Minimum Consolidated EBITDA. Company shall not permit Consolidated EBITDA for any four-Fiscal Quarter period ending during any of the periods set forth below to be less than the correlative amount indicated. Period Minimum Consolidated EBITDA ------ --------------------------- Closing through 10/30/00 $ 142,000,000 10/31/00 through 10/30/01 $ 160,000,000 10/31/01 through 10/30/02 $ 185,000,000 10/31/02 through 10/30/03 $ 200,000,000 10/31/03 through 10/30/04 $ 215,000,000 10/31/04 through 10/30/05 $ 230,000,000 10/31/05 through 10/30/06 $ 240,000,000 10/31/06 through 10/30/07 $ 250,000,000 thereafter $ 260,000,000 119 7.7 Restriction on Fundamental Changes; AsSales and Acquisitions. ------------------------------------------------------------ Company shall not, and shall not peany of its Subsidiaries to, alter the corporate, capital or legal structuf Company or any of its Subsidiaries, or merge or consolidate, or liq e, wind-up or dissolve itself (or suffer any liquidation or dissolution), or convey, sell, lease or sub-lease (as lessor or sublessor), transfer or otherwise dispose of, in one transaction or a series of transactions, all or any part of its business, property or assets, whether now owned or hereafter acquired, or acquire by purchase or otherwise all or substantially all the business, property or fixed assets of, or stock or other evidence of beneficial ownership of, any Person or any division or line of business of any Person, except: (i) Company and Merger Sub may consummate the Tender Offer and the Merger; (ii) any Subsidiary of Company may be merged with or into Company or any wholly-owned Subsidiary Guarantor, or be liquidated, wound up or dissolved, or all or any part of its business, property or assets may be conveyed, sold, leased, transferred or otherwise disposed of, in one transaction or a series of transactions, to Company or any wholly-owned Subsidiary Guarantor; provided that, in the case of such a merger, Company -------- or such wholly-owned Subsidiary Guarantor shall be the continuing or surviving corporation; (iii) Company and its Subsidiaries may dispose of obsolete, worn out or surplus property in the ordinary course of business; (iv) Company and its Subsidiaries may sell or otherwise dispose of assets in transactions that do not constitute Asset Sales, provided that -------- the consideration received for such assets shall be in an amount at least equal to the fair market value thereof; (v) Company and its Subsidiaries may make Asset Sales of assets (other than the Tendered Shares) having a fair market value of not in excess of $10,000,000 during any Fiscal Year, provided that (a) the -------- consideration received for such assets shall be in an amount at least equal to the fair market value thereof and shall be Cash or non-cash consideration permitted by subsection 7.3(ix); and (b) the proceeds of such Asset Sales shall be applied as required by subsection 2.4B(iii)(a); and (vi) subject to subsection 6.7, after January 1, 2000, Company and its Subsidiaries (other than Inactive Subsidiaries) may acquire by purchase or otherwise (each, a "Subsequent Acquisition") all or substantially all the business, property or fixed assets of, or stock or other evidence of beneficial ownership of, any Person (other than DMG) or any division or line of business of any Person (other than DMG) (any such business, property, assets, stock, evidence of ownership, division or line of business, being a "Target"), provided that (a) the sum of the aggregate -------- Total Purchase Price of all Subsequent Acquisitions does not exceed $60,000,000 in the aggregate during the term of this Agreement and (b) Company shall have delivered a Compliance Certificate to Administrative Agent demonstrating that, after giving effect to such proposed Subsequent 120 Acquisition, the Leverage Ratio is in compliance with the requirements of subsection 7.6C; (vii) licenses or sublicenses by the Company and its Subsidiaries of software, trademarks, patents and other intellectual property in the ordinary course of business and which do not materially interfere with the business of the Company or any of its Subsidiaries; (viii) transfers of condemned property to the respective governmental authority or agency that have condemned the same (whether by deed in lieu of condemnation or otherwise), and transfers of properties that have been subject to a casualty to the respective insurer of such property or its designee as part of an insurance settlement; and (ix) Company and its Subsidiaries may sell or otherwise dispose of Investments permitted to be made or owned by subsection 7.3(i). 7.8 Consolidated Capital Expenditures. --------------------------------- Company shall not, and shall not permit its Subsidiaries to, make or incur Consolidated Capital Expenditures, in any Fiscal Year indicated below, in an aggregate amount in excess of the corresponding amount (the "Maximum Consolidated Capital Expenditures Amount") set forth below opposite such Fiscal Year; provided that the Maximum Consolidated Capital Expenditures Amount for any -------- Fiscal Year shall be increased by an amount equal to the excess, if any, of the Maximum Consolidated Capital Expenditures Amount for the previous Fiscal Year (without giving effect to any adjustment in accordance with this proviso) over the actual amount of Consolidated Capital Expenditures for such previous Fiscal Year: Fiscal Year Maximum Consolidated Capital Expenditures Amount ----------- ------------------------------------------------ 2000 $34,000,000 2001 $36,000,000 2002 $38,000,000 2003 $40,000,000 2004 $42,000,000 2005 $44,000,000 2006 $46,000,000 thereafter $48,000,000 7.9 Sales and Lease-Backs. --------------------- Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, become or remain liable as lessee or as a guarantor or other surety with respect to any lease, whether an Operating Lease or a Capital Lease, of any property (whether real, personal or mixed), whether now owned or hereafter acquired, (i) which Company or any of its Subsidiaries has sold or transferred or is to sell or transfer to any other Person (other than Company or any of its Subsidiaries) or (ii) which Company or any of its Subsidiaries intends to use for substantially the same purpose as any other property which has been or is to be sold or transferred by 121 Company or any of its Subsidiaries to any Person (other than Company or any of its Subsidiaries) in connection with such lease. 7.10 Sale or Discount of Receivables. ------------------------------- Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, sell with recourse, discount or otherwise sell for less than the face value thereof, any of its accounts receivable. 7.11 Transactions with Shareholders and Affiliates. --------------------------------------------- Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, enter into or permit to exist any transaction (including the purchase, sale, lease or exchange of any property or the rendering of any service) with any holder of 5% or more of any class of equity Securities of Company or with any Affiliate of Company or of any such holder, on terms that are less favorable to Company or that Subsidiary, as the case may be, than those that might be obtained at the time from Persons who are not such a holder or Affiliate; provided that the foregoing restriction shall not apply to (i) any -------- transaction between Company and any of its wholly-owned Subsidiaries or between any of its wholly-owned Subsidiaries, (ii) reasonable and customary fees paid to members of the Boards of Directors of Company and its Subsidiaries, (iii) existing related party transactions described in Company's Annual Report on Form 10-K for the 1998 Fiscal Year, or (iv) the transactions contemplated by the Securities Purchase Agreement. 7.12 Conduct of Business. ------------------- From and after the Closing Date, Company shall not, and shall not permit any of its Subsidiaries to, engage in any business other than (i) the businesses engaged in by Company, DMG and their respective Subsidiaries on the Closing Date and similar or related businesses and (ii) such other lines of business as may be consented to by Requisite Lenders. 7.13 Amendments or Waivers of Related Agreements; Amendments of Documents -------------------------------------------------------------------- Relating to Subordinated Indebtedness. - ------------------------------------- A. Amendments or Waivers of Related Agreements. Except as set forth on Schedule 7.13 of the Closing Date Company Disclosure Letter, neither Company nor any of its Subsidiaries will agree to any material amendment to, or waive any of its material rights under, any Related Agreement (other than the Bridge Loan Agreement, the Senior Subordinated Note Indenture, the Existing Subordinated Agreements, the Securities Purchase Agreement or the Company Certificates of Designations) after the Closing Date without in each case obtaining the prior written consent of Requisite Lenders to such amendment or waiver. Neither Company nor any of its Subsidiaries will agree to any amendment to, or waive any of its rights under, the Securities Purchase Agreement or the Company Certificates of Designation in any respect that would be adverse to Company or Lenders after the Closing Date without in each case obtaining the prior written consent of Requisite Lenders to such amendment or waiver. B. Amendments of Documents Relating to Subordinated Indebtedness. Company shall not, and shall not permit any of its Subsidiaries to, amend or otherwise change 122 the terms of any Existing Subordinated Indebtedness, the Existing Subordinated Agreements, the Bridge Loan Agreement, the Bridge Notes, the Rollover Notes, the Senior Subordinated Notes or the Senior Subordinated Note Indenture, or make any payment consistent with an amendment thereof or change thereto. C. Designated Senior Indebtedness. Company shall not designate any Indebtedness as "Designated Senior Indebtedness" other than the Obligations for purposes of the Senior Subordinated Note Indenture without the prior written consent of Requisite Lenders. 7.14 Fiscal Year. ----------- Company shall not change its Fiscal Year-end from October 31. SECTION 8. EVENTS OF DEFAULT If any of the following conditions or events ("Events of Default") shall occur: 8.1 Failure to Make Payments When Due. --------------------------------- Failure by Company to pay any installment of principal of any Loan when due, whether at stated maturity, by acceleration, by notice of voluntary prepayment, by mandatory prepayment or otherwise; failure by Company to pay when due any amount payable to the Issuing Lender in reimbursement of any drawing under a Letter of Credit; or failure by Company to pay any interest on any Loan or any fee or any other amount due under this Agreement within five days after the date due; or 8.2 Default in Other Agreements. --------------------------- (i) Failure of Company or any of its Subsidiaries to pay when due any principal of or interest on or any other amount payable in respect of any Subordinated Indebtedness or one or more items of any other Indebtedness (other than Indebtedness referred to in subsection 8.1) or Contingent Obligations in an individual principal amount of $5,000,000 or more or with an aggregate principal amount of $5,000,000 or more, in each case beyond the end of any grace period provided therefor; or (ii) breach or default by Company or any of its Subsidiaries with respect to any other material term of (a) any Subordinated Indebtedness or one or more items of any other Indebtedness or Contingent Obligations in the individual or aggregate principal amounts referred to in clause (i) above or (b) any loan agreement, mortgage, indenture or other agreement relating to such item(s) of Indebtedness or Contingent Obligation(s), if the effect of such breach or default is to cause, or to permit the holder or holders of that Indebtedness or Contingent Obligation(s) (or a trustee on behalf of such holder or holders) to cause, that Indebtedness or Contingent Obligation(s) to become or be declared due and payable prior to its stated maturity or the stated maturity of any underlying obligation, as the case may be (upon the giving or receiving of notice, lapse of time, both, or otherwise); or 8.3 Breach of Certain Covenants. --------------------------- 123 Failure of Company to perform or comply with any term or condition contained in subsection 2.5, 6.1(vii) or 6.2 or Section 7 of this Agreement; or 8.4 Breach of Warranty. ------------------ Any representation, warranty, certification or other statement made by Company or any of its Subsidiaries in any Loan Document or in any statement or certificate at any time given by Company or any of its Subsidiaries in writing pursuant hereto or thereto or in connection herewith or therewith shall be false in any material respect on the date as of which made; or 8.5 Other Defaults Under Loan Documents. ----------------------------------- Any Loan Party shall default in the performance of or compliance with any term contained in this Agreement or any of the other Loan Documents, other than any such term referred to in any other subsection of this Section 8, and such default shall not have been remedied or waived within 30 days after the earlier of (i) a Responsible Officer of Company becoming aware of such default or (ii) receipt by Company and such Loan Party of notice from Administrative Agent or any Lender of such default; or 8.6 Involuntary Bankruptcy; Appointment of Receiver, etc. ----------------------------------------------------- (i) A court having jurisdiction in the premises shall enter a decree or order for relief in respect of Company or any of its Subsidiaries in an involuntary case under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect, which decree or order is not stayed; or any other similar relief shall be granted under any applicable federal or state law; or (ii) an involuntary case shall be commenced against Company or any of its Subsidiaries under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect; or a decree or order of a court having jurisdiction in the premises for the appointment of a receiver, liquidator, sequestrator, trustee, custodian or other officer having similar powers over Company or any of its Subsidiaries, or over all or a substantial part of its property, shall have been entered; or there shall have occurred the involuntary appointment of an interim receiver, trustee or other custodian of Company or any of its Subsidiaries for all or a substantial part of its property; or a warrant of attachment, execution or similar process shall have been issued against any substantial part of the property of Company or any of its Subsidiaries, and any such event described in this clause (ii) shall continue for 60 days unless dismissed, bonded or discharged; or 8.7 Voluntary Bankruptcy; Appointment of Receiver, etc. --------------------------------------------------- (i) Company or any of its Subsidiaries shall have an order for relief entered with respect to it or commence a voluntary case under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect, or shall consent to the entry of an order for relief in an involuntary case, or to the conversion of an involuntary case to a voluntary case, under any such law, or shall consent to the appointment of or taking possession by a receiver, trustee or other custodian for all or a substantial part of its property; or Company or any of its Subsidiaries shall make any 124 assignment for the benefit of creditors; or (ii) Company or any of its Subsidiaries shall be unable, or shall fail generally, or shall admit in writing its inability, to pay its debts as such debts become due; or the Board of Directors of Company or any of its Subsidiaries (or any committee thereof) shall adopt any resolution or otherwise authorize any action to approve any of the actions referred to in clause (i) above or this clause (ii); or 8.8 Judgments and Attachments. ------------------------- Any money judgment, writ or warrant of attachment or similar process involving (i) in any individual case an amount in excess of $5,000,000 or (ii) in the aggregate at any time an amount in excess of $5,000,000 shall be entered or filed against Company or any of its Subsidiaries or any of their respective assets and shall remain undischarged, unvacated, unbonded or unstayed for a period of 60 days (or in any event later than five days prior to the date of any proposed sale thereunder); or 8.9 Dissolution. ----------- Any order, judgment or decree shall be entered against Company or any of its Material Subsidiaries decreeing the dissolution or split up of Company or that Material Subsidiary and such order shall remain undischarged or unstayed for a period in excess of 30 days; or 8.10 Employee Benefit Plans. ---------------------- There shall occur one or more ERISA Events which individually or in the aggregate results in or might reasonably be expected to result in liability of Company, any of its Subsidiaries or any of their respective ERISA Affiliates in excess of $5,000,000 during the term of this Agreement; or there shall exist an amount of unfunded benefit liabilities (as defined in Section 4001(a)(18) of ERISA), individually or in the aggregate for all Pension Plans of Company and its Subsidiaries (excluding for purposes of such computation any such Pension Plans with respect to which assets exceed benefit liabilities), which exceeds $5,000,000; or 8.11 Material Adverse Effect. ----------------------- Any event or change shall occur that has caused or evidences, either in any case or in the aggregate, a Material Adverse Effect with respect to Company; or 8.12 Change in Control. ----------------- Any Person or any two or more Persons, other than RCBA and its Affiliates, acting in concert shall have acquired after the date hereof beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Exchange Act), directly or indirectly, of Securities of Company (or other Securities convertible into such Securities) representing 35% or more of the combined voting power of all Securities of Company entitled to vote in the election of directors, other than Securities having such power only by reason of the happening of a contingency; or during any period of 12 consecutive months after the Closing Date, individuals who at the beginning of such 12-month period constituted the Board of Directors of Company (together with any new directors whose election by such Board 125 of Directors or whose nomination for election by the stockholders of Company was approved by a vote of a majority of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved, including new directors designated in or provided for in an agreement regarding the merger, consolidation or sale, transfer or other conveyance, of all or substantially all of the assets of Company, if such agreement was approved by a vote of such majority directors) cease for any reason to constitute a majority of the Board of Directors of Company then in office, or 8.13 Invalidity of Subsidiary Guaranty; Failure of Security; Repudiation of ---------------------------------------------------------------------- Obligations. - ----------- At any time after the execution and delivery thereof, (i) the Subsidiary Guaranty for any reason, other than the satisfaction in full of all Obligations, shall cease to be in full force and effect (other than in accordance with its terms) or shall be declared to be null and void, (ii) any Collateral Document shall cease to be in full force and effect (other than by reason of a release of Collateral thereunder in accordance with the terms hereof or thereof, the satisfaction in full of the Obligations or any other termination of such Collateral Document in accordance with the terms hereof or thereof) or shall be declared null and void, or Administrative Agent shall not have or shall cease to have a valid and perfected First Priority Lien in any material part of the Collateral purported to be covered thereby, in each case for any reason other than the failure of Administrative Agent or any Lender to take any action within its control, or (iii) any Loan Party shall contest the validity or enforceability of any Loan Document in writing or deny in writing that it has any further liability, including with respect to future advances by Lenders, under any Loan Document to which it is a party; or 8.14 Failure to Consummate Merger. ---------------------------- The Merger shall not be consummated in accordance with the Merger Agreement or the Merger shall be unwound, reversed or otherwise rescinded in whole or in part for any reason; THEN (i) upon the occurrence of any Event of Default described in subsection 8.6 or 8.7 with respect to Company or any of its Significant Subsidiaries, each of (a) the unpaid principal amount of and accrued interest on the Loans, (b) an amount equal to the maximum amount that may at any time be drawn under all Letters of Credit then outstanding (whether or not any beneficiary under any such Letter of Credit shall have presented, or shall be entitled at such time to present, the drafts or other documents or certificates required to draw under such Letter of Credit), and (c) all other Obligations shall automatically become immediately due and payable, without presentment, demand, protest or other requirements of any kind, all of which are hereby expressly waived by Company, and the obligation of each Lender to make any Loan and the obligation of the Issuing Lender to issue any Letter of Credit hereunder shall thereupon terminate, and (ii) upon the occurrence and during the continuation of any other Event of Default, Administrative Agent shall, upon the written request or with the written consent of Requisite Lenders, by written notice to Company, declare all or any portion of the amounts described in clauses (a) through (c) above to be, and the same shall forthwith become, immediately due and payable, and the obligation of each Lender to make any Loan and the obligation of the Issuing Lender to issue any Letter of Credit hereunder shall thereupon terminate; provided that the foregoing shall not affect in any way the obligations of - -------- Lenders 126 under subsection 3.3C(i) or the obligations of Lenders to purchase participations in any unpaid Swing Line Loans as provided in subsection 2.1A(vi). Any amounts described in clause (b) above, when received by Administrative Agent, shall be held by Administrative Agent in an account satisfactory to Administrative Agent and in which Administrative Agent (on behalf of Lenders) has a First Priority Lien and shall be applied as provided in an agreement entered into by the parties with respect thereto. Notwithstanding anything contained in the second preceding paragraph, if at any time within 60 days after an acceleration of the Loans pursuant to clause (ii) of such paragraph Company shall pay all arrears of interest and all payments on account of principal which shall have become due otherwise than as a result of such acceleration (with interest on principal and, to the extent permitted by law, on overdue interest, at the rates specified in this Agreement) and all Events of Default and Potential Events of Default (other than non- payment of the principal of and accrued interest on the Loans, in each case which is due and payable solely by virtue of acceleration) shall be remedied or waived pursuant to subsection 10.6, then Requisite Lenders, by written notice to Company, may at their option rescind and annul such acceleration and its consequences; but such action shall not affect any subsequent Event of Default or Potential Event of Default or impair any right consequent thereon. The provisions of this paragraph are intended merely to bind Lenders to a decision which may be made at the election of Requisite Lenders and are not intended, directly or indirectly, to benefit Company, and such provisions shall not at any time be construed so as to grant Company the right to require Lenders to rescind or annul any acceleration hereunder or to preclude Administrative Agent or Lenders from exercising any of the rights or remedies available to them under any of the Loan Documents, even if the conditions set forth in this paragraph are met. SECTION 9. ADMINISTRATIVE AGENT 9.1 Appointment. ----------- A. Appointment of Administrative Agent. Wells Fargo is hereby appointed Administrative Agent hereunder and under the other Loan Documents and each Lender hereby authorizes Administrative Agent to act as its agent in accordance with the terms of this Agreement and the other Loan Documents. Administrative Agent agrees to act upon the express conditions contained in this Agreement and the other Loan Documents, as applicable. The provisions of this Section 9 are solely for the benefit of Administrative Agent and Lenders and Company shall have no rights as a third party beneficiary of any of the provisions thereof. In performing its functions and duties under this Agreement, Administrative Agent shall act solely as an agent of Lenders and does not assume and shall not be deemed to have assumed any obligation towards or relationship of agency or trust with or for Company or any of its Subsidiaries. B. Appointment of Supplemental Collateral Administrative Agents. It is the purpose of this Agreement and the other Loan Documents that there shall be no violation of any law of any jurisdiction denying or restricting the right of banking corporations or associations to transact business as agent or trustee in such jurisdiction. It is recognized that in case of litigation under this Agreement or any of the other Loan Documents, and in particular in case of the 127 enforcement of any of the Loan Documents, or in case Administrative Agent deems that by reason of any present or future law of any jurisdiction it may not exercise any of the rights, powers or remedies granted herein or in any of the other Loan Documents or take any other action which may be desirable or necessary in connection therewith, it may be necessary that Administrative Agent appoint an additional individual or institution reasonably acceptable to Company as a separate trustee, co-trustee, collateral agent or collateral co-agent (any such additional individual or institution being referred to herein individually as a "Supplemental Collateral Agent" and collectively as "Supplemental Collateral Agents"). Company shall not be obligated to pay any fees to such Supplemental Collateral Agent. In the event that Administrative Agent appoints a Supplemental Collateral Administrative Agent with respect to any Collateral, (i) each and every right, power, privilege or duty expressed or intended by this Agreement or any of the other Loan Documents to be exercised by or vested in or conveyed to Administrative Agent with respect to such Collateral shall be exercisable by and vest in such Supplemental Collateral Administrative Agent to the extent, and only to the extent, necessary to enable such Supplemental Collateral Administrative Agent to exercise such rights, powers and privileges with respect to such Collateral and to perform such duties with respect to such Collateral, and every covenant and obligation contained in the Loan Documents and necessary to the exercise or performance thereof by such Supplemental Collateral Administrative Agent shall run to and be enforceable by either Administrative Agent or such Supplemental Collateral Administrative Agent, and (ii) the provisions of this Section 9 and of subsections 10.2 and 10.3 that refer to Administrative Agent shall inure to the benefit of such Supplemental Collateral Administrative Agent and all references therein to Administrative Agent shall be deemed to be references to Administrative Agent and/or such Supplemental Collateral Administrative Agent, as the context may require. Should any instrument in writing from Company or any other Loan Party be required by any Supplemental Collateral Administrative Agent so appointed by Administrative Agent for more fully and certainly vesting in and confirming to him or it such rights, powers, privileges and duties, Company shall, or shall cause such Loan Party to, execute, acknowledge and deliver any and all such instruments promptly upon request by Administrative Agent. In case any Supplemental Collateral Administrative Agent, or a successor thereto, shall die, become incapable of acting, resign or be removed, all the rights, powers, privileges and duties of such Supplemental Collateral Administrative Agent, to the extent permitted by law, shall vest in and be exercised by Administrative Agent until the appointment of a new Supplemental Collateral Administrative Agent. 9.2 Powers and Duties; General Immunity. ----------------------------------- A. Powers; Duties Specified. Each Lender irrevocably authorizes Administrative Agent to take such action on such Lender's behalf and to exercise such powers, rights and remedies hereunder and under the other Loan Documents as are specifically delegated or granted to Administrative Agent by the terms hereof and thereof, together with such powers, rights and remedies as are reasonably incidental thereto. Administrative Agent shall have only those duties and responsibilities that are expressly specified in this Agreement and the other Loan Documents. Administrative Agent may exercise such powers, rights and remedies and perform such duties by or through its agents or employees. Administrative Agent shall not have, by 128 reason of this Agreement or any of the other Loan Documents, a fiduciary relationship in respect of any Lender; and nothing in this Agreement or any of the other Loan Documents, expressed or implied, is intended to or shall be so construed as to impose upon Administrative Agent any obligations in respect of this Agreement or any of the other Loan Documents except as expressly set forth herein or therein. B. No Responsibility for Certain Matters. Administrative Agent shall not be responsible to any Lender for the execution, effectiveness, genuineness, validity, enforceability, collectibility or sufficiency of this Agreement or any other Loan Document or for any representations, warranties, recitals or statements made herein or therein or made in any written or oral statements or in any financial or other statements, instruments, reports or certificates or any other documents furnished or made by Administrative Agent to Lenders or by or on behalf of Company to Administrative Agent or any Lender in connection with the Loan Documents and the transactions contemplated thereby or for the financial condition or business affairs of Company or any other Person liable for the payment of any Obligations, nor shall Administrative Agent be required to ascertain or inquire as to the performance or observance of any of the terms, conditions, provisions, covenants or agreements contained in any of the Loan Documents or as to the use of the proceeds of the Loans or the use of the Letters of Credit or as to the existence or possible existence of any Event of Default or Potential Event of Default. Anything contained in this Agreement to the contrary notwithstanding, Administrative Agent shall not have any liability arising from confirmations of the amount of outstanding Loans or the Letter of Credit Usage or the component amounts thereof. C. Exculpatory Provisions. Neither Administrative Agent nor any of its officers, directors, employees or agents shall be liable to Lenders for any action taken or omitted by Administrative Agent under or in connection with any of the Loan Documents except to the extent caused by Administrative Agent's gross negligence or willful misconduct. Administrative Agent shall be entitled to refrain from any act or the taking of any action (including the failure to take an action) in connection with this Agreement or any of the other Loan Documents or from the exercise of any power, discretion or authority vested in it hereunder or thereunder unless and until Administrative Agent shall have received instructions in respect thereof from Requisite Lenders (or such other Lenders as may be required to give such instructions under subsection 10.6) and, upon receipt of such instructions from Requisite Lenders (or such other Lenders, as the case may be), Administrative Agent shall be entitled to act or (where so instructed) refrain from acting, or to exercise such power, discretion or authority, in accordance with such instructions. Without prejudice to the generality of the foregoing, (i) Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any communication, instrument or document believed by it to be genuine and correct and to have been signed or sent by the proper person or persons, and shall be entitled to rely and shall be protected in relying on opinions and judgments of attorneys (who may be attorneys for Company and its Subsidiaries), accountants, experts and other professional advisors selected by it; and (ii) no Lender shall have any right of action whatsoever against Administrative Agent as a result of Administrative Agent acting or (where so instructed) refraining from acting under this Agreement or any of the other Loan Documents in accordance with the instructions of Requisite Lenders (or such other Lenders as may be required to give such instructions under subsection 10.6). 129 D. Administrative Agent Entitled to Act as Lender. The agency hereby created shall in no way impair or affect any of the rights and powers of, or impose any duties or obligations upon, Administrative Agent in its individual capacity as a Lender hereunder. With respect to its participation in the Loans and the Letters of Credit, Administrative Agent shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not performing the duties and functions delegated to it hereunder, and the term "Lender" or "Lenders" or any similar term shall, unless the context clearly otherwise indicates, include Administrative Agent in its individual capacity. Administrative Agent and its Affiliates may accept deposits from, lend money to and generally engage in any kind of banking, trust, financial advisory or other business with Company or any of its Affiliates as if it were not performing the duties specified herein, and may accept fees and other consideration from Company for services in connection with this Agreement and otherwise without having to account for the same to Lenders. 9.3 Representations and Warranties; No Responsibility For Appraisal of ------------------------------------------------------------------ Creditworthiness. - ---------------- Each Lender represents and warrants that it has made its own independent investigation of the financial condition and affairs of Company and its Subsidiaries in connection with the making of the Loans and the issuance of Letters of Credit hereunder and that it has made and shall continue to make its own appraisal of the creditworthiness of Company and its Subsidiaries. Administrative Agent shall not have any duty or responsibility, either initially or on a continuing basis, to make any such investigation or any such appraisal on behalf of Lenders or to provide any Lender with any credit or other information with respect thereto, whether coming into its possession before the making of the Loans or at any time or times thereafter, and Administrative Agent shall not have any responsibility with respect to the accuracy of or the completeness of any information provided to Lenders. 9.4 Right to Indemnity. ------------------ Each Lender, in proportion to its Pro Rata Share, severally agrees to indemnify Administrative Agent, to the extent that Administrative Agent shall not have been reimbursed by Company, for and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including counsel fees and disbursements) or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against Administrative Agent in exercising its powers, rights and remedies or performing its duties hereunder or under the other Loan Documents or otherwise in its capacity as Administrative Agent in any way relating to or arising out of this Agreement or the other Loan Documents; provided that no Lender shall be liable -------- for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from Administrative Agent's gross negligence or willful misconduct. If any indemnity furnished to Administrative Agent for any purpose shall, in the opinion of Administrative Agent, be insufficient or become impaired, Administrative Agent may call for additional indemnity and cease, or not commence, to do the acts indemnified against until such additional indemnity is furnished. 9.5 Successor Administrative Agent and Swing Line Lender. ---------------------------------------------------- 130 A. Administrative Agent may resign at any time by giving 30 days' prior written notice thereof to Lenders and Company, and Administrative Agent may be removed at any time with or without cause by an instrument or concurrent instruments in writing delivered to Company and Administrative Agent and signed by Requisite Lenders. Upon any such notice of resignation or any such removal, Requisite Lenders shall have the right, upon five Business Days' notice to Company, to appoint a successor Administrative Agent, except during the continuance of an Event of Default, with the consent of Company (which consent shall not be unreasonably withheld or delayed). Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, that successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring or removed Administrative Agent and the retiring or removed Administrative Agent shall be discharged from its duties and obligations under this Agreement. After any retiring or removed Administrative Agent's resignation or removal hereunder as Administrative Agent, the provisions of this Section 9 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement. B. Successor Swing Line Lender. Any resignation or removal of Administrative Agent pursuant to subsection 9.5A shall also constitute the resignation or removal of Wells Fargo or its successor as Swing Line Lender, and any successor Administrative Agent appointed pursuant to subsection 9.5A shall, upon its acceptance of such appointment, become the successor Swing Line Lender for all purposes hereunder. In such event (i) Company shall prepay any outstanding Swing Line Loans made by the retiring or removed Administrative Agent in its capacity as Swing Line Lender, (ii) upon such prepayment, the retiring or removed Administrative Agent and Swing Line Lender shall surrender any Swing Line Note held by it to Company for cancellation, and (iii) if so requested by the successor Administrative Agent and Swing Line Lender in accordance with subsection 2.1E, Company shall issue a new Swing Line Note to the successor Administrative Agent and Swing Line Lender substantially in the form of Exhibit IX annexed hereto, in the principal amount of the Swing Line ------- -- Loan Commitment then in effect and with other appropriate insertions. 9.6 Collateral Documents and Guaranties. ----------------------------------- Each Lender hereby further authorizes Administrative Agent, on behalf of and for the benefit of Lenders, to enter into each Collateral Document as secured party and to be the agent for and representative of Lenders under the Subsidiary Guaranty, and each Lender agrees to be bound by the terms of each Collateral Document and the Subsidiary Guaranty; provided that Administrative -------- Agent shall not (i) enter into or consent to any material amendment, modification, termination or waiver of any provision contained in any Collateral Document or the Subsidiary Guaranty or (ii) release any Collateral (except as otherwise expressly permitted or required pursuant to the terms of this Agreement or the applicable Collateral Document), in each case without the prior consent of Requisite Lenders (or, if required pursuant to subsection 10.6, all Lenders); provided further, however, that, without further written consent or -------- ------- ------- authorization from Lenders, Administrative Agent may execute any documents or instruments necessary to (a) release any Lien encumbering any item of Collateral that is the subject of a sale or other disposition of assets permitted by this Agreement or to which Requisite Lenders have otherwise consented or (b) release any Subsidiary Guarantor from the Subsidiary Guaranty if all of the Capital Stock of such Subsidiary Guarantor is sold to any Person (other than an Affiliate of 131 Company) pursuant to a sale or other disposition permitted hereunder or to which Requisite Lenders have otherwise consented. Anything contained in any of the Loan Documents to the contrary notwithstanding, Company, Administrative Agent and each Lender hereby agree that (1) no Lender shall have any right individually to realize upon any of the Collateral under any Collateral Document or to enforce the Subsidiary Guaranty, it being understood and agreed that all powers, rights and remedies under the Collateral Documents and the Subsidiary Guaranty may be exercised solely by Administrative Agent for the benefit of Lenders in accordance with the terms thereof, and (2) in the event of a foreclosure by Administrative Agent on any of the Collateral pursuant to a public or private sale, Administrative Agent or any Lender may be the purchaser of any or all of such Collateral at any such sale and Administrative Agent, as agent for and representative of Lenders (but not any Lender or Lenders in its or their respective individual capacities unless Requisite Lenders shall otherwise agree in writing) shall be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Collateral sold at any such public sale, to use and apply any of the Obligations as a credit on account of the purchase price for any collateral payable by Administrative Agent at such sale. 9.7 Syndication Agent. ----------------- Syndication Agent shall have no right, power, obligation, liability, responsibility or duty under this Agreement other than those applicable to all Lenders as such or to Syndication Agent as such. SECTION 10. MISCELLANEOUS 10.1 Assignments and Participations in Loans and Letters of Credit. ------------------------------------------------------------- A. General. Subject to subsection 10.1B, each Lender shall have the right at any time to (i) sell, assign or transfer to any Eligible Assignee, or (ii) sell participations to any Person in, all or any part of its Commitments or any Loan or Loans made by it or its Letters of Credit or participations therein or any other interest herein or in any other Obligations owed to it; provided that no such sale, assignment, transfer or participation shall, without the consent of Company, require Company to file a registration statement with the Securities and Exchange Commission or apply to qualify such sale, assignment, transfer or participation under the securities laws of any state; provided, further that no -------- ------- such sale, assignment or transfer described in clause (i) above shall be effective unless and until an Assignment Agreement effecting such sale, assignment or transfer shall have been accepted by Administrative Agent and consented to by Company and Administrative Agent as provided in subsection 10.1B(ii); provided, further that no such sale, assignment, transfer or -------- ------- participation of any Letter of Credit or any participation therein may be made separately from a sale, assignment, transfer or participation of a corresponding interest in the Revolving Loan Commitment and the Revolving Loans of the Lender effecting such sale, assignment, transfer or participation; and provided, further that, anything contained herein to the contrary notwithstanding, the Swing Line Loan Commitment and the Swing Line Loan of Swing Line Lender may not be sold, assigned or transferred as described in clause (i) above to any Person other than a successor Administrative Agent and Swing Line Lender to the extent contemplated by subsection 9.5. Except as otherwise provided in this subsection 10.1, no Lender shall, as between Company and such Lender, be relieved of any of its obligations hereunder as a result of any sale, assignment or transfer of, or any granting of participations in, all or any part of 132 its Commitments or the Loans, the Letters of Credit or participations therein, or the other Obligations owed to such Lender. B. Assignments. (i) Amounts and Terms of Assignments. Each Commitment, Loan, Letter -------------------------------- of Credit or participation therein, or other Obligation may (a) be assigned in any amount to another Lender, or to an Affiliate of the assigning Lender or another Lender, with the giving of notice to Company and Administrative Agent or (b) be assigned in an aggregate amount of not less than $5,000,000 (or such lesser amount as shall constitute the aggregate amount of the Commitments, Loans, Letters of Credit and participations therein, and other Obligations of the assigning Lender) to any other Eligible Assignee with the consent of Administrative Agent and, except during the continuance of an Event of Default, with the consent of Company (which consent of Company and Administrative Agent shall not be unreasonably withheld or delayed); provided, however that any Lender that assigns its Revolving Sterling Loan -------- ------- Commitment must also assign a pro rata portion of its Revolving Loan Commitment. To the extent of any such assignment in accordance with either clause (a) or (b) above, the assigning Lender shall be relieved of its obligations with respect to its Commitments, Loans, Letters of Credit or participations therein, or other Obligations or the portion thereof so assigned. The parties to each such assignment shall execute and deliver to Administrative Agent, for its acceptance, an Assignment Agreement, together with a recordation fee of $3,500 and such forms, certificates or other evidence, if any, with respect to United States federal income tax withholding matters as the assignee under such Assignment Agreement may be required to deliver to Administrative Agent pursuant to subsection 2.7B(iii)(a). Upon such execution, delivery and acceptance, from and after the effective date specified in such Assignment Agreement, (1) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment Agreement, shall have the rights and obligations of a Lender hereunder and (2) the assigning Lender thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment Agreement, relinquish its rights (other than any rights which survive the termination of this Agreement under subsection 10.9B) and be released from its obligations under this Agreement (and, in the case of an Assignment Agreement covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto; provided that, anything contained in any of the Loan -------- Documents to the contrary notwithstanding, if such Lender is the Issuing Lender with respect to any outstanding Letters of Credit such Lender shall continue to have all rights and obligations of the Issuing Lender with respect to such Letters of Credit until the cancellation or expiration of such Letters of Credit and the reimbursement of any amounts drawn thereunder). The Commitments hereunder shall be modified to reflect the Commitment of such assignee and any remaining Commitment of such assigning Lender and, if any such assignment occurs after the issuance of any Notes hereunder, the assigning Lender shall, upon the effectiveness of such assignment or as promptly thereafter as practicable, surrender its applicable Notes, if any, to Administrative Agent for cancellation, and thereupon new Notes shall, if so requested by the assignee and/or the assigning Lender in accordance with subsection 2.1E, be issued to the assignee and to the assigning Lender, 133 substantially in the form of Exhibit IV, Exhibit V, Exhibit VI or Exhibit ------- -- --------- ---------- ------- VII annexed hereto, as the case may be, with appropriate insertions, to --- reflect the new Commitments and/or outstanding Tranche A Term Loans and/or Tranche B Term Loans and/or Tranche C Term Loans, as the case may be, of the assignee and the assigning Lender. (ii) Acceptance by Administrative Agent. Upon its receipt of an ---------------------------------- Assignment Agreement executed by an assigning Lender and an assignee representing that it is an Eligible Assignee, together with the recordation fee referred to in subsection 10.1B(i) and any forms, certificates or other evidence with respect to United States federal income tax withholding matters that such assignee may be required to deliver to Administrative Agent pursuant to subsection 2.7B(iii)(a), Administrative Agent shall, if Administrative Agent and Company have consented to the assignment evidenced thereby (in each case to the extent such consent is required pursuant to subsection 10.1B(i)), (a) accept such Assignment Agreement by executing a counterpart thereof as provided therein (which acceptance shall evidence any required consent of Administrative Agent to such assignment), and (b) give prompt notice thereof to Company. Administrative Agent shall maintain a copy of each Assignment Agreement delivered to and accepted by it as provided in this subsection 10.1B(ii). C. Participations. The holder of any participation, other than an Affiliate of the Lender granting such participation, shall not be entitled to require such Lender to take or omit to take any action hereunder except action directly affecting (i) the extension of the regularly scheduled maturity of any portion of the principal amount of or interest on any Loan allocated to such participation or (ii) a reduction of the principal amount of or the rate of interest payable on any Loan allocated to such participation, and all amounts payable by Company hereunder (including amounts payable to such Lender pursuant to subsections 2.6D, 2.7 and 3.6) shall be determined as if such Lender had not sold such participation. D. Assignments to Federal Reserve Banks. In addition to the assignments and participations permitted under the foregoing provisions of this subsection 10.1, any Lender may assign and pledge all or any portion of its Loans, the other Obligations owed to such Lender, and its Notes to any Federal Reserve Bank as collateral security pursuant to Regulation A of the Board of Governors of the Federal Reserve System and any operating circular issued by such Federal Reserve Bank; provided that (i) no Lender shall, as between Company and such Lender, be -------- relieved of any of its obligations hereunder as a result of any such assignment and pledge and (ii) in no event shall such Federal Reserve Bank be considered to be a "Lender" or be entitled to require the assigning Lender to take or omit to take any action hereunder. E. Information. Each Lender may furnish any information concerning Company and its Subsidiaries in the possession of that Lender from time to time to assignees and participants (including prospective assignees and participants), subject to subsection 10.18. F. Representations of Lenders. Each Lender listed on the signature pages hereof hereby represents and warrants (i) that it is an Eligible Assignee described in clause (i) of the definition thereof; (ii) that it has experience and expertise in the making of loans such as the Loans; and (iii) that it will make its Loans for its own account in the ordinary course of its business and without a view to distribution of such Loans within the meaning of the Securities 134 Act or the Exchange Act or other federal securities laws (it being understood that, subject to the provisions of this subsection 10.1, the disposition of such Loans or any interests therein shall at all times remain within its exclusive control). Each Lender that becomes a party hereto pursuant to an Assignment Agreement shall be deemed to agree that the representations and warranties of such Lender contained in Section 2(c) of such Assignment Agreement are incorporated herein by this reference. 10.2 Expenses. -------- Whether or not the transactions contemplated hereby shall be consummated, Company agrees to pay promptly (i) all the actual and reasonable costs and expenses of preparation of the Loan Documents and any consents, amendments, waivers or other modifications thereto and the transactions contemplated thereby; (ii) all the costs of furnishing all opinions by counsel for Company required hereunder and of Company's performance of and compliance with all agreements and conditions on its part to be performed or complied with under this Agreement and the other Loan Documents, including with respect to confirming compliance with environmental, insurance and solvency requirements; (iii) the reasonable fees, expenses and disbursements of counsel to Administrative Agent (including allocated costs of internal counsel) in connection with the negotiation, preparation, execution and administration of the Loan Documents and any consents, amendments, waivers or other modifications thereto and any other documents or matters requested by Company; (iv) all the actual costs and reasonable expenses of creating and perfecting Liens in favor of Administrative Agent on behalf of Lenders pursuant to any Collateral Document, including filing and recording fees, expenses and taxes, stamp or documentary taxes, search fees, title insurance premiums and reasonable fees, expenses and disbursements of counsel to Administrative Agent and of counsel providing any opinions required hereunder; (v) all the actual costs and reasonable expenses (including the reasonable fees, expenses and disbursements of any auditors, accountants or appraisers and any environmental or other consultants, advisors and agents employed or retained by Administrative Agent or its counsel) of obtaining and reviewing any reports provided for under subsection 6.8; (vi) the custody or preservation of any of the Collateral; (vii) all actual and reasonable costs and expenses incurred by Administrative Agent in connection with the syndication of the Commitments; and (vi) after the occurrence of an Event of Default, all costs and expenses, including reasonable attorneys' fees (including allocated costs of internal counsel) and costs of settlement, incurred by Administrative Agent and Lenders in enforcing any Obligations of or in collecting any payments due from any Loan Party hereunder or under the other Loan Documents by reason of such Event of Default (including in connection with the sale of, collection from, or other realization upon any of the Collateral or the enforcement of the Subsidiary Guaranty) or in connection with any refinancing or restructuring of the credit arrangements provided under this Agreement in the nature of a "work-out" or pursuant to any insolvency or bankruptcy proceedings. 10.3 Indemnity. --------- In addition to the payment of expenses pursuant to subsection 10.2, whether or not the transactions contemplated hereby shall be consummated, Company agrees to defend (subject to Indemnitees' selection of counsel) indemnify, pay and hold harmless Administrative Agent and Lenders, and the officers, directors, employees, agents and affiliates of Administrative 135 Agent and Lenders (collectively called the "Indemnitees"), from and against any and all Indemnified Liabilities (as hereinafter defined); provided that Company -------- shall not have any obligation to any Indemnitee hereunder with respect to any Indemnified Liabilities to the extent such Indemnified Liabilities arise solely from the gross negligence or willful misconduct of that Indemnitee as determined by a final judgment of a court of competent jurisdiction. As used herein, "Indemnified Liabilities" means, collectively, any and all liabilities, obligations, losses, damages (including natural resource damages), penalties, actions, judgments, suits, claims (including Environmental Claims), costs (including the costs of any investigation, study, sampling, testing, abatement, cleanup, removal, remediation or other response action necessary to remove, remediate, clean up or abate any Hazardous Materials Activity), expenses and disbursements of any kind or nature whatsoever (including the reasonable fees and disbursements of counsel for Indemnitees in connection with any investigative, administrative or judicial proceeding commenced or threatened by any Person, whether or not any such Indemnitee shall be designated as a party or a potential party thereto, and any fees or expenses incurred by Indemnitees in enforcing this indemnity), whether direct, indirect or consequential and whether based on any federal, state or foreign laws, statutes, rules or regulations (including securities and commercial laws, statutes, rules or regulations and Environmental Laws), on common law or equitable cause or on contract or otherwise, that may be imposed on, incurred by, or asserted against any such Indemnitee, in any manner relating to or arising out of (i) this Agreement or the other Loan Documents or the Related Agreements or the transactions contemplated hereby or thereby (including Lenders' agreement to make the Loans hereunder or the use or intended use of the proceeds thereof or the issuance of Letters of Credit hereunder or the use or intended use of any thereof, or any enforcement of any of the Loan Documents (including any sale of, collection from, or other realization upon any of the Collateral or the enforcement of the Subsidiary Guaranty), (ii) the statements contained in the commitment letter delivered by any Lender to Company with respect thereto, or (iii) any Environmental Claim or any Hazardous Materials Activity relating to or arising from, directly or indirectly, any past or present activity, operation, land ownership, or practice of Company or any of its Subsidiaries. To the extent that the undertakings to defend, indemnify, pay and hold harmless set forth in this subsection 10.3 may be unenforceable in whole or in part because they are violative of any law or public policy, Company shall contribute the maximum portion that it is permitted to pay and satisfy under applicable law to the payment and satisfaction of all Indemnified Liabilities incurred by Indemnitees or any of them. Promptly after receipt by an Indemnitee of notice of the commencement of any action, such Indemnitee shall use reasonable efforts to notify Company of the commencement of such action. 10.4 Set-Off. ------- In addition to any rights now or hereafter granted under applicable law and not by way of limitation of any such rights, upon the occurrence of any Event of Default each Lender is hereby authorized by Company at any time or from time to time, without notice to Company or to any other Person, any such notice being hereby expressly waived, to set off and to appropriate and to apply any and all deposits (general or special, including Indebtedness evidenced by certificates of deposit, whether matured or unmatured, but not including trust accounts) and any 136 other Indebtedness at any time held or owing by that Lender to or for the credit or the account of Company against and on account of the obligations and liabilities of Company to that Lender under this Agreement, the Letters of Credit and participations therein and the other Loan Documents, including all claims of any nature or description arising out of or connected with this Agreement, the Letters of Credit and participations therein or any other Loan Document, irrespective of whether or not (i) that Lender shall have made any demand hereunder or (ii) the principal of or the interest on the Loans or any amounts in respect of the Letters of Credit or any other amounts due hereunder shall have become due and payable pursuant to Section 8 and although said obligations and liabilities, or any of them, may be contingent or unmatured. Company hereby further grants to Administrative Agent and each Lender a security interest in all deposits and accounts maintained with Administrative Agent or such Lender as security for the Obligations. 10.5 Ratable Sharing. --------------- Lenders hereby agree among themselves that if any of them shall, whether by voluntary payment (other than a voluntary prepayment of Loans made and applied in accordance with the terms of this Agreement), by realization upon security, through the exercise of any right of set-off or banker's lien, by counterclaim or cross action or by the enforcement of any right under the Loan Documents or otherwise, or as adequate protection of a deposit treated as cash collateral under the Bankruptcy Code, receive payment or reduction of a proportion of the aggregate amount of principal, interest, amounts payable in respect of Letters of Credit, fees and other amounts then due and owing to that Lender hereunder or under the other Loan Documents (collectively, the "Aggregate Amounts Due" to such Lender) which is greater than the proportion received by any other Lender in respect of the Aggregate Amounts Due to such other Lender, then the Lender receiving such proportionately greater payment shall (i) notify Administrative Agent and each other Lender of the receipt of such payment and (ii) apply a portion of such payment to purchase participations (which it shall be deemed to have purchased from each seller of a participation simultaneously upon the receipt by such seller of its portion of such payment) in the Aggregate Amounts Due to the other Lenders so that all such recoveries of Aggregate Amounts Due shall be shared by all Lenders in proportion to the Aggregate Amounts Due to them; provided that if all or part of such proportionately -------- greater payment received by such purchasing Lender is thereafter recovered from such Lender upon the bankruptcy or reorganization of Company or otherwise, those purchases shall be rescinded and the purchase prices paid for such participations shall be returned to such purchasing Lender ratably to the extent of such recovery, but without interest. Company expressly consents to the foregoing arrangement and agrees that any holder of a participation so purchased may exercise any and all rights of banker's lien, set-off or counterclaim with respect to any and all monies owing by Company to that holder with respect thereto as fully as if that holder were owed the amount of the participation held by that holder. Each Lender hereby agrees that, solely for purposes of this subsection 10.5, a participant shall be considered to be a Lender. 10.6 Amendments and Waivers. ---------------------- No amendment, modification, termination or waiver of any provision of this Agreement or of the Notes, and no consent to any departure by Company therefrom, shall in any event be effective without the written concurrence of Requisite Lenders; provided that any such -------- 137 amendment, modification, termination, waiver or consent which: increases the amount of any of the Commitments or reduces the principal amount of any of the Loans; changes in any manner the definition of "Class" or the definition of "Pro Rata Share" or the definition of "Requisite Class Lenders" or the definition of "Requisite Lenders"; changes in any manner any provision of this Agreement which, by its terms, expressly requires the approval or concurrence of all Lenders; postpones the date or reduces the amount of any scheduled payment (but not prepayment) of principal of any of the Loans; postpones the date on which any interest or any fees are payable; decreases the interest rate borne by any of the Loans (other than any waiver of any increase in the interest rate applicable to any of the Loans pursuant to subsection 2.2E) or the amount of any fees payable hereunder; increases the maximum duration of Interest Periods permitted hereunder; reduces the amount or postpones the due date of any amount payable in respect of, or extends the required expiration date of, any Letter of Credit; changes in any manner the obligations of Lenders relating to the purchase of participations in Letters of Credit; releases any Lien granted in favor of Administrative Agent with respect to all or substantially all of the Collateral; releases all or substantially all of the Subsidiary Guarantors from their obligations under the Subsidiary Guaranty, in each case other than in accordance with the terms of the Loan Documents; or changes in any manner the provisions contained in subsection 8.1 or this subsection 10.6 shall be effective only if evidenced by a writing signed by or on behalf of all Lenders. In addition, (i) any amendment, modification, termination or waiver of any of the provisions contained in Section 4 shall be effective only if evidenced by a writing signed by or on behalf of Administrative Agent and Requisite Lenders, (ii) no amendment, modification, termination or waiver of any provision of any Note shall be effective without the written concurrence of the Lender which is the holder of that Note, (iii) no amendment, modification, termination or waiver of any provision of subsection 2.1A(vi) or of any other provision of this Agreement relating to the Swing Line Loan Commitment or the Swing Line Loans shall be effective without the written concurrence of Swing Line Lenders, (iv) no amendment, modification, termination or waiver of any provision of Section 9 or of any other provision of this Agreement which, by its terms, expressly requires the approval or concurrence of Administrative Agent shall be effective without the written concurrence of Administrative Agent and (iv) no amendment, modification, termination or waiver of any provision of subsection 2.4 which has the effect of changing any interim scheduled payments, voluntary or mandatory prepayments, or Commitment reductions applicable to any Class (the "Affected Class") in a manner that disproportionately disadvantages such Class relative to any other Class shall be effective without the written concurrence of Requisite Class Lenders of the Affected Class (it being understood and agreed that any amendment, modification, termination or waiver of any such provision which only postpones or reduces any interim scheduled payment, voluntary or mandatory prepayment, or Commitment reduction from those set forth in subsection 2.4 with respect to one Class but not the other Class shall be deemed to disproportionately disadvantage such one Class but not to disproportionately disadvantage such other Class for purposes of this clause (iv)). Administrative Agent may, but shall have no obligation to, with the concurrence of any Lender, execute amendments, modifications, waivers or consents on behalf of that Lender. Any waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given. No notice to or demand on Company in any case shall entitle Company to any other or further notice or demand in similar or other circumstances. Any amendment, modification, termination, waiver or consent effected in accordance with this subsection 10.6 138 shall be binding upon each Lender at the time outstanding, each future Lender and, if signed by Company, on Company. 10.7 Independence of Covenants. ------------------------- All covenants hereunder shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or would otherwise be within the limitations of, another covenant shall not avoid the occurrence of an Event of Default or Potential Event of Default if such action is taken or condition exists. 10.8 Notices. ------- Unless otherwise specifically provided herein, any notice or other communication herein required or permitted to be given shall be in writing and may be personally served or sent by telefacsimile or United States mail or courier service and shall be deemed to have been given when delivered in person or by courier service, upon receipt of telefacsimile or three Business Days after depositing it in the United States mail with postage prepaid and properly addressed; provided that notices to Administrative Agent shall not be effective -------- until received. For the purposes hereof, the address of each party hereto shall be as set forth under such party's name on the signature pages hereof or (i) as to Company and Administrative Agent, such other address as shall be designated by such Person in a written notice delivered to the other parties hereto and (ii) as to each other party, such other address as shall be designated by such party in a written notice delivered to Administrative Agent. 10.9 Survival of Representations, Warranties and Agreements. ------------------------------------------------------ A. All representations, warranties and agreements made herein shall survive the execution and delivery of this Agreement and the making of the Loans and the issuance of the Letters of Credit hereunder. B. Notwithstanding anything in this Agreement or implied by law to the contrary, the agreements of Company set forth in subsections 2.6D, 2.7, 3.5A, 3.6, 10.2, 10.3 and 10.4 and the agreements of Lenders set forth in subsections 9.2C, 9.4, 10.5 and 10.19 shall survive the payment of the Loans, the cancellation or expiration of the Letters of Credit and the reimbursement of any amounts drawn thereunder, and the termination of this Agreement. 10.10 Failure or Indulgence Not Waiver; Remedies Cumulative. ----------------------------------------------------- No failure or delay on the part of Administrative Agent or any Lender in the exercise of any power, right or privilege hereunder or under any other Loan Document shall impair such power, right or privilege or be construed to be a waiver of any default or acquiescence therein, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other power, right or privilege. All rights and remedies existing under this Agreement and the other Loan Documents are cumulative to, and not exclusive of, any rights or remedies otherwise available. 10.11 Marshalling; Payments Set Aside. ------------------------------- 139 Neither Administrative Agent nor any Lender shall be under any obligation to marshal any assets in favor of Company or any other party or against or in payment of any or all of the Obligations. To the extent that Company makes a payment or payments to Administrative Agent or Lenders (or to Administrative Agent for the benefit of Lenders), or Administrative Agent or Lenders enforce any security interests or exercise their rights of setoff, 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 and/or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, any other state or federal law, common law or any equitable cause, then, to the extent of such recovery, the obligation or part thereof originally intended to be satisfied, and all Liens, rights and remedies therefor or related thereto, shall be revived and continued in full force and effect as if such payment or payments had not been made or such enforcement or setoff had not occurred. 10.12 Severability. ------------ In case any provision in or obligation under this Agreement or the Notes shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby. 10.13 Obligations Several; Independent Nature of Lenders' Rights. ---------------------------------------------------------- The obligations of Lenders hereunder are several and no Lender shall be responsible for the obligations or Commitments of any other Lender hereunder. Nothing contained herein or in any other Loan Document, and no action taken by Lenders pursuant hereto or thereto, shall be deemed to constitute Lenders as a partnership, an association, a joint venture or any other kind of entity. The amounts payable at any time hereunder to each Lender shall be a separate and independent debt, and each Lender shall be entitled to protect and enforce its rights arising out of this Agreement and it shall not be necessary for any other Lender to be joined as an additional party in any proceeding for such purpose. 10.14 Headings. -------- Section and subsection headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose or be given any substantive effect. 10.15 Applicable Law. -------------- THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES (OTHER THAN SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK). 140 10.16 Successors and Assigns. ---------------------- This Agreement shall be binding upon the parties hereto and their respective successors and assigns and shall inure to the benefit of the parties hereto and the successors and assigns of Lenders (it being understood that Lenders' rights of assignment are subject to subsection 10.1). Neither Company's rights or obligations hereunder nor any interest therein may be assigned or delegated by Company without the prior written consent of all Lenders. 10.17 Consent to Jurisdiction and Service of Process . ---------------------------------------------- ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST COMPANY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY OBLIGATIONS THEREUNDER, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK. BY EXECUTING AND DELIVERING THIS AGREEMENT, COMPANY, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY (I) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS; (II) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS; (III) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO COMPANY AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH SUBSECTION 10.8; (IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER COMPANY IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT; (V) AGREES THAT LENDERS RETAIN THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST COMPANY IN THE COURTS OF ANY OTHER JURISDICTION; AND (VI) AGREES THAT THE PROVISIONS OF THIS SUBSECTION 10.17 RELATING TO JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST EXTENT PERMISSIBLE UNDER NEW YORK GENERAL OBLIGATIONS LAW SECTION 5- 1402 OR OTHERWISE. 141 10.18 Waiver of Jury Trial. -------------------- EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION OR THE LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. The scope of this waiver is intended to be all-encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this transaction, including contract claims, tort claims, breach of duty claims and all other common law and statutory claims. Each party hereto acknowledges that this waiver is a material inducement to enter into a business relationship, that each has already relied on this waiver in entering into this Agreement, and that each will continue to rely on this waiver in their related future dealings. Each party hereto further warrants and represents that it has reviewed this waiver with its legal counsel and that it knowingly and voluntarily waives its jury trial rights following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SUBSECTION 10.18 AND EXECUTED BY EACH OF THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS MADE HEREUNDER. In the event of litigation, this Agreement may be filed as a written consent to a trial by the court. 10.19 Confidentiality. --------------- Each Lender shall hold all non-public information obtained pursuant to the requirements of this Agreement, including pursuant to any inspection under subsection 6.5, in accordance with such Lender's customary procedures for handling confidential information of this nature and in accordance with safe and sound banking practices, it being understood and agreed by Company that in any event a Lender may make disclosures to Affiliates of such Lender or disclosures reasonably required by any bona fide assignee, transferee or participant in connection with the contemplated assignment or transfer by such Lender of any Loans or any participations therein (provided that such assignee, transferee or participant shall have agreed by accepting and retaining such information to the terms of this subsection 10.19) or disclosures required or requested by any governmental agency or representative thereof or pursuant to legal process or disclosures to the National Association of Insurance Commissioners or any similar organization, or any nationally recognized rating agency that requires access to information about any Lender's investment portfolio; provided that, -------- unless specifically prohibited by applicable law or court order, each Lender shall notify Company of any request by any governmental agency or representative thereof (other than any such request in connection with any examination of the financial condition of such Lender by such governmental agency) for disclosure of any such non-public information prior to disclosure of such information; and provided, further that in no event shall any Lender be obligated or required to - -------- ------- return any materials furnished by Company or any of its Subsidiaries. 142 10.20 Judgment Currency. ----------------- A. Currency Conversion Rate. If, for the purposes of obtaining judgment in any court, it is necessary to convert a sum due hereunder in any currency (the "Original Currency") into another currency (the "Other Currency"), the parties hereto agree, to the fullest extent permitted by law, that the rate of exchange used shall be that at which in accordance with normal banking procedures Administrative Agent could purchase the Original Currency with the Other Currency on the Business Day preceding that on which final judgment is given. B. Discharge of Judgment. The obligations of Company in respect of any sum due from it to Lenders hereunder shall, notwithstanding any judgment in such Other Currency, be discharged only to the extent that, on the Business Day following receipt by Administrative Agent of any sum adjudged to be so due in the Other Currency, Administrative Agent may in accordance with normal banking procedures purchase the Original Currency with the Other Currency; if the Original Currency so purchased is less than the sum originally due to Lenders in the Original Currency, Company agrees, as a separate obligation and notwithstanding any such judgment, to indemnify Lenders against such loss, and if the amount of the Original Currency so purchased exceeds the sum originally due to Lenders in the Original Currency, Lenders shall remit such excess to Company. 10.21 Counterparts; Effectiveness. --------------------------- This Agreement and any amendments, waivers, consents or supplements hereto or in connection herewith may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document. This Agreement shall become effective upon the execution of a counterpart hereof by each of the parties hereto and receipt by Company and Administrative Agent of written or telephonic notification of such execution and authorization of delivery thereof. [Remainder of page intentionally left blank] 143 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above. COMPANY: URS CORPORATION By: /s/ Kent P. Ainsworth --------------------- Name: Kent P. Ainsworth Title: Executive Vice President and Chief Financial Officer Notice Address: 100 California Street San Francisco, CA 94111 Attention: Mr. Kent P. Ainsworth Executive Vice President and Chief Financial Officer Fax: (415) 398-1905 LENDERS: WELLS FARGO BANK, NATIONAL ASSOCIATION, Individually and as Administrative Agent By: /s/ Peter Gruebele ------------------ Name: Peter Gruebele Title: Vice President Notice Address: 420 Montgomery Street, 9th Floor San Francisco, CA 94163 Attention: Mr. Peter Gruebele Vice President Fax: (415) 421-1352 S-2 Payment Instructions: WELLS FARGO BANK, NATIONAL ASSOCIATION San Francisco, CA ABA #1210-00248 For Acct.: 4518-105598 Ref: URS Corporation MORGAN STANLEY SENIOR FUNDING, INC., Individually and as Syndication Agent By: /s/ Michael Hart --------------------------------------- Name: Michael Hart ------------------------------------- Title: Principal ------------------------------------ Notice Address: S-2 CREDIT AGREEMENT DATED AS OF JUNE 9, 1999 AMONG URS CORPORATION, as Borrower, THE LENDERS LISTED HEREIN, as Lenders, and WELLS FARGO BANK, NATIONAL ASSOCIATION, as Co-Lead Arranger and Administrative Agent and MORGAN STANLEY SENIOR FUNDING, INC. as Co-Lead Arranger and Syndication Agent TABLE OF CONTENTS
Page Section 1. DEFINITIONS..................................................................................................... 3 1.1 Certain Defined Terms........................................................................................... 3 1.2 Accounting Terms; Utilization of GAAP for Purposes of Calculations Under Agreement.............................. 33 1.3 Other Definitional Provisions and Rules of Construction......................................................... 34 Section 2. AMOUNTS AND TERMS OF COMMITMENTS AND LOANS...................................................................... 34 2.1 Commitments; Making of Loans; Notes............................................................................. 34 2.2 Interest on the Loans........................................................................................... 42 2.3 Fees............................................................................................................ 48 2.4 Repayments, Prepayments and Reductions in Revolving Loan Commitments; General Provisions Regarding Payments..... 49 2.5 Use of Proceeds................................................................................................. 59 2.6 Special Provisions Governing Eurodollar Rate Loans and Domestic Sterling Rate Loans............................. 60 2.7 Increased Costs; Taxes; Capital Adequacy........................................................................ 63 2.8 Obligation of Lenders and Issuing Lenders to Mitigate........................................................... 67 2.9 Substitution of Lenders......................................................................................... 67 2.10 European Monetary Union......................................................................................... 68 Section 3. LETTERS OF CREDIT............................................................................................... 70 3.1 Issuance of Letters of Credit and Lenders' Purchase of Participations Therein................................... 70 3.2 Letter of Credit Fees........................................................................................... 72 3.3 Drawings and Reimbursement of Amounts Paid Under Letters of Credit.............................................. 73
-i- TABLE OF CONTENTS (continued)
Page 3.4 Obligations Absolute............................................................................................ 75 3.5 Indemnification; Nature of Issuing Lenders' Duties.............................................................. 76 3.6 Increased Costs and Taxes Relating to Letters of Credit......................................................... 77 Section 4. CONDITIONS TO LOANS AND LETTERS OF CREDIT....................................................................... 78 4.1 Conditions to Initial Term Loans and the Acquisition Revolving Loans............................................ 78 4.2 Conditions to Merger Date Loans................................................................................. 85 4.3 Conditions to All Loans......................................................................................... 88 4.4 Conditions to Letters of Credit................................................................................. 89 Section 5. COMPANY'S REPRESENTATIONS AND WARRANTIES........................................................................ 90 5.1 Organization, Powers, Qualification, Good Standing, Business and Subsidiaries................................... 90 5.2 Authorization of Borrowing, etc................................................................................. 92 5.3 Financial Condition............................................................................................. 93 5.4 No Material Adverse Change; No Restricted Junior Payments....................................................... 94 5.5 Title to Properties; Liens; Real Property; Licenses, Trademarks; etc............................................ 94 5.6 Litigation; Adverse Facts....................................................................................... 95 5.7 Payment of Taxes................................................................................................ 95 5.8 Performance of Agreements; Materially Adverse Agreements; Material Contracts.................................... 96 5.9 Governmental Regulation......................................................................................... 96 5.10 Securities Activities........................................................................................... 96 5.11 Employee Benefit Plans.......................................................................................... 96
-ii- TABLE OF CONTENTS (continued)
Page 5.12 Certain Fees.................................................................................................... 97 5.13 Environmental Protection........................................................................................ 97 5.14 Employee Matters................................................................................................ 98 5.15 Solvency........................................................................................................ 98 5.16 Matters Relating to Collateral.................................................................................. 98 5.17 Related Agreements.............................................................................................. 99 5.18 Disclosure...................................................................................................... 100 Section 6. COMPANY'S AFFIRMATIVE COVENANTS................................................................................. 100 6.1 Financial Statements and Other Reports.......................................................................... 100 6.2 Corporate Existence, etc........................................................................................ 105 6.3 Payment of Taxes and Claims; Tax Consolidation.................................................................. 105 6.4 Maintenance of Properties; Insurance; Application of Net Insurance/ Condemnation Proceeds....................... 106 6.5 Inspection Rights............................................................................................... 107 6.6 Compliance with Laws, etc....................................................................................... 108 6.7 Execution of Subsidiary Guaranty and Personal Property Collateral Documents by Certain Additional Subsidiaries.. 108 6.8 Matters Relating to Real Property Collateral.................................................................... 109 6.9 Interest Rate Protection........................................................................................ 110 6.10 Year 2000....................................................................................................... 110 6.11 Syndication..................................................................................................... 110 6.12 Consummation of Merger.......................................................................................... 110 Section 7. COMPANY'S NEGATIVE COVENANTS.................................................................................... 111
-iii- TABLE OF CONTENTS (continued)
Page 7.1 Indebtedness.................................................................................................... 111 7.2 Liens and Related Matters....................................................................................... 113 7.3 Investments; Joint Ventures..................................................................................... 114 7.4 Contingent Obligations.......................................................................................... 115 7.5 Restricted Junior Payments...................................................................................... 116 7.6 Financial Covenants............................................................................................. 117 7.7 Restriction on Fundamental Changes; Asset Sales and Acquisitions................................................ 118 7.8 Consolidated Capital Expenditures............................................................................... 119 7.9 Sales and Lease-Backs........................................................................................... 119 7.10 Sale or Discount of Receivables................................................................................. 120 7.11 Transactions with Shareholders and Affiliates................................................................... 120 7.12 Conduct of Business............................................................................................. 120 7.13 Amendments or Waivers of Related Agreements; Amendments of Documents Relating to Subordinated Indebtedness...... 120 7.14 Fiscal Year..................................................................................................... 121 Section 8. EVENTS OF DEFAULT............................................................................................... 121 8.1 Failure to Make Payments When Due............................................................................... 121 8.2 Default in Other Agreements..................................................................................... 121 8.3 Breach of Certain Covenants..................................................................................... 121 8.4 Breach of Warranty.............................................................................................. 122 8.5 Other Defaults Under Loan Documents............................................................................. 122 8.6 Involuntary Bankruptcy; Appointment of Receiver, etc............................................................ 122 8.7 Voluntary Bankruptcy; Appointment of Receiver, etc.............................................................. 122
-iv- TABLE OF CONTENTS (continued)
Page 8.8 Judgments and Attachments....................................................................................... 123 8.9 Dissolution..................................................................................................... 123 8.10 Employee Benefit Plans.......................................................................................... 123 8.11 Material Adverse Effect......................................................................................... 123 8.12 Change in Control............................................................................................... 123 8.13 Invalidity of Subsidiary Guaranty; Failure of Security; Repudiation of Obligations.............................. 123 8.14 Failure to Consummate Merger.................................................................................... 124 Section 9. ADMINISTRATIVE AGENT............................................................................................ 125 9.1 Appointment..................................................................................................... 125 9.2 Powers and Duties; General Immunity............................................................................. 126 9.3 Representations and Warranties; No Responsibility For Appraisal of Creditworthiness............................. 128 9.4 Right to Indemnity.............................................................................................. 128 9.5 Successor Administrative Agent and Swing Line Lender............................................................ 128 9.6 Collateral Documents and Guaranties............................................................................. 129 9.7 Syndication Agent............................................................................................... 130 Section 10. MISCELLANEOUS................................................................................................... 130 10.1 Assignments and Participations in Loans and Letters of Credit................................................... 130 10.2 Expenses........................................................................................................ 132 10.3 Indemnity....................................................................................................... 133 10.4 Set-Off......................................................................................................... 134 10.5 Ratable Sharing................................................................................................. 135
-v- TABLE OF CONTENTS (continued)
Page 10.6 Amendments and Waivers.......................................................................................... 135 10.7 Independence of Covenants....................................................................................... 136 10.8 Notices......................................................................................................... 136 10.9 Survival of Representations, Warranties and Agreements.......................................................... 137 10.10 Failure or Indulgence Not Waiver; Remedies Cumulative........................................................... 137 10.11 Marshalling; Payments Set Aside................................................................................. 137 10.12 Severability.................................................................................................... 137 10.13 Obligations Several; Independent Nature of Lenders' Rights...................................................... 138 10.14 Headings........................................................................................................ 138 10.15 Applicable Law.................................................................................................. 138 10.16 Successors and Assigns.......................................................................................... 138 10.17 Consent to Jurisdiction and Service of Process.................................................................. 138 10.18 Waiver of Jury Trial............................................................................................ 139 10.19 Confidentiality................................................................................................. 140 10.20 Judgment Currency............................................................................................... 140 10.21 Counterparts; Effectiveness..................................................................................... 141
Signatures S-1 -vi- EXHIBITS I FORM OF NOTICE OF BORROWING II FORM OF NOTICE OF CONVERSION/CONTINUATION III FORM OF NOTICE OF ISSUANCE OF LETTER OF CREDIT IV FORM OF REVOLVING NOTE V FORM OF TRANCHE A TERM NOTE VI FORM OF TRANCHE B TERM NOTE VII FORM OF TRANCHE C TERM NOTE VIII FORM OF SWING LINE NOTE IX FORM OF COMPLIANCE CERTIFICATE X FORM OF CLOSING DATE COMPLIANCE CERTIFICATE XI FORM OF CLOSING DATE OPINION OF COMPANY'S COUNSEL XII FORM OF OPINION OF ADMINISTRATIVE AGENT COUNSEL XIII FORM OF ASSIGNMENT AGREEMENT XIV FORM OF CERTIFICATE RE NON-BANK STATUS XV FORM OF PLEDGE AND SECURITY AGREEMENT XVI FORM OF SUBSIDIARY GUARANTY XVII FORM OF TENDER PLEDGE AGREEMENT XVIII FORM OF FINANCIAL CONDITION CERTIFICATE (v) SCHEDULES 2.1 LENDERS' COMMITMENTS AND PRO RATA SHARES
Revolving Revolving Tranche A Tranche B Tranche C Loan Sterling Loan Term Loan Term Loan Term Loan Commitment Commitment Commitment Commitment Commitment Wells Fargo Bank, $54,545,454.55 $8,181,818.19 $136,363,636.37 $95,454,545.46 $95,454,545.46 National Association Morgan Stanley $45,454,545.45 $6,818,181.81 $113,636,363.63 $ 4,545,454.54 $ 4,545,454.54 Senior Funding, Inc. Total $ 100,000,000 $ 15,000,000* $ 250,000,000 $ 100,000,000 $ 100,000,000
*Part of Revolving Loan Commitment -i- An extra section break has been inserted above this paragraph. Do not delete this section break if you plan to add text after the Table of Contents/Authorities. Deleting this break will cause Table of Contents/Authorities headers and footers to appear on any pages following the Table of Contents/Authorities. EX-2.3 3 NOTE PURCHASE AGREEMENT, DATED 06-09-1999 EXHIBIT 2.3 ================================================================================ URS CORPORATION =========================== $200,000,000 =========================== SENIOR SUBORDINATED INCREASING RATE NOTES DUE JUNE 9, 2000 ================================================================================ NOTE PURCHASE AGREEMENT Dated as of June 9, 1999 TABLE OF CONTENTS
Page 1. AUTHORIZATION OF NOTES; INTEREST..................................................... 1 2. SALE AND PURCHASE OF NOTES........................................................... 2 2.1. Obligation to Purchase....................................................... 2 2.2. Purchase Date................................................................ 2 3. CONDITIONS TO THE PURCHASE OF NOTES.................................................. 3 3.1. Documents Required........................................................... 3 3.2. Opinions of Counsel.......................................................... 5 3.3. Consummation of Tender Offer................................................. 5 3.4. Actions by DMG Board of Directors............................................ 5 3.5. Consummation of Other Financings............................................. 6 3.6. Consents and Approvals....................................................... 6 3.7. No Material Adverse Change; Pre-Commitment Information....................... 6 3.8. Litigation................................................................... 6 3.9. Change in Market Conditions.................................................. 7 3.10. Payment of Accrued Fees and Expenses......................................... 7 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................................ 7 4.1. Organization; Power and Authority............................................ 7 4.2. Authorization, Enforceability, Etc........................................... 7 4.3. Disclosure................................................................... 8 4.4. Organization and Ownership of Shares of Subsidiaries; Inactive Subsidiaries.. 8 4.5. Financial Statements......................................................... 9 4.6. Compliance with Laws, Other Instruments, Etc................................. 9 4.7. Governmental Authorizations, Etc............................................. 9 4.8. Litigation................................................................... 10 4.9. Taxes........................................................................ 10 4.10. Compliance with ERISA........................................................ 11 4.11. Use of Proceeds.............................................................. 11 4.12. Environmental Matters........................................................ 11 4.13. Existing Indebtedness; Future Liens; Pari Passu Obligations.................. 12 4.14. Material Contracts........................................................... 13 4.15. DMG.......................................................................... 13 4.16. Investment Company Act; Other Regulations.................................... 13 4.17. Public Utility Holding Company Act........................................... 13 4.18. Year 2000 Representation..................................................... 14 4.19. Private Placement Representation............................................. 14 4.20. Compliance with Rule 144A Requirements....................................... 14 5. REPRESENTATIONS OF THE PURCHASERS.................................................... 15 5.1. Purchase for Investment, Etc15 5.2. Solicitation by Each Purchaser............................................... 15
6. PREPAYMENTS AND REDEMPTIONS OF THE NOTES................................................... 15 6.1. Optional Prepayment of the Notes and Rollover Notes................................ 15 6.2. Mandatory Redemption of Notes or Rollover Notes in the Event of a Change of Control............................................................................ 16 6.3. Mandatory Redemptions of the Notes or Rollover Notes............................... 17 6A.3. Offer to Repurchase Fixed Rate Rollover Notes in Respect of an Asset Sale.......... 18 6.4. Allocation of Partial Prepayments.................................................. 19 6.5. Maturity; Surrender, Etc........................................................... 20 6.6. Purchase of Notes or Rollover Notes................................................ 20 7. ROLLOVER................................................................................... 20 7.1. Rollover Notes..................................................................... 20 7.2. Warrant Agreements................................................................. 20 7.3. Registration Rights................................................................ 21 7.4. Conditions to Rollover............................................................. 22 7.5. Documents Required................................................................. 22 7.6. Special Rollover Note Interest Rate Provisions..................................... 23 8. AFFIRMATIVE COVENANTS (NOTES).............................................................. 23 8.1. Financial Statements and Other Reports............................................. 23 8.2. Corporate Existence, Etc........................................................... 27 8.3. Payment of Taxes and Claims; Tax Consolidation..................................... 28 8.4. Maintenance of Properties; Insurance............................................... 28 8.5. Inspection Rights.................................................................. 28 8.6. Compliance with Laws, Etc.......................................................... 28 8.7. Execution of Subsidiary Guaranty by Certain Subsidiaries and Future Subsidiaries... 29 8.8. Year 2000.......................................................................... 30 8.9. Syndication........................................................................ 30 8.10. Consummation of Merger............................................................. 30 8.11. Use of Proceeds.................................................................... 30 8.12. Refinancing of the Notes; Rule 144A................................................ 30 8.13. Payment of Notes................................................................... 31 8.14. Global Notes....................................................................... 31 8.15. Opinion of Counsel................................................................. 31 8A. AFFIRMATIVE COVENANTS (ROLLOVER NOTES)..................................................... 31 8A.1. Financial Statements and Other Reports............................................. 31 8A.2. Corporate Existence, Etc........................................................... 35 8A.3. Payment of Taxes and Claims; Tax Consolidation..................................... 36 8A.4. Maintenance of Properties; Insurance............................................... 36 8A.5. Inspection Rights.................................................................. 36 8A.6. Compliance with Laws, Etc.......................................................... 36 8A.7. Execution of Subsidiary Guaranty by Certain Subsidiaries and Future Subsidiaries... 37 8A.8. Refinancing of the Rollover Notes; Rule 144A....................................... 38 8A.9. Payment of Rollover Notes.......................................................... 38 8A.10. Global Notes....................................................................... 38 8A.11. Issuance of Warrants............................................................... 38 9. NEGATIVE COVENANTS (NOTES)................................................................. 38
9.1. Indebtedness.................................................................. 39 9.2. Liens and Related Matters..................................................... 40 9.3. Investments; Joint Ventures................................................... 41 9.4. Contingent Obligations........................................................ 43 9.5. Restricted Junior Payments.................................................... 44 9.6. Restriction on Fundamental Changes; Asset Sales and Acquisitions.............. 44 9.7. Consolidated Capital Expenditures............................................. 45 9.8. Sales and Lease-Backs......................................................... 46 9.9. Sale or Discount of Receivables............................................... 46 9.10. Transactions with Shareholders and Affiliates................................. 46 9.11. Conduct of Business........................................................... 47 9.12. Amendments or Waivers of Related Agreements; Amendments of Documents Relating to Subordinated Indebtedness......................................... 47 9.13. Fiscal Year................................................................... 47 9A. NEGATIVE COVENANTS (ROLLOVER NOTES)................................................... 47 9A.1. Restriction on Incurrence of Indebtedness..................................... 47 9A.2. Restriction on Senior Subordinated Indebtedness............................... 50 9A.3. Restriction on Restricted Payments............................................ 50 9A.4. Restriction on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries....................................................... 54 9A.5. Restriction on Issuances of Guarantees by Restricted Subsidiaries............. 56 9A.6. Restriction on Transactions with Shareholders and Affiliates.................. 57 9A.7. Restriction on Liens.......................................................... 58 9A.8. Restriction on Asset Sales.................................................... 59 10. EVENTS OF DEFAULT..................................................................... 59 10.1. Events of Default............................................................. 59 10.2. Acceleration.................................................................. 62 10.3. Other Remedies................................................................ 62 10.4. Rescission.................................................................... 62 10.5. Restoration of Rights and Remedies............................................ 63 10.6. No Waivers or Election of Remedies, Expenses, Etc............................. 63 11. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES....................................... 63 11.1. Registration of Notes......................................................... 63 11.2. Transfer and Exchange of Notes................................................ 64 11.3. Replacement of Notes.......................................................... 65 12. PAYMENTS ON NOTES..................................................................... 65 12.1. Place of Payment.............................................................. 65 12.2. Home Office Payment........................................................... 65 13. EXPENSES, INCREASED COSTS AND INDEMNIFICATION, ETC.................................... 66 13.1. Transaction Expenses.......................................................... 66 13.2. Indemnity..................................................................... 66 13.3. Taxes......................................................................... 68 13.4. Increased Costs............................................................... 71 13.5. Survival...................................................................... 71
14. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.................... 72 15. AMENDMENT AND WAIVER............................................................ 72 15.1. Requirements............................................................ 72 15.2. Solicitation of Holders of Notes........................................ 73 15.3. Binding Effect, Etc..................................................... 73 15.4. Notes Held by the Company, Etc.......................................... 73 16. NOTICES......................................................................... 74 17. REPRODUCTION OF DOCUMENTS....................................................... 74 18. CONFIDENTIAL INFORMATION........................................................ 75 19. SUBSTITUTION OF PURCHASER....................................................... 76 20. SUBORDINATION OF THE NOTES AND ROLLOVER NOTES................................... 76 20.1. Notes or Rollover Notes Subordinated to Senior Indebtedness............. 76 20.2. Payment Over of Proceeds Upon Bankruptcy................................ 76 20.3. Suspension of Payment When Senior Indebtedness in Default............... 77 20.4. Payment Permitted If No Default......................................... 78 20.5. Subrogation to Rights of Holders of Senior Indebtedness................. 78 20.6. Provisions Solely to Define Relative Rights............................. 79 20.7. No Waiver of Subordination Provisions................................... 79 20.8. Reliance on Judicial Order or Certificate of Liquidating Agent.......... 80 20.9. Notice to the Holders of the Notes and the Rollover Notes............... 80 20.10. Proof of Claim.......................................................... 80 21. MISCELLANEOUS................................................................... 81 21.1. Successors and Assigns.................................................. 81 21.2. Payments Due on Non-Business Days....................................... 81 21.3. Satisfaction Requirement................................................ 81 21.4. Severability............................................................ 81 21.5. Construction; Accounting Terms, Etc..................................... 81 21.6. Computation of Time Periods............................................. 82 21.7. Execution in Counterparts............................................... 82 21.8. GOVERNING LAW; SUBMISSION TO JURISDICTION, ETC.......................... 82 21.9. WAIVER OF JURY TRIAL.................................................... S-1
v vi EXHIBITS Exhibit A -- Form of Note Exhibit B -- Form of Rollover Note Exhibit C -- Form of Solvency Certificate Exhibit D -- Form of Subsidiary Guaranty Exhibit E-1 -- Form of Opinion of Cooley Godward LLP, Counsel for the Company Exhibit E-2 -- Form of Opinion of Skadden, Arps, Slate, Meagher & Flom LLP, Special New York Counsel for the Company Exhibit E-3 -- Form of Opinion of Vorys, Sater, Seymour & Pease LLP, Special Ohio Counsel for the Company Exhibit E-4 -- Form of Opinion of Marshall Hill Cassas & de Lipkau, Special Nevada Counsel for the Company Exhibit E-5 __ Form of Opinion of Latham & Watkins LLP, Counsel for DMG Exhibit F -- Form of Compliance Certificate Exhibit G -- Form of Rollover Notes Registration Rights Agreement Exhibit H -- Form of Warrant Agreement vii URS CORPORATION 100 California Street, Suite 500 San Francisco, CA 94111-4529 Senior Subordinated Increasing Rate Notes due June 9, 2000 As of June 9, 1999 TO EACH OF THE PURCHASERS LISTED IN SCHEDULE I ATTACHED HERETO: Ladies and Gentlemen: URS Corporation, a Delaware corporation (the "Company"), hereby agrees with you as follows: 1. AUTHORIZATION OF NOTES; INTEREST. (a) The Company has authorized the issue and sale of $200,000,000 aggregate principal amount of its Senior Subordinated Increasing Rate Notes due June 9, 2000 (the Notes delivered pursuant to Section 2 of this Agreement, any Secondary Notes (as hereinafter defined) issued in respect of such Notes or such Secondary Notes and any Notes issued in substitution therefor pursuant to Section 11 of this Agreement being, collectively, the "Notes"), to be dated the date of issue, to bear interest from such date as provided therein and to mature on June 9, 2000. The Notes shall be in substantially the form of Exhibit A hereto, with such amendments, supplements and other modifications thereto, if any, as shall be approved from time to time by you and the Company. Capitalized terms used in this Agreement shall have the meanings specified in Schedule II hereto (except that capitalized terms used in Section 9A of this Agreement shall have the meanings specified in Schedule III); and references in this Agreement to a "Schedule" or an "Exhibit" are, unless otherwise specified herein, references to a Schedule or an Exhibit attached to this Agreement. (b) On each Interest Payment Date on which interest accrued on a Note or a Rollover Note or a Secondary Note (as hereinafter defined) at an interest rate in excess of 15% per annum, the Company shall have the option to pay the amount of such excess interest due on such date (the "PIK Portion") in cash or through the issuance of additional Notes (the "Secondary Notes") in an aggregate principal amount equal to the PIK Portion (rounded to the nearest whole cent); provided that the Company shall pay cash in lieu of issuing Secondary Notes in any denominations of less than $100,000 (determined for each Holder with respect to the aggregate principal amount of all Notes or Rollover Notes, as the case may be, held by such Holder). On each Interest Payment Date on which the Company elects to pay the PIK Portion through the issuance of Secondary Notes, the Company shall issue and deliver Secondary Notes to each Holder, in the aggregate principal amount required to pay such PIK Portion, together with cash in the amount necessary to pay the portion of the interest due on such Interest Payment Date that is payable in cash. Any Secondary Notes so issued shall be dated the applicable Interest Payment Date, shall mature on the same date as the maturity date of the Note or Rollover Note or Secondary Note, as the case may be, in respect of which it is issued, and shall be governed by, and subject to, the terms, provisions and conditions of this Agreement, and shall bear interest from and after such date in the same manner as, and have the same rights and benefits as, the Note or Rollover Note or Secondary Note, as the case may be, in respect of which it is issued. Any Secondary Notes issued in respect of the Notes issued pursuant to Section 2 (and any Secondary Notes issued in respect of such Secondary Notes) shall be in substantially the form of Exhibit A hereto and any Secondary Notes issued in respect of the Rollover Notes (and any Secondary Notes issued in respect of such Secondary Notes) shall be in substantially the form of Exhibit B, but in each case shall be issued with the description "PIK" on their face. The Company shall pay any interest payable on and after the date of maturity (including as a result of acceleration) of any Note or Rollover Note or Secondary Note, as the case may be, solely in cash. Any Holder shall have the right to aggregate amounts of interest payable in the form of Secondary Notes to such Holder and request the Company to issue to such Holder a single Secondary Note in payment thereof. 2. SALE AND PURCHASE OF NOTES. 2.1. Obligation to Purchase. Subject to the terms and conditions of this Agreement, the Company will issue, and you severally agree to purchase from the Company, the respective amount of Notes specified in Schedule I hereto, at the purchase price of 100% of the aggregate principal amount thereof. Your respective obligations hereunder are several and not joint obligations and you shall have no obligation under this Agreement and no liability to any Person for the performance or nonperformance by any other Purchaser hereunder. Notes purchased and sold under this Section 2.1 and repaid or prepaid in full may not be repurchased and resold. 2.2. Purchase Date. The sale and purchase of Notes shall occur at the offices of Shearman & Sterling, 555 California Street, Suite 2000, San Francisco, California 94104- 1522, at or before 10:00 A.M. (San Francisco time), at a closing on June 9, 1999 or on such other Business Day thereafter and on or prior to September 30, 1999 as may be agreed upon among the Company and you (such date being the "Purchase Date"). On the Purchase Date, subject to the fulfillment of the 2 applicable conditions set forth in Section 3, the Company will deliver to each Purchaser the Notes to be purchased in the form of one or more Notes in amounts equal to such Purchaser's Commitment and in an aggregate amount equal to the Total Commitment, dated the Purchase Date and registered in each Purchaser's respective name (or in the names of their respective nominees), against delivery by you to the Company or its order of same day funds in the amount of the aggregate purchase price therefor by wire transfer for the account of the Company to Wells Fargo Bank, National Association, ABA No. 121000248, 420 Montgomery Street, San Francisco, California 94163, Account No. 4520105693, Account Name: URS Corporation. 3. CONDITIONS TO THE PURCHASE OF NOTES. Your obligation to purchase and pay for the Notes to be sold to you on the Purchase Date is subject to the fulfillment, on or prior to the Purchase Date, of the following conditions: 3.1. Documents Required. You shall have received the following documents, each dated as of the Purchase Date (except as otherwise specified below) and in the form of the respective Exhibit hereto, if any, or otherwise in form and substance reasonably satisfactory to you: (a) Notes. One or more Notes, duly executed by the Company and ----- payable to you in the amount of your Commitment. (b) Corporate Approvals and Other Similar Documentation. Certified --------------------------------------------------- copies of the resolutions of the Board of Directors of the Company and each Subsidiary Guarantor approving each of the Note Documents to which it is or is to be a party, the issuance and sale of the Notes, the issuance of the Rollover Notes, the Secondary Notes, the Warrant Agreements and the Rollover Notes Registration Rights Agreement and the transactions contemplated hereby and thereby, and all documents evidencing other necessary corporate action with respect to each such Note Document, the issuance and sale of the Notes, the Rollover Notes, the Secondary Notes, the Warrant Agreements and the Rollover Notes Registration Rights Agreement and the other transactions contemplated hereby and thereby. (c) Organizational Documents. A copy of the Organizational Documents ------------------------ of the Company and each Subsidiary Guarantor and each amendment thereto, certified (as of a date reasonably near the Purchase Date) by the Secretary of State of the respective jurisdiction of its incorporation as being a true and complete copy thereof. 3 (d) Good Standing Certificates. A copy of a certificate of the -------------------------- Secretary of State of the respective jurisdiction of incorporation, dated reasonably near the Purchase Date, listing the Organizational Documents of the Company and each Subsidiary Guarantor and each amendment thereto on file in the office of such Secretary of State and certifying that (i) such amendments are the only amendments to the Organizational Documents of the Company or the Subsidiary Guarantor, as the case may be, on file in his office, (ii) the Company or the Subsidiary Guarantor, as the case may be, has paid all franchise taxes (or the equivalent thereof) to the date of such certificate and (iii) the Company or the Subsidiary Guarantor, as the case may be, is duly incorporated and is in good standing under the laws of the jurisdiction of its incorporation. (e) Secretary's Certificate. A certificate from the secretary or an ----------------------- assistant secretary (or a person performing similar functions) of the Company and each Subsidiary Guarantor certifying: (i) the completeness and accuracy of the resolutions of the Board of Directors of the Company or such Subsidiary Guarantor, as the case may be, and all documents evidencing other necessary corporate action thereof referred to under subsection (b) of this Section 3.1; (ii) the completeness and accuracy of the bylaws of the Company or such Subsidiary Guarantor, as the case may be, as in effect on the date the resolutions specified in subsection (b) of this Section 3.1 were adopted and on the Purchase Date (a copy of which shall be attached to such certificate); and (iii) the names and true signatures of the officers of the Company or such Subsidiary Guarantor, as the case may be, authorized to sign each of the Note Documents to which it is or is to be a party and the other agreements, instruments and other documents to be delivered hereunder or thereunder. (f) Officer's Certificate. A certificate of the Company, signed on --------------------- behalf of the Company by a Senior Financial Officer thereof (the statements made in which certificate shall be true on and as of the Purchase Date), certifying as to: (i) the completeness and accuracy in all material respects of all of the representations and warranties made by the Company in this Agreement and the other Note Documents to which it is or is to be a party, before and after giving effect to the issue and sale of the Notes and to the application of the proceeds therefrom as contemplated by Section 4.11, as though made on and as of the Purchase Date (except for such representations and warranties that by their terms relate to an earlier date, which representations and warranties shall only be required to be complete and accurate as of such specified date); 4 (ii) the absence of any event occurring and continuing, or resulting from the issue and sale of the Notes or the consummation of any of the transactions contemplated hereby, that constitutes a Default or an Event of Default; (iii) to the best of their knowledge, the absence of any existing or threatened event or circumstance applicable to the Company or any of its Subsidiaries that could reasonably be expected to impair the ability of the Company to consummate the Refinancing; (iv) the satisfaction of all conditions precedent by the Company to the issue and sale of the Notes on and as of the Purchase Date; and (v) the aggregate gross revenues for the Fiscal Year ended October 31, 1998 of the Subsidiary Guarantors, which shall be equal to at least 90% of the aggregate gross revenues of the Company and its Domestic Subsidiaries on a consolidated basis for such Fiscal Year. (g) Solvency Certificate. The Company shall have delivered a -------------------- certificate from its Senior Financial Officer in substantially the form of Exhibit C hereto. (h) Financial Information. Copies of the audited consolidated --------------------- financial statements of the Company and its Subsidiaries referred to in Section 4.5(a). (i) Consents. Certified copies of all material Governmental -------- Authorizations, and all material consents, approvals and authorizations of, and notices to and other actions by, all Persons with whom any of the Obligors or any of their respective Subsidiaries has any Contractual Obligations, that are necessary or advisable in connection with the execution, delivery or performance of this Agreement and the other Note Documents or the consummation of the issuance and sale of the Notes or any of the other transactions contemplated hereby or thereby, including the Refinancing. (j) Subsidiary Guaranties. A guaranty in the form of Exhibit D --------------------- hereto executed by each Subsidiary Guarantor and DMG. (k) Bridge Note Disclosure Letter. The Bridge Note Disclosure ----------------------------- Letter, executed by the Company. 3.2 Opinions of Counsel. You shall have received the following favorable opinions, each dated the Purchase Date and in the form of the respective Exhibit hereto or otherwise in form and substance reasonably satisfactory to you: 5 (a) Cooley Godward LLP, counsel of the Company, in substantially the form of Exhibit E-1 hereto; (b) Skadden, Arps, Slate, Meagher & Flom LLP, special New York counsel for the Company, in substantially the form of Exhibit E-2 hereto; (c) Vorys, Sater, Seymour & Pease LLP, special Ohio counsel for the Company, in substantially the form of Exhibit E-3 hereto; (d) Marshall Hill Cassas & de Lipkau, special Nevada counsel for the Company, in substantially the form of Exhibit E-4 hereto; and (e) Latham & Watkins LLP, special counsel to DMG, in substantially the form of Exhibit E-5 hereto. 3.3. Consummation of Tender Offer. The Tender Offer shall have been consummated in accordance with the terms of the Tender Offer Materials and the Merger Agreement (which shall be in full force and effect), and in compliance with all applicable laws, and the Company shall have delivered evidence reasonably satisfactory to you that in excess of 50% of the shares of capital stock of DMG, on a fully diluted basis, have been validly tendered for payment pursuant to the Tender Offer and that the aggregate amount of funds required to consummate the Merger (including all related costs and expenses) will not exceed $347,000,000. 3.4. Actions by DMG Board of Directors. DMG's Board of Directors shall have taken such actions in connection with its Stockholder Rights Agreement so that the Purchasers are satisfied that the rights arising thereunder are not applicable to the Tender Offer or the Merger. 3.5. Consummation of Other Financings. (a) The Senior Credit Agreement (in a form reasonably satisfactory to the Required Holders) shall have been executed by the parties thereto and shall be in full force and effect, all conditions to the initial loans thereunder shall have been satisfied or waived (or will be satisfied or waived coincidentally with the sale of the Notes) and the initial Term Loans and the Acquisition Revolving Loans (each as defined in the Senior Credit Agreement) shall be made to the Company under the Senior Credit Agreement coincidentally with the sale of the Notes and 6 the proceeds of such loans shall be applied by the Company as contemplated by the Senior Credit Agreement. (b) The Securities Purchase Agreement shall be in full force and effect and the Company Series A Preferred Stock, the Company Series B Preferred Stock and the Company Series C Preferred Stock to be issued pursuant thereto shall be reasonably satisfactory to the Required Holders. The Company shall have sold to RCBA for cash consideration of $100,000,000 all of the outstanding Company Series A Preferred Stock and Company Series C Preferred Stock pursuant to the Securities Purchase Agreement, and such consideration shall be applied by the Company as contemplated by the Securities Purchase Agreement. 3.6. Consents and Approvals. All material governmental and third party consents and approvals necessary in connection with the Transaction and the issuance of the Notes shall have been obtained (without the imposition of any material conditions that are not acceptable to the Purchasers) and shall be in full force and effect; all applicable waiting periods shall have expired without any adverse action being taken by any competent authority; and no law or regulation shall be applicable in the reasonable judgment of the Required Holders that restrains, prevents or imposes materially adverse conditions upon the Transaction or the issuance of the Notes. 3.7. No Material Adverse Change; Pre-Commitment Information. (a) There shall not have occurred any material adverse change in the business, financial condition, operations, performance, properties or prospects of the Company and its Subsidiaries, taken as a whole since October 31, 1998, or DMG and its Subsidiaries, taken as a whole since December 25, 1998 (except for those items included in the disclosure schedules to the Merger Agreement). (b) No additional facts or information (including the occurrence of any events or circumstances) shall have come to the attention of Purchasers that are inconsistent with the Pre-Commitment Information and that, either individually or in the aggregate, could reasonably be expected, in the reasonable judgment of the Purchasers, to have a Material Adverse Effect. 3.8. Litigation. There shall exist no action, suit, investigation, litigation or proceeding (including those pertaining to Environmental Claims) pending or threatened in any court or before any arbitrator or governmental or regulatory agency or authority that could reasonably be expected to 7 have a Material Adverse Effect (except for such actions, suits, investigations, litigation and proceedings disclosed to the Purchasers in the Pre-Commitment Information). 3.9. Change in Market Conditions. There shall not have occurred any disruption or change in financial, banking or capital markets or in the regulatory environment that in the good faith judgment of the Purchasers could materially and adversely affect the sale of the Notes or the Refinancing. 3.10. Payment of Accrued Fees and Expenses. Without limiting the provisions of Section 13.1, all of the accrued fees and expenses incurred in connection with the transactions contemplated by this Agreement and the other Note Documents to be paid by or on behalf of the Company, and all compensation payable to MS pursuant to the terms of the Commitment Letter, on or prior to the Purchase Date shall have been paid. 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants to you that as of the date hereof and the Purchase Date: 4.1. Organization; Power and Authority. The Company and each of its Subsidiaries are Persons duly organized, validly existing and in good standing under the laws of their respective jurisdictions of organization and are duly qualified as foreign corporations or other entities and are in good standing in each other jurisdiction in which the ownership, lease or operation of their property and assets or the conduct of their businesses requires such qualification, other than in any such jurisdiction in which the failure to be so qualified or in good standing, either individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. The Company and each of its Subsidiaries have all corporate and other necessary power and authority to own or to hold under lease all of the property and assets they purport to own or hold under lease and to conduct the business they conduct and propose to conduct. Each of the Obligors has all corporate and other necessary power and authority to execute and deliver this Agreement, the Notes and the other Note Documents to which it is or is to be a party, to perform its Obligations hereunder and thereunder and to consummate all of the transactions contemplated hereby and thereby. 8 4.2. Authorization, Enforceability, Etc. This Agreement and each of the other Note Documents have been duly authorized by all necessary corporate or other appropriate action (including, without limitation, all necessary shareholder action) on the part of each of the Obligors intended to be a party thereto. This Agreement has been, and the Notes and each of the other Note Documents, when delivered hereunder, will have been, duly executed and delivered by each of the Obligors intended to be a party thereto. This Agreement constitutes, and the Notes and each of the other Note Documents, when delivered hereunder, will constitute, the legal, valid and binding obligations of each of the Obligors intended to be a party thereto, enforceable against such Obligor in accordance with their respective terms, except as such enforceability may be limited by the effect of applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally. 4.3. Disclosure. (a) All of the information (other than projections and forecasts) furnished by or on behalf of any of the Obligors or any of their respective Subsidiaries to you under or in connection with this Agreement (including but not limited to the Bridge Note Disclosure Letter) or any of the other Note Documents or any other document, certificate or other writing furnished to you in connection with the sale and purchase of the Notes or any of the other transactions contemplated hereby is complete and correct in all material respects and does not contain any untrue statement of a material fact or omit to state a material fact (known to the Company, in the case of any document not furnished by it) necessary to make the statements made therein, in light of the circumstances under which any such statements were made, not misleading. All financial projections and forecasts that have been prepared by or on behalf of the Company or any of its Subsidiaries and made available to you have been prepared in good faith based upon reasonable assumptions and represented at the time each such financial projection or forecast was delivered to you the Company's best estimate of its future financial performance (it being recognized by you that such financial projections or forecasts are not to be viewed as facts and that the actual results during the period or periods covered by any such financial projections or forecasts may differ from the projected or forecasted results). (b) There is no fact or circumstance known to the Company or its Subsidiaries that, either individually, or in the aggregate, could reasonably be expected to have a Material Adverse Effect that has not been disclosed in this Agreement or the other Note Documents or in other documents, certificates and other writings delivered to the Purchasers by or on behalf of the Company, specifically for use in connection with the purchase of the Notes. (c) The statements set forth in clauses (a) and (b) above shall be construed in the same manner as claims asserted pursuant to Section 10(b) of the Securities Act. 9 4.4. Organization and Ownership of Shares of Subsidiaries; Inactive Subsidiaries. (a) Section 4.4(a) of the Bridge Note Disclosure Letter sets forth all of the Subsidiaries of the Company as of the Purchase Date, showing, as to each such Subsidiary, the correct name thereof, the jurisdiction of its organization and the percentage of shares of each class of its capital stock or similar equity interests outstanding that are owned by the Company and/or one or more of its Subsidiaries, except certain of such information in respect of Subsidiaries of DMG will be provided as set forth in Section 8.1(q). All of the outstanding shares of capital stock or similar equity interests of each Subsidiary of the Company shown as being owned by the Company and/or one or more of its Subsidiaries have been validly issued, are fully paid and nonassessable and are owned by the Company and/or one or more of its Subsidiaries, free and clear of all Liens, except for Liens permitted under Section 9.2. (b) Except for restrictions in agreements with respect to Indebtedness of Foreign Subsidiaries, none of the Subsidiaries of the Company is a party to or otherwise is subject to any legal restriction or any agreement or arrangement restricting the ability of such Subsidiary to pay dividends out of profits or to make any other similar distributions of profits to the Company or any of its Subsidiaries that owns shares of capital stock of or similar equity interests in such Subsidiary. (c) None of the Subsidiaries of the Company listed in Section 4.4(c) of the Bridge Note Disclosure Letter (the "Inactive Subsidiaries") is conducting any material business, owns any material property or is generating any material revenue. 4.5. Financial Statements. (a) (i) The audited consolidated balance sheets of the Company and its Subsidiaries as of October 31, 1998 and the related audited consolidated statements of income, stockholders' equity and cash flows of the Company for the Fiscal Year then ended and (ii) the unaudited consolidated balance sheets of the Company and its Subsidiaries as at January 31, 1999 and April 30, 1999 and the related unaudited consolidated statements of income, stockholders' equity and cash flows of the Company and its Subsidiaries for the period then ended, have been prepared in accordance with GAAP and fairly present the consolidated financial condition of the Company and its Subsidiaries as at such dates and the consolidated results of operations and cash flows of the Company and its Subsidiaries for the respective periods ended on such dates. (b) Since October 31, 1998, except as disclosed in the Pre- Commitment Information, there has been (i) no material adverse change in the business, financial condition, 10 operations, performance, properties or prospects of the Company and its Subsidiaries, taken as a whole, and (ii) no development, event or circumstance relating to or affecting the Company or any of its Subsidiaries that, either individually or in the aggregate, has had or could reasonably be expected to have a Material Adverse Effect. 4.6. Compliance with Laws, Other Instruments, Etc. The execution, delivery and performance by each of the Obligors of each of the Note Documents to which it is or is to be a party and the consummation of the issue and sale of the Notes and the other transactions contemplated hereby and thereby do not (a) contravene such Obligor's Organizational Documents or bylaws, (b) violate any Requirement of Law, (c) conflict with or result in the breach of, or constitute a default under, any Contractual Obligation or (d) result in or require the creation or imposition of any Lien upon or with respect to any of the property or assets of any of the Obligors or any of their respective Subsidiaries that, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. Neither any of the Obligors nor any of their respective Subsidiaries is in violation of any of the terms of its Organizational Documents or bylaws or any Requirement of Law, the violation of which, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. 4.7. Governmental Authorizations, Etc. (a) The Company and each of its Subsidiaries (i) own or possess all of the Governmental Authorizations that are necessary to own or lease and operate their respective property and assets and to conduct their respective businesses as presently conducted, except where and to the extent that the failure to obtain or maintain in effect any such Governmental Authorization, either individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect, and (ii) have not received any notice relating to or threatening the revocation, termination, cancellation, denial, impairment or modification of any such Governmental Authorization, nor is the Company or any of its Subsidiaries in violation or contravention of, or in default under, any such Governmental Authorization. (b) No Governmental Authorization, and no consent, approval or authorization of, or notice to, or other action by, any Person, is required for the due execution, delivery, recordation, filing or performance by any of the Obligors of this Agreement or any of the other Note Documents to which it is or is to be a party, or for the consummation of the sale and purchase of the Notes and the other transactions contemplated hereby and thereby. 4.8. Litigation. 11 There are no actions, suits, investigations, litigations or proceedings pending or, to the Company's knowledge, threatened against or affecting any of the Obligors or any of their respective Subsidiaries or any of the property or assets thereof in any court or before any arbitrator or by or before any other Governmental Authority of any kind that either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. 4.9. Taxes. (a) Except to the extent that failure to perform would not be likely to result in a Material Adverse Effect, each of the Obligors and each of their respective Subsidiaries have filed or caused to be filed all tax returns and reports that are required to have been filed in any jurisdiction, and have paid all taxes shown to be due and payable on such returns and all taxes shown to be due and payable on any assessments of which such Obligor or such Subsidiary, as the case may be, has received notice and all other taxes, assessments, levies, fees and other governmental charges imposed upon any of the Obligors or any of their respective Subsidiaries, or their property, assets, income or franchises, to the extent such taxes, assessments, levies, fees and other charges have become due and payable and before they have become delinquent, except for taxes, assessments, levies, fees or other charges the amount, applicability or validity of which is being contested in good faith and by appropriate proceedings diligently conducted and with respect to which such Obligor or such Subsidiary, as the case may be, has established appropriate and adequate reserves in accordance with GAAP. (b) The Company or the relevant Subsidiary has established appropriate and adequate reserves for all taxable years and all other taxable periods for which the expiration of the applicable statute of limitations for assessment or collection of the federal income tax liabilities of the Company or any of its Subsidiaries has not occurred (whether as a result of extension or otherwise) and for its current fiscal period. (c) Neither any of the Obligors nor any of their respective Subsidiaries or Affiliates has entered into an agreement or waiver or been requested to enter into an agreement or waiver extending any statute period of limitations for the assessment of any material tax of any such Obligor or any such Subsidiary or Affiliate, except to the extent that the Company or the relevant Subsidiary has established an appropriate and adequate reserve in respect of such tax. 4.10. Compliance with ERISA. (a) The Company, each of its Subsidiaries and each of their respective ERISA Affiliates are in compliance with all applicable provisions and requirements of ERISA and the regulations and published interpretations thereunder with respect to each Employee Benefit Plan of the Company and its Subsidiaries, and have performed all their obligations under each such Employee Benefit Plan, except where such failure to comply or failure to perform would not be 12 likely to result in a Material Adverse Effect. Each such Employee Benefit Plan which is intended to qualify under Section 401(a) of the Internal Revenue Code is so qualified. (b) No ERISA Event has occurred or is reasonably expected to occur. (c) Except to the extent required under Section 4980B of the Internal Revenue Code or except as set forth on Section 4.10 of the Bridge Note Disclosure Letter, no such Employee Benefit Plan provides health or welfare benefits (through the purchase of insurance or otherwise) for any retired or former employee of the Company, any of its Subsidiaries or any of their respective ERISA Affiliates. (d) As of the most recent valuation date for any Pension Plan of the company and its Subsidiaries, the amount of unfunded benefit liabilities (as defined in Section 4001(a)(18) of ERISA) individually or in the aggregate for all such Pension Plans (excluding for purposes of such computation any such Pension Plans with respect to which assets exceed benefit liabilities), does not exceed $1,000,000 . (e) As of the most recent valuation date for each Multiemployer Plan for which the actuarial report is available, the potential liability of the Company, its Subsidiaries and their respective ERISA Affiliates for a complete withdrawal from such Multiemployer Plan (within the meaning of Section 4203 of ERISA), when aggregated with such potential liability for a complete withdrawal from all such Multiemployer Plans, based on information available pursuant to Section 4221(e) of ERISA, does not exceed $5,000,000. 4.11. Use of Proceeds. The proceeds received from the sale of the Notes to you will be used solely to finance the purchase price of the Tender Offer, to refinance certain existing Indebtedness of the Company and its Subsidiaries, and to pay costs, fees and expenses incurred in connection with the Transaction. 4.12. Environmental Matters. Except as set forth on Section 4.12 of the Bridge Note Disclosure Letter: (i) neither the Company nor any of its Subsidiaries nor any of their respective Facilities or operations are subject to any outstanding written order, consent decree or settlement agreement with any Person relating to (a) any Environmental Law, (b) any Environmental Claim, or (c) any Hazardous Materials Activity that, individually or in the aggregate, would be likely to result in a Material Adverse Effect; 13 (ii) neither the Company nor any of its Subsidiaries has received on its own behalf any letter or request for information under Section 104 of the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. (S)9604) or any comparable state law; (iii) there are and, to the knowledge of each Responsible Officer of the Company, have been no conditions, occurrences, or Hazardous Materials Activities that could reasonably be expected to form the basis of an Environmental Claim against the Company or any of its Subsidiaries that, individually or in the aggregate, would be likely to result in a Material Adverse Effect; (iv) neither the Company nor any of its Subsidiaries nor, to the knowledge of each Responsible Officer of the Company, any predecessor of the Company or any of its Subsidiaries has filed on its own behalf any notice under any Environmental Law indicating past or present treatment of Hazardous Materials at any Facility, and none of the Company's nor any of its Subsidiaries' operations involves (other than in a solely advisory capacity) the generation, transportation, treatment, storage or disposal of hazardous waste, as defined under 40 C.F.R. Parts 260-270 or any state equivalent; and (v) compliance by the Company and its Subsidiaries with all current or reasonably foreseeable future requirements pursuant to or under Environmental Laws will not, individually or in the aggregate, be likely to result in a Material Adverse Effect. Notwithstanding anything in this Section 4.12 to the contrary, no event or condition is occurring with respect to the Company or any of its Subsidiaries or, to the knowledge of any Responsible Officer of the Company, has occurred with respect to the Company or any of its Subsidiaries relating to any Environmental Law, any Release of Hazardous Materials, or any Hazardous Materials Activity, including any matter disclosed on Section 4.12 of the Bridge Note Disclosure Letter that individually or in the aggregate has had or would be likely to result in a Material Adverse Effect. 4.13. Existing Indebtedness; Future Liens; Pari Passu Obligations. (a) Section 4.13 of the Bridge Note Disclosure Letter sets forth a complete and correct list of all outstanding Indebtedness of the Company and each of its Subsidiaries as of the Purchase Date. As of the Purchase Date and after giving effect to the Transaction, neither the Company nor any of its Subsidiaries will be in default, and no waiver of default will be in effect, in the payment of any principal of or interest on any Indebtedness of the Company or any such Subsidiary, and no event or condition will exist with respect to any Indebtedness of the Company or any such Subsidiary that would permit (or that with notice or the lapse of time, or both, would permit) one or more Persons to cause such Indebtedness to become due and payable, or would 14 require an offer to prepay, redeem, repurchase, purchase or defease such Indebtedness to be made, in each case prior to its stated maturity or its regularly scheduled dates of payment. (b) Neither any of the Obligors nor any of their respective Subsidiaries has agreed or consented to cause or permit in the future (upon the happening of a contingency or otherwise) any of its property or assets, whether now owned or hereafter acquired, to be subject to a Lien not expressly permitted under Section 9.2. (c) The Obligations of the Company under this Agreement and the other Note Documents shall (i) rank pari passu with all unsubordinated Indebtedness of the Company (other than Senior Indebtedness of the Company), (ii) rank senior to any other subordinated Indebtedness of the Company and (iii) be subordinated to the Senior Indebtedness of the Company. 4.14. Material Contracts. (a) Neither the Company nor any of its Subsidiaries is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any of its Contractual Obligations, and no condition exists that, with the giving of notice or the lapse of time or both, would constitute such a default, except where the consequences, direct or indirect, of such default or defaults, if any, would not be likely to result in a Material Adverse Effect. (b) Neither the Company nor any of its Subsidiaries is a party to or is otherwise subject to any agreements or instruments or any charter or other internal restrictions that, individually or in the aggregate, would be likely to result in a Material Adverse Effect. 4.15. DMG. The Company has heretofore delivered to the Purchasers, at the Purchasers' request, the audited consolidated balance sheet of DMG and its Subsidiaries as at March 27, 1998 and March 26, 1999 and the related consolidated statements of income, stockholders' equity and cash flows of DMG and its Subsidiaries for the DMG Fiscal Year then ended. All such statements were prepared in conformity with GAAP and fairly present, in all material respects, the financial position (on a consolidated basis) of the entities described therein for each of the periods then ended, subject, in the case of any such unaudited financial statements, to changes resulting from audit and normal year-end adjustments. DMG does not (and will not following the purchase of the Notes) have any Contingent Obligation, contingent liability or liability for taxes, long-term lease or unusual forward or long-term commitment that is not reflected in the foregoing financial statements or the notes thereto and which in any such case is material in relation to the business, operations, properties, assets, financial condition or prospects of DMG or any of its Subsidiaries. 15 4.16. Investment Company Act; Other Regulations. Neither the Company nor any of its Subsidiaries 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. The Company is not subject to regulation under any Federal or State statute or regulation that limits its ability to incur Indebtedness as contemplated herein. 4.17. 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 of a "subsidiary company" of a "holding company" within the meaning of the Public Utility Holding Company Act of 1935, as amended. 4.18. Year 2000 Representation. Any reprogramming or other corrective modifications required to permit the proper functioning, in and following the year 2000, of (i) the Company's and its Subsidiaries' computer systems and (ii) equipment containing embedded microchips (including systems and equipment supplied by others or with which the Company's and its Subsidiaries' systems interface) and the testing of all such systems and equipment, as so reprogrammed, will be completed by September 30, 1999, except to the extent the failure to complete such reprogramming could not reasonably be expected to have a Material Adverse Effect. The cost of the Company and its Subsidiaries of such reprogramming and testing and of the reasonably foreseeable consequences of the year 2000 to the Company and its Subsidiaries (including, without limitation, reprogramming errors and the failure of others' systems or equipment) could not reasonably be expected to have a Material Adverse Effect. Except for such of the reprogramming referred to in the preceding sentence as may be necessary, the computer and management information systems of the Company and its Subsidiaries are and, with ordinary course upgrading and maintenance, will continue to be, sufficient to permit the Company and its Subsidiaries to conduct their respective businesses without a Material Adverse Effect. 4.19. Private Placement Representation. None of the Company, its Subsidiaries nor any of their respective "affiliates" (as defined in Rule 501(b) of Regulation D under the Securities Act) has directly, or through any agent, (i) sold, offered for sale, solicited offers to buy or otherwise negotiated in respect of, any 16 "security" (as defined in the Securities Act) that is or could be integrated with the sale of the Notes in a manner that would require the registration under the Securities Act of the Notes or (ii) engaged in any form of general solicitation or general advertising (as those terms are used in Regulation D under the Securities Act) in connection with the offering of the Notes or in any manner involving a public offering within the meaning of Section 4(2) of the Securities Act. Neither the Company nor any of its Subsidiaries has distributed any offering material in connection with the offering of the Notes; provided that the preceding portion of this sentence does not apply to any offering material distributed directly by the Purchasers. No securities of the same class as the Notes have been issued and sold by the Company or any of its Subsidiaries within the six-month period immediately prior to the date hereof. 4.20. Compliance with Rule 144A Requirements. (a) The Notes are not of the same class (within the meaning of Rule 144A under the Securities Act) as any securities of the Company or any of its Subsidiaries that are listed on a national securities exchange registered under Section 6 of the Exchange Act, or quoted in a U.S. automated inter-dealer quotation system. (b) Each of the Notes satisfies the eligibility requirements of Rule 144A(d)(3) under the Securities Act. 5. REPRESENTATIONS OF THE PURCHASERS. 5.1. Purchase for Investment, Etc. Each of the Purchasers, severally and not jointly, represents and warrants to the Company that: (a) such Purchaser is an institutional "accredited investor" within the meaning of Regulation D of the Securities Act and the Notes (or Rollover Notes and Warrants) to be acquired by it pursuant to this Agreement are being acquired for its own account and without a view to, or for resale in connection with, any distribution thereof or any interest therein; provided that the provisions of this Section shall not prejudice such Purchaser's right at all times to sell or otherwise dispose of all or any part of the Notes (or Rollover Notes and Warrants) so acquired pursuant to a registration under the Securities Act or an exemption from such registration available under the Securities Act; (b) such Purchaser has such knowledge and experience in financial and business matters so as to be capable of evaluating the merits and risks of its investment in the 17 Notes (or Rollover Notes and Warrants), such Purchaser is capable of bearing the economic risks of such investment and such Purchaser has had the opportunity to conduct its own due diligence investigation in relation to its purchase of the Notes (or Rollover Notes and Warrants) hereunder; (c) such Purchaser (i) is (A) exempt from withholding tax or (B) entitled to a treaty-reduced rate of withholding tax and (ii) otherwise meets or has satisfied the requirements of Section 13.3; and (d) no part of the funds used by such Purchaser to purchase the Notes (or Rollover Notes or Warrants) hereunder constitutes assets of any Pension Plan or any "plan" (as defined in Section 4975 of the Internal Revenue Code). 5.2. Solicitation by Each Purchaser. Each of the Purchasers, severally and not jointly, represents and warrants to the Company that no form of general solicitation or general advertising was used by such Purchaser or, to the best of its knowledge, any other Person acting on behalf of such Purchaser, in respect of the Notes (or Rollover Notes and Warrants) or in connection with the purchase of the Notes (or Rollover Notes and Warrants) and that the Notes have not been offered to any Person that is not an institutional "accredited investor" within the meaning of Regulation D of the Securities Act. 6. PREPAYMENTS AND REDEMPTIONS OF THE NOTES. 6.1. Optional Prepayment of the Notes and Rollover Notes. (a) The Notes. The Company may, at its option, upon not less than --------- ten days' prior written notice to the Holders of the Notes, prepay all or any part of the Notes, in an aggregate principal amount of $5,000,000 or integral multiples of $1,000,000 in excess thereof (or, if less, the remaining aggregate principal amount of all Notes outstanding at such time), at a purchase price in cash equal to 100% of the aggregate principal amount of the Notes so prepaid, plus all accrued and unpaid interest thereon, if any, to the date of such prepayment. Each notice of an optional prepayment of the Notes pursuant to this Section 6.1(a) shall specify the date fixed for such prepayment, the aggregate principal amount of Notes to be prepaid on such date, the principal amount of each Note held by such Holder to be prepaid (determined in accordance with Section 6.4) and the interest to be paid on the prepayment date with respect to such principal amount being prepaid, and shall state that such prepayment is to be made pursuant to this Section 6.1(a). 18 (b) The Rollover Notes. The Company may, at its option, upon not ------------------ less than ten days' prior written notice to the Holders of the Rollover Notes, prepay all or any part of the Rollover Notes, in an aggregate principal amount of $5,000,000 or integral multiples of $1,000,000 in excess thereof (or, if less, the remaining aggregate principal amount of all Notes outstanding at such time) at a purchase price in cash equal to 100% of the aggregate principal amount of the Notes so prepaid, plus all accrued and unpaid interest therein, if any, to the date of such prepayment; provided, however, that the redemption price (i) for any Fixed Rate Rollover Notes prepaid during the 5-year period commencing from the Rollover Date also will include the Make-Whole Premium and (ii) for any Fixed Rate Rollover Notes prepaid during the period from the fifth anniversary of the Rollover Date to the ninth anniversary of the Rollover Date will also include a premium equal to the product of 50% of the coupon interest rate for such Fixed Rate Rollover Notes and the principal amount of the Fixed Rate Rollover Notes prepaid from the fifth anniversary to but not including the sixth anniversary of the Rollover Date, with such premium to decline to the product of 37 1/2% of such interest rate and the principal amount of the Fixed Rate Rollover Notes prepaid from the sixth anniversary to but not including the seventh anniversary of the Rollover Date, the product of 25% of such interest rate and the principal amount of the Fixed Rate Rollover Notes prepaid from the seventh anniversary to but not including the eighth anniversary of the Rollover Date and the product of 12 1/2% of such interest rate and the principal amount of the Fixed Rate Rollover Notes prepaid from the eighth anniversary to but not including the ninth anniversary of the Rollover Date. Each notice of an optional prepayment of the Rollover Notes pursuant to this Section 6.1(b) shall specify the date fixed for such prepayment, the aggregate principal amount of Rollover Notes to be prepaid on such date, the principal amount of each Rollover Note held by such Holder to be prepaid (determined in accordance with Section 6.4) and the interest and premium, if any, to be paid on the prepayment date with respect to such principal amount being prepaid, and shall state that such prepayment is to be made pursuant to this Section 6.1(b). 6.2. Mandatory Redemption of Notes or Rollover Notes in the Event of a Change of Control. (a) Upon the occurrence of a Change of Control, the Company shall redeem all of the Notes or Rollover Notes at a redemption price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest, if any, thereon to the date of such redemption (the "Change of Control Payment"). Within three Business Days following any Change of Control, the Company shall deliver a notice, by facsimile confirmed the same day by overnight courier service, to each Holder of the Notes or Rollover Notes stating: (i) that a Change of Control redemption is being made pursuant to this Section 6.2; and (ii) the redemption price for the Note or Rollover Note or Notes or Rollover Notes of such Holder and the Change of Control Repurchase Date therefor. 19 Notwithstanding the foregoing, the failure of the Company to deliver the notice referred to in the second sentence of this Section 6.2(a) to any Holder of the Notes or Rollover Notes shall not affect or impair the obligation of the Company to purchase any Note or Rollover Note from such Holder on the applicable Change of Control Repurchase Date. (b) On a date that is no earlier than 30 days nor later than 60 days from the date that the Company delivers or causes to be delivered notice of the Change of Control to the Holders or, if the Company fails to deliver such notice or cause such notice to be delivered, on the date that is 30 days after the occurrence of such Change of Control (the "Change of Control Repurchase Date"), the Company shall pay to each of the Holders of the Notes or Rollover Notes the Change of Control Payment for its Notes or Rollover Notes. 6.3. Mandatory Redemptions of the Notes or Rollover Notes. (a) Refinancing. Upon the consummation of the sale of the ----------- Refinancing Securities, the Company shall redeem all outstanding Notes or Rollover Notes at a redemption price in cash equal to 100% of the aggregate principal amount thereof plus accrued and unpaid interest to the date of such redemption and all fees, expenses and other payments due and payable to the Holders of the Notes or Rollover Notes under the Note Documents on such date; provided, however, that the redemption price for any Fixed Rate Rollover Notes also will include the respective premium provided for optional prepayments in Section 6.1(b). (b) The Notes. In addition to the mandatory redemption provided in --------- Section 6.3(a), except to the extent that the respective Net Cash Proceeds or Net Equity Securities Proceeds are applied to repay Indebtedness under the Senior Credit Agreement, upon receipt by the Company or any of its Subsidiaries of the Net Cash Proceeds or Net Equity Securities Proceeds, as the case may be, from (i) the issuance or incurrence by the Company or any of its Subsidiaries of any Indebtedness (other than Indebtedness issued or incurred pursuant to Section 9.1), (ii) the sale or issuance by the Company or any of its Subsidiaries of any equity Securities other than (A) issuances of equity Securities of the Company to directors and employees of the Company and its Subsidiaries pursuant to a written employee benefit plan maintained by the Company or any of its Subsidiaries, approved by the Company's Board of Directors and issuances of equity Securities of the Company pursuant to the exercise of options or warrants issued under any such plan, (B) the issuance of the Company Series B Preferred Stock to RCBA in the manner contemplated by the Securities Purchase Agreement and (C) issuances of equity Securities of the Company, the Net Equity Security Proceeds of which are applied by the Company or its Subsidiaries to the consideration paid by the Company or such Subsidiary for Subsequent Acquisitions (provided that the Company shall apply such Net Equity Securities Proceeds to the consideration for such Subsequent Acquisitions during the three-month period following the date of receipt of such Net Equity Securities Proceeds by the Company) and (iii) any Asset Sale (other than (A) Asset Sales effected in the ordinary course of the Company's or the applicable Subsidiary's business or (B) Asset Sales with respect to 20 Exchange Assets (excluding, however, Net Cash Proceeds to the extent they exceed the amount of cash expected to be expended by the Company and its Subsidiaries to acquire such Exchange Assets)), the Company shall redeem outstanding Notes in an amount equal to (1) in the case of clause (ii) above, the lesser of (xx) 50% of the aggregate principal amount of all Notes outstanding on the date of such redemption and (yy) the amount of such Net Equity Securities Proceeds and (2) in the case of clauses (i) and (iii) above, the lesser of (xx) 100% of the aggregate principal amount of all Notes outstanding on the date of such redemption and (yy) the amount of such Net Cash Proceeds, in either case at a purchase price in cash equal to 100% of the aggregate principal amount thereof plus accrued and unpaid interest to the date of such redemption and all fees, expenses and other payments due and payable to the Holders of the Notes under the Note Documents on such date. For purposes of this Section 6.3, "Exchange Assets" means assets that the Company or any of its Subsidiaries intends to replace with assets that are of a nature and type that are used or useful in a business engaged in by the Company and its Subsidiaries at the time of any such replacement or any business activity substantially similar or related thereto. (c) The Rollover Notes. Except to the extent that the respective Net ------------------ Cash Proceeds or Net Equity Securities Proceeds are applied to repay Indebtedness under the Senior Credit Agreement and until any Fixed Rate Rollover Notes are issued, upon receipt by the Company or any of its Subsidiaries of the Net Cash Proceeds or Net Equity Securities Proceeds, as the case may be, from (i) the issuance or incurrence by the Company or any of its Subsidiaries of any Indebtedness (other than Indebtedness issued or incurred pursuant to Section 9A.1), (ii) the sale or issuance by the Company or any of its Subsidiaries of any equity Securities other than (A) issuances of equity Securities of the Company to directors and employees of the Company and its Subsidiaries pursuant to a written employee benefit plan maintained by the Company or any of its Subsidiaries, approved by the Company's Board of Directors and issuances of equity Securities of the Company pursuant to the exercise of options or warrants issued under any such plan, (B) the issuance of the Company Series B Preferred Stock to RCBA in the manner contemplated by the Securities Purchase Agreement, (C) issuances of equity Securities of the Company, the Net Equity Security Proceeds of which are applied by the Company or its Subsidiaries to the consideration paid by the Company or such Subsidiary for Investments (as defined in Schedule III) permitted under Section 9A.3 (provided that the Company shall apply such Net Equity Securities Proceeds to the consideration for such Investments during the three-month period following the date of receipt of such Net Equity Securities Proceeds by the Company) and (D) the issuance of Securities as provided in the Warrant Agreements and (iii) any Asset Sale (other than (A) Asset Sales effected in the ordinary course of the Company's or the applicable Subsidiary's business or (B) Asset Sales with respect to Exchange Assets), the Company shall redeem outstanding Rollover Notes in an amount equal to (1) in the case of clause (ii) above, the lesser of (xx) 50% of the aggregate principal amount of all Rollover Notes outstanding on the date of such redemption and (yy) the amount of such Net Equity Securities Proceeds and (2) in the case of clauses (i) and (iii) above, the lesser of (xx) 100% of the aggregate principal amount of all Rollover Notes outstanding on the date of such redemption and (yy) the amount of such Net Cash Proceeds, in either case at redemption 21 price in cash equal to 100% of the aggregate principal amount thereof plus accrued and unpaid interest to the date of such redemption and all fees, expenses and other payments due and payable to the Holders of the Rollover Notes under the Note Documents on such date. 6A.3. Offer to Repurchase Fixed Rate Rollover Notes in Respect of an Asset Sale. Except to the extent that the respective Net Cash Proceeds are applied to repay Indebtedness under the Senior Credit Agreement, upon receipt by the Company or any of its Subsidiaries of the Net Cash Proceeds that constitute "Excess Proceeds" under Section 9A.8 from any Asset Sale (other than (i) Asset Sales effected in the ordinary course of the Company's or the applicable Subsidiary's business or (ii) Asset Sales with respect to Exchange Assets), each Holder of the Fixed Rate Rollover Notes will have the right to require the Company to repurchase all or any portion of the Fixed Rate Rollover Notes of such Holder pursuant to an offer made in the manner described below (each, an "Offer to Purchase"), at a purchase price (the "Repurchase Payment") in cash equal to 100% of the aggregate principal amount thereof plus accrued and unpaid interest, if any, thereon to the date of such repurchase (the "Repurchase Date") plus the respective premium provided for optional prepayments in Section 6.1(b). Within three Business Days following any Asset Sale generating Excess Proceeds, the Company shall deliver a notice, by facsimile confirmed the same day by overnight courier service, to each Holder of the Fixed Rate Rollover Notes stating: (i) that the Offer to Purchase is being made pursuant to this Section 6A.3 and that all Fixed Rate Rollover Notes tendered shall be accepted for repurchase; (ii) the repurchase price for the Fixed Rate Rollover Note or Fixed Rate Rollover Notes of such Holder and the proposed Repurchase Date therefor (which shall not be less than 30 days nor more than 60 days from the date the Company delivers such notice); (iii) that any Fixed Rate Rollover Note not tendered for repurchase shall continue to accrue interest in accordance with the terms thereof; (iv) that, unless the Company defaults in the payment of the Repurchase Payment, all Fixed Rate Rollover Notes accepted for repurchase pursuant to this Section 6A.3 shall cease to accrue interest after the Repurchase Date; and (v) that Holders whose Fixed Rate Rollover Notes are being tendered for repurchase only in part shall be issued a new Fixed Rate Rollover Note equal in principal amount to the unpurchased portion of the Fixed Rate Rollover Notes surrendered. 22 On the Repurchase Date, the Company shall pay the respective Repurchase Payment in respect of all Fixed Rate Rollover Notes tendered as provided herein against the delivery to the Company of such Fixed Rate Rollover Notes. Any Holder of the Fixed Rate Rollover Notes that elects to have all or a portion of its Fixed Rate Rollover Notes repurchased as part of the Offer to Purchase shall deliver notice to the Company of its election at least three Business Days prior the scheduled Repurchase Date. Any Holder of a Fixed Rate Rollover Note that does not deliver to the Company notice accepting the Offer to Purchase at least three Business Days prior to the Repurchase Date shall be deemed to have rejected such Offer to Purchase. Notwithstanding the foregoing, the failure of the Company to deliver the notice referred to in the third sentence of this Section 6A.3 to any Holder of the Fixed Rate Rollover Notes shall not affect or impair the obligation of the Company to purchase any Fixed Rate Rollover Notes from such Holder as provided herein. 6.4. Allocation of Partial Prepayments. In the case of each partial repurchase or redemption of Notes or Rollover Notes pursuant to Section 6.1 or 6.3, the principal amount of Notes or Rollover Notes to be repurchased or redeemed shall be allocated (in integral multiples of $1,000) among all of the Notes or Rollover Notes at the time outstanding in proportion, as nearly as practicable, to the respective unpaid principal amounts thereof not theretofore called for repurchase or redemption, with adjustments to the extent practicable to compensate for any prior repurchases or redemptions not made exactly in such proportion. 6.5. Maturity; Surrender, Etc. In the case of each repurchase or redemption of the Notes or Rollover Notes pursuant to Section 6.1, 6.2 or 6.3, the principal amount of each Note or Rollover Note to be redeemed and the principal amount of each Note or Rollover Note surrendered for repurchase shall mature and become due and payable on the date fixed for such repurchase or redemption, together with accrued and unpaid interest on such principal amount to such date. From and after such date, unless the Company shall fail to pay such principal amount when so due and payable, together with the accrued and unpaid interest thereon as aforesaid, interest on such principal amount shall cease to accrue. Any Note or Rollover Note redeemed or repurchased in full shall be surrendered to the Company and canceled and shall not be reissued, and no Note or Rollover Note shall be issued in lieu of any repurchased or redeemed principal amount of any Note or Rollover Note. 6.6. Purchase of Notes or Rollover Notes. 23 The Company will promptly cancel all Notes or Rollover Notes acquired by it pursuant to any payment, prepayment or purchase of Notes or Rollover Notes in accordance with the terms of this Agreement and the Notes or Rollover Notes, and no Notes or Rollover Notes may be issued in substitution or exchange for any such Notes or Rollover Notes. 7. ROLLOVER. 7.1. Rollover Notes. If, on the Rollover Date, any Notes shall not have been prepaid or redeemed in full pursuant to Section 6.1, 6.2 or 6.3, then, subject to the terms contained herein and the satisfaction of the conditions set forth below, each Note then outstanding shall be exchanged (the "Rollover") for a new Note (the "Rollover Notes"), each in a principal amount equal to the sum of (a) 102.75% of the principal amount of such exchanged Note and (b) the aggregate principal amount of all Secondary Notes issued in respect of such Note. Any accrued and unpaid interest on the Notes outstanding immediately prior to the Rollover Date (including interest due on the Rollover Date in respect of the Notes) shall be due and payable prior to the consummation of the Rollover. The Rollover Notes shall mature ten years after their issuance. The Rollover Notes shall be in substantially the form of Exhibit B hereto (except as set forth in Section 7.2), with such changes therefrom, if any, as may be approved by you and the Company. Unless otherwise specified in the Rollover Notes, in this Section 7 or in Section 8A or 9A, the Rollover Notes shall have the same terms, and shall be governed by the provisions of this Agreement to the same extent, as the Notes. 7.2. Warrant Agreements. (a) Warrant Agreements to purchase up to an aggregate of 1.5% of the fully diluted shares of the common stock of the Company will be issued to the Holders of the Rollover Notes on the Rollover Date, and, consistent with Section 8A.11 hereof, Warrant Agreements to purchase an additional 1.5% of the fully diluted shares of the common stock of the Company will be issued to the Holders of the Rollover Notes on the six-month anniversary of the Rollover Date, with the amount of shares subject to such Warrant Agreements to be determined in each case as of the date of issuance of such Warrant Agreements. (b) The aggregate amount of Warrants to be issued to the Holders of Rollover Notes pursuant to Section 7.2(a) shall be allocated among the Holders of Rollover Notes in accordance with the percentage that the outstanding principal amount of Rollover Notes held by each Holder bears to the total outstanding principal amount of all Rollover Notes held by all of the Holders (excluding the Company and its Subsidiaries). The Holders of the Rollover Notes 24 shall be reflected as the registered owners of Warrants on the register maintained by the Company for such purpose pursuant to Section 3 of the Warrant Agreements. 7.3. Registration Rights. (a) Upon the issuance of the Rollover Notes, the Company shall deliver to each Holder of Rollover Notes an executed counterpart of a registration rights agreement substantially in the form of Exhibit G hereto, as amended, supplemented or otherwise modified from time to time (the "Rollover Notes Registration Rights Agreement"), providing for the following registration rights and otherwise in form and substance satisfactory to the Holders of a majority of the Rollover Notes. Pursuant to the Rollover Notes Registration Rights Agreement, as soon as practicable after the Rollover Date, the Company shall file, and shall use its best efforts to have declared effective, at the expense of the Company, an exchange offer registration statement on Form S-4 (or any other similar form adopted by the Securities and Exchange Commission) with respect to the exchange of the Rollover Notes and to keep such exchange registration statement effective until closing of the exchange offer. If such exchange offer cannot be completed within 180 days from the date of issue of the Rollover Notes, the issuer will file and cause to become effective, at the expense of the Company, a "Shelf" registration with respect to resales of the Rollover Notes. (b) If the registration statement referred to in Subsection 7.3(a) above is either (i) not filed within 60 days following the Rollover Date or (ii) such exchange offer is not completed or a Shelf registration is not declared effective within 180 days following the Rollover Date, the Company will pay liquidated damages to each Holder of the Rollover Notes in an amount equal to $.192 per week per $1,000 principal amount of Rollover Notes held by such Holder until such time as such registration statement has been declared effective or such exchange offer has been completed, as the case may be. The Company will also pay to each Holder of Rollover Notes liquidated damages in an amount equal to $.192 per week per $1,000 principal amount of Rollover Notes for any period of time following the effectiveness of such registration statement during which such registration statement is not available for resales of the Rollover Notes. (c) In connection with the registration statement contemplated herein, the Company will execute and deliver an indenture setting forth the terms of the notes to be issued under such indenture, which terms will include, without limitation, covenants and events of default identical to the Rollover Notes, except that (i) the provisions of Section 10.2 with respect to acceleration shall be replaced with a provision to the effect that if an Event of Default (other than an Event of Default specified in Section 10.1(g)) occurs and is continuing, the trustee under such indenture or the holders of not less than 25% in principal amount of the outstanding notes issued thereunder may, and the trustee under such indenture shall, at the request of the holders of not less than 25% in principal amount of such notes, declare the principal of all of such notes to be due and payable and (ii) such changes as are required for the issuance of such notes under 25 such indenture shall be made. The other provisions of such indenture shall contain customary terms and conditions and shall be in form and substance reasonably satisfactory to the Required Holders. The Company shall appoint under such indenture a trustee eligible to act as trustee under Section 310(a)(1) of the Trust Indenture Act of 1939. Upon the issuance and effectiveness of an indenture contemplated by this Section 7.3(c), which shall govern the rights of the Holders of the Rollover Notes and the related obligations of the Company and the Subsidiary Guarantors, this Note Purchase Agreement shall cease to be effective. 7.4. Conditions to Rollover. The obligation of the Holders of the Notes to consummate the Rollover shall be subject to the following conditions precedent: (a) No Event of Default shall have occurred and be continuing. (b) The Rollover would not violate the terms of any order, decree, injunction or judgment entered by a court of competent jurisdiction. (c) The Company shall have paid all accrued fees and expenses arising out of the transactions contemplated by this Agreement and the other Note Documents (including the reasonable accrued fees and expenses of counsel). (d) You shall have received each of the documents required to be delivered pursuant to Section 7.5. 7.5. Documents Required. On the Rollover Date, the Company shall deliver to you the following documents, each dated the Rollover Date and duly executed or authenticated, as the case may be, by each Person party thereto: (a) The Rollover Notes in exchange for the Notes held by you. (b) An executed counterpart of the Rollover Notes Registration Rights Agreement, substantially in the form of Exhibit G hereto. (c) Executed counterparts of the Warrant Agreements, substantially in the form of Exhibit H hereto, for each Holder representing its ratable share of 1.5% on a fully diluted basis of the common stock of the Company. 7.6. Special Rollover Note Interest Rate Provisions. 26 Upon not less than twenty days' prior notice to the Company, any Person that was a Holder of a Rollover Note on the Rollover Date shall have the right to sell such Rollover Note to any other Person and in connection with any such sale to set, in its sole discretion, a fixed rate of interest for such Rollover Note (in lieu of the increasing rate of interest then applicable to such Rollover Note), which fixed rate of interest shall be no less favorable (including that such fixed rate of interest shall not exceed the maximum rate of interest per annum provided for in the Rollover Notes and the maximum rate of interest per annum payable in cash in respect of such fixed rate of interest shall not exceed the maximum interest rate per annum payable in cash provided for in the Rollover Notes) to the Company than the then applicable rate of interest on such Rollover Note. The Company agrees that from time to time coincidental with any such sale it shall issue a replacement Rollover Note (the "Fixed Rate Rollover Notes") to the respective Holder that shall provide for the respective fixed rate of interest and otherwise be substantially in the form of Exhibit B hereto. 8. AFFIRMATIVE COVENANTS (NOTES). From the date of this Agreement and, thereafter, so long as any of the Notes shall be outstanding, the Company will at all times perform and comply, and will cause each of its Subsidiaries to perform and comply, with each of the following covenants: 8.1. Financial Statements and Other Reports. The Company will maintain, and cause each of its Subsidiaries to maintain, a system of accounting established and administered in accordance with sound business practices to permit preparation of consolidated financial statements in conformity with GAAP. The Company will deliver to each Holder of a Note: (a) Quarterly Financials. (i) as soon as available and in any event -------------------- within 55 days after the end of each of the first three Fiscal Quarters of each Fiscal Year, the consolidated balance sheet of the Company and its Subsidiaries as at the end of such Fiscal Quarter and the related consolidated statements of income and cash flows of the Company and its Subsidiaries for such Fiscal Quarter and for the period from the beginning of the then current Fiscal Year to the end of such Fiscal Quarter, setting forth in each case in comparative form the corresponding figures for the corresponding periods of the previous Fiscal Year, all in reasonable detail and certified by the Senior Financial Officer of the Company that they fairly present, in all material respects, the financial condition of the Company and its Subsidiaries as at the dates indicated and the results of their operations and their cash flows for the periods indicated, subject to changes resulting from audit and normal year-end adjustments, and (ii) as soon as available and in any 27 event within 90 days after the end of each Fiscal Quarter, a summary of such consolidated statements setting forth in comparative form the corresponding figures from the Financial Plan for the current Fiscal Year and a narrative report describing the operations of the Company and its Subsidiaries in each case in the form prepared for presentation to the Board of Directors for such Fiscal Quarter and for the period from the beginning of the then current Fiscal Year to the end of such Fiscal Quarter; (b) Year-End Financials. as soon as available and in any event within ------------------- 100 days after the end of each Fiscal Year, (i) the consolidated balance sheet of the Company and its Subsidiaries as at the end of such Fiscal Year and the related consolidated statements of income, stockholders' equity and cash flows of the Company and its Subsidiaries for such Fiscal Year, setting forth in each case in comparative form the corresponding figures for the previous Fiscal Year, all in reasonable detail and certified by a Senior Financial Officer of the Company that they fairly present, in all material respects, the financial condition of the Company and its Subsidiaries as at the dates indicated and the results of their operations and their cash flows for the periods indicated, (ii) a summary of such consolidated statements setting forth in comparative form the corresponding figures from the Financial Plan for the current Fiscal Year and a narrative report describing the operations of the Company and its Subsidiaries in each case in the form prepared for presentation to the Board of Directors for such Fiscal Year, (iii) an office performance summary for the Fiscal Year then ended and (iv) in the case of such consolidated financial statements, a report thereon of PricewaterhouseCoopers L.L.P. or other independent certified public accountants of recognized national standing selected by the Company, which report shall be unqualified, shall express no doubts about the ability of the Company and its Subsidiaries to continue as a going concern, and shall state that such consolidated financial statements fairly present, in all material respects, the consolidated financial position of the Company and its Subsidiaries as at the dates indicated and the results of their operations and their cash flows for the periods indicated in conformity with GAAP applied on a basis consistent with prior years (except as otherwise disclosed in such financial statements) and that the examination by such accountants in connection with such consolidated financial statements has been made in accordance with generally accepted auditing standards; (c) Officer's and Compliance Certificates. together with each ------------------------------------- delivery of financial statements of the Company and its Subsidiaries pursuant to subsections (a) and (b) above, (i) an Officer's Certificate of the Company stating that the signers have reviewed the terms of this Agreement and have made, or caused to be made under their supervision, a review in reasonable detail of the transactions and condition of the Company and its Subsidiaries during the accounting period covered by such financial statements and that such review has not disclosed the existence during or at the end of such accounting period, and that the signers do not have knowledge of the existence as at the date of such Officer's Certificate, of any condition or event that constitutes an Event of Default or Default, or, if any such condition or event existed or exists, specifying the nature and period of existence thereof and what action the Company has taken, is taking and proposes to take with respect thereto; and (ii) a Compliance Certificate demonstrating in reasonable detail compliance during and at the end of the applicable accounting 28 periods with the restrictions contained in Sections 9.1(j) and (k), 9.2(a)(viii), 9.3(h) and (m), 9.4(i) and 9.6(f) and 9.7, in each case to the extent compliance with such restrictions is required to be tested at the end of the applicable accounting period; (d) Reconciliation Statements. if, as a result of any change in ------------------------- accounting principles and policies from those used in the preparation of the audited financial statements referred to in Section 4.5(a), the consolidated financial statements delivered pursuant to subsections (a) or (b) of this Section 8.1 will differ in any material respect from the consolidated financial statements that would have been delivered pursuant to such subsections had no such change in accounting principles and policies been made, then (i) together with the first delivery of financial statements pursuant to subsection (a), (b) or (l) of this Section 8.1 following such change, consolidated financial statements of the Company and its Subsidiaries for (A) the current Fiscal Year to the effective date of such change and (B) the two full Fiscal Years immediately preceding the Fiscal Year in which such change is made, in each case prepared on a pro forma basis as if such change had been in effect during such periods, and (ii) together with each delivery of financial statements pursuant to subsections (a) or (b) of this Section 8.1 following such change, a written statement of a Senior Financial Officer of the Company setting forth the differences that would have resulted if such financial statements had been prepared without giving effect to such change; (e) Accountants' Certification. together with each delivery of -------------------------- consolidated financial statements of the Company and its Subsidiaries pursuant to subsection (b) above, a written statement by the independent certified public accountants giving the report thereon stating that their audit examination has included a review of the terms of this Agreement and the other Note Documents as they relate to accounting matters and that, based on their audit examination, nothing has come to their attention that causes them to believe that the matters set forth in the Compliance Certificates delivered therewith pursuant to clause (ii) of subsection (c) above for the applicable Fiscal Year are not stated in accordance with the terms of this Agreement; (f) Accountants' Reports. promptly upon receipt thereof (unless -------------------- restricted by applicable professional standards), copies of all reports submitted to the Company by independent certified public accountants in connection with each annual, interim or special audit of the financial statements of the Company and its Subsidiaries made by such accountants, including any comment letter submitted by such accountants to management in connection with their annual audit; (g) SEC Filings and Press Releases. promptly upon their becoming ------------------------------ available, copies of (i) all financial statements, reports, notices and proxy statements sent or made available generally by the Company to its security holders or by any Subsidiary of the Company to its security holders other than the Company or another Subsidiary of the Company, (ii) all regular and periodic reports and all registration statements (other than on Form S-8 or a similar form) and prospectuses, if any, filed by the Company or any of its Subsidiaries with any securities 29 exchange or with the Securities and Exchange Commission or any governmental or private regulatory authority and (iii) 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 business of the Company or any of its Subsidiaries; (h) Events of Default, Etc. promptly upon any Responsible Officer of ----------------------- the Company obtaining knowledge (i) of any condition or event that constitutes an Event of Default or Default, or becoming aware that any Holder of a Note has given any notice or taken any other action with respect to a claimed Event of Default or Default, (ii) that any Person has given any notice to the Company or any of its Subsidiaries or taken any other action with respect to a claimed default or event or condition of the type referred to in Section 10.1(f), (iii) of any condition or event that would be required to be disclosed in a current report filed by the Company with the Securities and Exchange Commission on Form 8-K (Items 1, 2, 4, 5 and 6 of such Form as in effect on the date hereof) if the Company were required to file such reports under the Exchange Act or (iv) of the occurrence of any event or change that has caused or evidences, either in any case or in the aggregate, a Material Adverse Effect, an Officer's Certificate specifying the nature and period of existence of such condition, event or change, or specifying the notice given or action taken by any such Person and the nature of such claimed Event of Default, Default, default, event or condition, and what action the Company has taken, is taking and proposes to take with respect thereto; (i) Litigation or Other Proceedings. ------------------------------- (i) promptly upon any Responsible Officer of the Company obtaining knowledge of (A) the institution of, or non-frivolous threat of, any action, suit, proceeding (whether administrative, judicial or otherwise), governmental investigation or arbitration against or affecting the Company or any of its Subsidiaries or any property of the Company or any of its Subsidiaries (collectively, "Proceedings") not previously disclosed in writing by the Company to the Holders of the Notes or (B) any material development in any Proceeding that, in any case: (1) is reasonably likely to result in a Material Adverse Effect; or (2) seeks to enjoin or otherwise prevent the consummation of, or to recover any damages or obtain relief as a result of, the transactions contemplated hereby; written notice thereof together with such other information as may be reasonably available to the Company to enable the Holders of the Notes and their counsel to evaluate such matters; and 30 (ii) promptly upon request by any Holder of a Note, a copy of the list of Proceedings delivered by the Company to its independent certified public accountants in connection with the report prepared by them on the consolidated financial statements of the Company and its Subsidiaries for each Fiscal Year, and promptly after request by any Holder of a Note such other information as may be reasonably requested by such Holder to enable such Holder and its counsel to evaluate any of such Proceedings; (j) ERISA Events. promptly upon becoming aware of the occurrence of ------------ or forthcoming occurrence of any ERISA Event, a written notice specifying the nature thereof, what action the Company, any of its Subsidiaries or any of their respective ERISA Affiliates has taken, is taking or proposes to take with respect thereto and, when known, any action taken or threatened by the Internal Revenue Service, the Department of Labor or the PBGC with respect thereto; (k) ERISA Notices. with reasonable promptness upon request by any ------------- Holder of a Note, copies of (i) each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) filed by the Company, any of its Subsidiaries or any of their respective ERISA Affiliates with the Internal Revenue Service with respect to each Pension Plan of the Company or any of its Subsidiaries; (ii) all notices received by the Company, any of its Subsidiaries or any of their respective ERISA Affiliates from a Multiemployer Plan sponsor concerning an ERISA Event; and (iii) copies of such other documents or governmental reports or filings relating to any Employee Benefit Plan of the Company or any of its Subsidiaries as any Holder of a Note shall reasonably request; (l) Financial Plans. as soon as practicable and in any event no later than 60 days following the end of each Fiscal Year, a consolidated plan and financial forecast for the then current Fiscal Year (the "Financial Plan" for such Fiscal Year), including, (i) forecasted consolidated balance sheets and forecasted consolidated statements of income and cash flows of the Company and its Subsidiaries for such Fiscal Year, together with a projected Compliance Certificate for such Fiscal Year and an explanation of the assumptions on which such forecasts are based, (ii) forecasted consolidated statements of income and cash flows of the Company and its Subsidiaries for each Fiscal Quarter of such Fiscal Year, together with an explanation of the assumptions on which such forecasts are based, and (iii) such other information and projections as any Holder of a Note may reasonably request; (m) Insurance. as soon as practicable and in any event by the last --------- day of each Fiscal Year, a report in form and substance reasonably satisfactory to the Holders of the Notes outlining any change since the proceeding Fiscal Year in any material insurance coverage maintained by the Company and its Subsidiaries; (n) Board of Directors. with reasonable promptness, written notice ------------------ of any change in the Board of Directors of the Company; 31 (o) New Subsidiaries or Change in Status of Subsidiaries. annually, ---------------------------------------------------- within 100 days of the end of each Fiscal Year, all of the data required to be set forth on Section 4.4(a) of the Bridge Note Disclosure Letter as of the Purchase Date with respect to all Subsidiaries of the Company and an Officer's Certificate, together with supporting documentation in form and substance satisfactory to the Required Holders, setting forth the aggregate gross revenues for the immediately preceding Fiscal Year of the Subsidiary Guarantors; (p) Subordinated Indebtedness Notices. promptly upon receipt by the --------------------------------- Company or any of its Subsidiaries of any notice with respect to any Subordinated Indebtedness, and promptly upon the giving of notice by the Company or any of its Subsidiaries with respect to any Subordinated Indebtedness, in each case relating to any default or payment or prepayment of principal of, premium, if any, redemption, purchase, retirement, defeasance (including in- substance or legal defeasance), sinking fund or similar payment with respect to such Subordinated Indebtedness, a copy of such notice; (q) DMG Subsidiaries. not later than the twentieth Business Day ---------------- after the Purchase Date, deliver to each Holder a supplement to Section 4.4(a) of the Bridge Note Disclosure Letter showing as to each Subsidiary of the Company (to the extent not set forth in Section 4.4(a) of the Bridge Note Disclosure Letter), the correct name thereof, the jurisdiction of its organization and the percentage of shares of each class of its capital stock or similar equity interests outstanding that is owned by the Company and/or one or more of its Subsidiaries; and (r) Other Information. with reasonable promptness, such other ----------------- information and data with respect to the Company or any of its Subsidiaries as from time to time may be reasonably requested by any Holder of a Note. 8.2. Corporate Existence, Etc. Except as permitted under Section 9.6, the Company will, and will cause each of its Subsidiaries to, at all times preserve and keep in full force and effect its corporate existence and all rights and franchises material to its business; provided, however, that neither the Company nor any of its Subsidiaries shall be required to preserve any such right or franchise if the Board of Directors of the Company or such Subsidiary shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company or such Subsidiary, as the case may be, and that the loss thereof is not disadvantageous in any material respect to the Company, such Subsidiary or the Holders of the Notes. 8.3. Payment of Taxes and Claims; Tax Consolidation. The Company will, and will cause each of its Subsidiaries to, pay all taxes, assessments and other governmental charges imposed upon it or any of its properties or assets or 32 in respect of any of its income, businesses or franchises before any penalty accrues thereon, and all claims (including, claims for labor, services, materials and supplies) for sums that have become due and payable and that by law have or may become a Lien upon any of its properties or assets, prior to the time when any penalty or fine shall be incurred with respect thereto, except where the failure to pay such taxes, assessments and governmental charges would not be likely to result in a Material Adverse Effect; provided that no such charge or claim need be paid if it is being contested in good faith by appropriate proceedings promptly instituted and diligently conducted, so long as such reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made therefor. 8.4. Maintenance of Properties; Insurance. (a) Maintenance of Properties. The Company will, and will cause ------------------------- each of its Subsidiaries to, maintain or cause to be maintained in good repair, working order and condition, ordinary wear and tear excepted, all material properties used or useful in the business of the Company and its Subsidiaries (including all intellectual property) and from time to time will make or cause to be made all appropriate repairs, renewals and replacements thereof the failure of which would likely result in a Material Adverse Effect. (b) Insurance. The Company will maintain or cause to be maintained, --------- with financially sound and reputable insurers, such public liability insurance, third party property damage insurance, business interruption insurance and casualty insurance with respect to liabilities, losses or damage in respect of the assets, properties and businesses of the Company and its Subsidiaries as may customarily be carried or maintained under similar circumstances by corporations of established reputation engaged in similar businesses, in each case in such amounts (giving effect to self-insurance), with such deductibles, covering such risks and otherwise on such terms and conditions as shall be customary for corporations similarly situated in the industry. 8.5. Inspection Rights. The Company shall, and shall cause each of its Subsidiaries to, permit any authorized representatives designated by any Holder of a Note to visit and inspect any of the properties of the Company or of any of its Subsidiaries, to inspect, copy and take extracts from its and their financial and accounting records, and to discuss its and their affairs, finances and accounts with its and their officers and independent public accountants (provided that the Company may, if it so chooses, be present at or participate in any such discussion), all upon reasonable notice and at such reasonable times during normal business hours and as often as may reasonably be requested. 8.6. Compliance with Laws, Etc. 33 The Company shall comply, and shall cause each of its Subsidiaries to comply, with the requirements of all applicable laws, rules, regulations and orders of any Governmental Authority (including all Environmental Laws), noncompliance with which would be likely to cause, individually or in the aggregate, a Material Adverse Effect. The Company shall maintain and shall cause each Subsidiary Guarantor to maintain, at all times, each Governmental Authorization necessary in order to permit such Obligor fully to own or lease its respective property and assets and properly to conduct its respective business. The Company shall ensure and shall cause each Subsidiary Guarantor to ensure, that at all times, it will have the full intended benefits of and rights under each Governmental Authorization, unless the revocation, termination, cancellation, denial, impairment or modification of such Governmental Authorization, either individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. 8.7. Execution of Subsidiary Guaranty by Certain Subsidiaries and Future Subsidiaries. (a) Execution of Subsidiary Guaranty. In the event that the -------------------------------- aggregate gross revenues of the Subsidiary Guarantors for any Fiscal Year, commencing with the Fiscal Year ending October 31, 1999, is less than 90% of the aggregate gross revenues of the Company and its Domestic Subsidiaries on a consolidated basis for such Fiscal Year, the Company will, within 100 days after the end of such Fiscal Year, cause one or more additional Domestic Subsidiaries after consultation with the Required Holders to execute and deliver to the Holders of the Notes a counterpart of the Subsidiary Guaranty such that the aggregate gross revenues of all Subsidiary Guarantors for such Fiscal Year shall be equal to at least 90% of the aggregate gross revenues of the Company and its Domestic Subsidiaries on a consolidated basis for such Fiscal Year; provided, however, that notwithstanding the foregoing provision, the Company shall cause any Subsidiary that executes and delivers a guaranty with respect to the Senior Credit Agreement to execute and deliver to the Holders of the Notes a counterpart of the Subsidiary Guaranty. (b) Subsidiary Organizational Documents, Legal Opinions, Etc. The --------------------------------------------------------- Company shall deliver to each Holder of the Notes, together with a Subsidiary Guaranty, (i) certified copies of the Organizational Documents of each Subsidiary described in Section 8.7(a), together with a good standing certificate from the Secretary of State of the jurisdiction of its incorporation and, to the extent generally available, a certificate or other evidence of good standing as to payment of any applicable franchise or similar taxes from the appropriate taxing authority of such jurisdiction, each to be dated a recent date prior to their delivery to each Holder of the Notes, (ii) a copy of such Subsidiary's bylaws, certified by its corporate secretary or an assistant secretary as of a recent date prior to their delivery to each Holder of the Notes, (iii) a certificate executed by the secretary or an assistant secretary of such Subsidiary as to (a) the fact that the attached resolutions of the Board of Directors of such Subsidiary approving and 34 authorizing the execution, delivery and performance of the Subsidiary Guaranty are in full force and effect and have not been modified or amended and (b) the incumbency and signatures of the officers of such Subsidiary executing such Subsidiary Guaranty, and (iv) a favorable opinion of counsel to such Subsidiary, in form and substance reasonably satisfactory to the Required Holders of the Notes and its counsel, as to (a) the due organization and good standing of such Subsidiary, (b) the due authorization, execution and delivery by such Subsidiary of such Subsidiary Guaranty, (c) the enforceability of such Subsidiary Guaranty against such Subsidiary and (d) such other matters as the Required Holders of the Notes may reasonably request, all of the foregoing to be reasonably satisfactory in form and substance to the Required Holders of the Notes and their counsel. 8.8. Year 2000. The Company shall perform all acts reasonably necessary to ensure that the Company and its Subsidiaries become Year 2000 Compliant in a timely manner. Such acts shall include performing a comprehensive review and assessment of all of the Company's systems and adopting a detailed plan, with itemized budget, for the remediation, monitoring and testing of such systems. As used in this Section, "Year 2000 Compliant" shall mean, in regard to any entity, that all software, hardware, firmware, equipment, goods or systems utilized by or material to the business operations or financial condition of such entity, will properly perform date sensitive functions before, during and after the year 2000. The Company shall, immediately upon request, provide to any Holder of a Note such certifications or other evidence of the Company's compliance with the terms of this paragraph as such Holder may from time to time require. 8.9. Syndication. The Company shall cooperate with MS in the syndication of the Notes (such cooperation to include participating in meetings with MS and assisting in the preparation of an information memorandum and other materials to be used in connection with such syndication) and shall provide and cause their respective advisors to provide all information reasonably deemed necessary by MS to such syndication. The Company shall coordinate any other financings by the Company and its Subsidiaries with MS's primary syndication efforts relating to the Notes. 8.10. Consummation of Merger. The Company shall proceed to consummate the Merger as soon as practicable following the consummation of the Tender Offer. 35 8.11. Use of Proceeds. The Company will use the proceeds of the issue and sale of the Notes solely for the purposes set forth in Section 4.11 hereof. 8.12. Refinancing of the Notes; Rule 144A. (a) The Company shall use its best efforts to effectuate a Refinancing as soon as practicable after the date of this Agreement for the purpose, among other things, of refinancing or redeeming the Notes then outstanding, which Refinancing shall yield an amount sufficient, and, if consummated, the proceeds of which shall be used, to repay the aggregate unpaid principal amount of the Notes in full plus accrued interest thereon to the date of repayment and all other amounts payable under the Note Documents. (b) The Company will take all necessary actions so that the Notes are eligible for resale under Rule 144A (or any successor rule) of the Securities Act. 8.13. Payment of Notes. The Company shall pay the principal of, premium, if any, and interest on the Notes on the dates and in the manner provided in the Notes and this Agreement. 8.14. Global Notes. At the request of the Required Holders, the Company shall use its best efforts to issue notes in global form (the "Global Notes") in replacement of the Notes. The Global Notes shall be registered in the name of the Depository Trust Company (or its nominee or successor) ("DTC"), be delivered to a paying agent for DTC if so requested by the Required Holders and otherwise be legended, have a "CUSIP" number, be subject to transfer restrictions and have other rights and attributes as are customary in similar financial transactions involving global notes. Without limiting the foregoing and in connection with any Global Note, the Company shall maintain in the Borough of Manhattan in the City of New York an office or agency where the Global Notes may be surrendered for registration of transfer or exchange an where notices and demands to of upon the Company may be served. 8.15. Opinion of Counsel. 36 On the Rollover Date, the Company shall deliver to the Holders an opinion of counsel to the Company, dated as of the Rollover Date and, where applicable, substantially in the form of Exhibits E-1 and E-2 hereto, opining on (i) the due authorization, execution and delivery, and enforceability against the Company, of the Rollover Notes, the Warrant Agreements and the Rollover Notes Registration Rights Agreement and (ii) such other matters as the Required Holders may reasonably request. 8A. AFFIRMATIVE COVENANTS (ROLLOVER NOTES). From the date of issuance of the Rollover Notes and thereafter until the issuance of any Fixed Rate Rollover Notes, so long as any Rollover Notes shall be outstanding, the Company will at all times perform and comply, and will cause each of its Subsidiaries to perform and comply, with the following covenants; provided that from the date of issuance of any Fixed Rate Rollover Notes, so long as any Rollover Notes shall be outstanding, the Company will at all times perform and comply, and will cause each of its Subsidiaries to perform and comply, with the covenants set forth in Sections 8A.1(a), (b), (c), (e), 8A.2, 8A.3, and 8A.6 through 8A.11: 8A.1. Financial Statements and Other Reports. The Company will maintain, and cause each of its Subsidiaries to maintain, a system of accounting established and administered in accordance with sound business practices to permit preparation of consolidated financial statements in conformity with GAAP. The Company will deliver to each Holder of a Rollover Note: (a) Quarterly Financials. (i) as soon as available and in any event -------------------- within 55 days after the end of each of the first three Fiscal Quarters of each Fiscal Year, the consolidated balance sheet of the Company and its Subsidiaries as at the end of such Fiscal Quarter and the related consolidated statements of income and cash flows of the Company and its Subsidiaries for such Fiscal Quarter and for the period from the beginning of the then current Fiscal Year to the end of such Fiscal Quarter, setting forth in each case in comparative form the corresponding figures for the corresponding periods of the previous Fiscal Year, all in reasonable detail and certified by the Senior Financial Officer of the Company that they fairly present, in all material respects, the financial condition of the Company and its Subsidiaries as at the dates indicated and the results of their operations and their cash flows for the periods indicated, subject to changes resulting from audit and normal year-end adjustments, and (ii) as soon as available and in any event within 90 days after the end of each Fiscal Quarter, a summary of such consolidated statements setting forth in comparative form the corresponding figures from the Financial Plan for the current Fiscal Year and a narrative report describing the operations of the Company and its Subsidiaries in each case in the form prepared for presentation to the Board of Directors for such Fiscal Quarter and for the period from the beginning of the then current Fiscal Year to the end of such Fiscal Quarter; 37 (b) Year-End Financials. as soon as available and in any event within ------------------- 100 days after the end of each Fiscal Year, (i) the consolidated balance sheet of the Company and its Subsidiaries as at the end of such Fiscal Year and the related consolidated statements of income, stockholders' equity and cash flows of the Company and its Subsidiaries for such Fiscal Year, setting forth in each case in comparative form the corresponding figures for the previous Fiscal Year, all in reasonable detail and certified by a Senior Financial Officer of the Company that they fairly present, in all material respects, the financial condition of the Company and its Subsidiaries as at the dates indicated and the results of their operations and their cash flows for the periods indicated, (ii) a summary of such consolidated statements setting forth in comparative form the corresponding figures from the Financial Plan for the current Fiscal Year and a narrative report describing the operations of the Company and its Subsidiaries in each case in the form prepared for presentation to the Board of Directors for such Fiscal Year, (iii) an office performance summary for the Fiscal Year then ended and (iv) in the case of such consolidated financial statements, a report thereon of PricewaterhouseCoopers L.L.P. or other independent certified public accountants of recognized national standing selected by the Company, which report shall be unqualified, shall express no doubts about the ability of the Company and its Subsidiaries to continue as a going concern, and shall state that such consolidated financial statements fairly present, in all material respects, the consolidated financial position of the Company and its Subsidiaries as at the dates indicated and the results of their operations and their cash flows for the periods indicated in conformity with GAAP (except as otherwise disclosed in such financial statements) and that the examination by such accountants in connection with such consolidated financial statements has been made in accordance with generally accepted auditing standards; (c) Officer's and Compliance Certificates. together with each ------------------------------------- delivery of financial statements of the Company and its Subsidiaries pursuant to subsections (a) and (b) above, an Officer's Certificate of the Company stating that the signers have reviewed the terms of this Agreement and have made, or caused to be made under their supervision, a review in reasonable detail of the transactions and condition of the Company and its Subsidiaries during the accounting period covered by such financial statements and that such review has not disclosed the existence during or at the end of such accounting period, and that the signers do not have knowledge of the existence as at the date of such Officer's Certificate, of any condition or event that constitutes an Event of Default or Default, or, if any such condition or event existed or exists, specifying the nature and period of existence thereof and what action the Company has taken, is taking and proposes to take with respect thereto; (d) Reconciliation Statements. if, as a result of any change in ------------------------- accounting principles and policies from those used in the preparation of the audited financial statements referred to in Section 4.5(a), the consolidated financial statements delivered pursuant to subsections (a) or (b) of this Section 8.1 will differ in any material respect from the consolidated financial statements that would have been delivered pursuant to such subsections had no such change in accounting principles and policies been made, then (i) together with the first delivery of financial statements pursuant to subsection (a), (b) or (l) of this Section 8.1 following such 38 change, consolidated financial statements of the Company and its Subsidiaries for (A) the current Fiscal Year to the effective date of such change and (B) the two full Fiscal Years immediately preceding the Fiscal Year in which such change is made, in each case prepared on a pro forma basis as if such change had been in effect during such periods, and (ii) together with each delivery of financial statements pursuant to subsections (a) or (b) of this Section 8.1 following such change, a written statement of a Senior Financial Officer of the Company setting forth the differences that would have resulted if such financial statements had been prepared without giving effect to such change; (e) Accountants' Certification. together with each delivery of -------------------------- consolidated financial statements of the Company and its Subsidiaries pursuant to subsection (b) above, a written statement by the independent certified public accountants giving the report thereon stating that their audit examination has included a review of the terms of this Agreement and the other Note Documents as they relate to accounting matters and that, based on their audit examination, nothing has come to their attention that causes them to believe that the matters set forth in the Compliance Certificates delivered therewith pursuant to clause (ii) of subsection (c) above for the applicable Fiscal Year are not stated in accordance with the terms of this Agreement; (f) Accountants' Reports. promptly upon receipt thereof (unless -------------------- restricted by applicable professional standards), copies of all reports submitted to the Company by independent certified public accountants in connection with each annual, interim or special audit of the financial statements of the Company and its Subsidiaries made by such accountants, including any comment letter submitted by such accountants to management in connection with their annual audit; (g) SEC Filings and Press Releases. promptly upon their becoming ------------------------------ available, copies of (i) all financial statements, reports, notices and proxy statements sent or made available generally by the Company to its security holders or by any Subsidiary of the Company to its security holders other than the Company or another Subsidiary of the Company, (ii) all regular and periodic reports and all registration statements (other than on Form S-8 or a similar form) and prospectuses, if any, filed by the Company or any of its Subsidiaries with any securities exchange or with the Securities and Exchange Commission or any governmental or private regulatory authority and (iii) 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 business of the Company or any of its Subsidiaries; (h) Events of Default, Etc. promptly upon any Responsible Officer of ----------------------- the Company obtaining knowledge (i) of any condition or event that constitutes an Event of Default or Default, or becoming aware that any Holder of a Rollover Note has given any notice or taken any other action with respect to a claimed Event of Default or Default, (ii) that any Person has given any notice to the Company or any of its Subsidiaries or taken any other action with respect to a claimed default or event or condition of the type referred to in Section 10.1(f), (iii) of any 39 condition or event that would be required to be disclosed in a current report filed by the Company with the Securities and Exchange Commission on Form 8-K (Items 1, 2, 4, 5 and 6 of such Form as in effect on the date hereof) if the Company were required to file such reports under the Exchange Act or (iv) of the occurrence of any event or change that has caused or evidences, either in any case or in the aggregate, a Material Adverse Effect, an Officer's Certificate specifying the nature and period of existence of such condition, event or change, or specifying the notice given or action taken by any such Person and the nature of such claimed Event of Default, Default, default, event or condition, and what action the Company has taken, is taking and proposes to take with respect thereto; (i) Litigation or Other Proceedings. ------------------------------- (i) promptly upon any Responsible Officer of the Company obtaining knowledge of (A) the institution of, or non-frivolous threat of, any Proceedings not previously disclosed in writing by the Company to the Holders of the Rollover Notes or (B) any material development in any Proceeding that, in any case: (1) is reasonably likely to result in a Material Adverse Effect; or (2) seeks to enjoin or otherwise prevent the consummation of, or to recover any damages or obtain relief as a result of, the transactions contemplated hereby; written notice thereof together with such other information as may be reasonably available to the Company to enable the Holders of the Rollover Notes and their counsel to evaluate such matters; and (ii) promptly upon request by any Holder of a Rollover Note, a copy of the list of Proceedings delivered by the Company to its independent certified public accountants in connection with the report prepared by them on the consolidated financial statements of the Company and its Subsidiaries for each Fiscal Year, and promptly after request by any Holder of a Rollover Note such other information as may be reasonably requested by such Holder to enable such Holder and its counsel to evaluate any of such Proceedings; (j) ERISA Events. promptly upon becoming aware of the occurrence of ------------ or forthcoming occurrence of any ERISA Event, a written notice specifying the nature thereof, what action the Company, any of its Subsidiaries or any of their respective ERISA Affiliates has taken, is taking or proposes to take with respect thereto and, when known, any action taken or threatened by the Internal Revenue Service, the Department of Labor or the PBGC with respect thereto; 40 (k) ERISA Notices. with reasonable promptness upon request by any ------------- Holder of a Rollover Note, copies of (i) each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) filed by the Company, any of its Subsidiaries or any of their respective ERISA Affiliates with the Internal Revenue Service with respect to each Pension Plan of the Company or any of its Subsidiaries; (ii) all notices received by the Company, any of its Subsidiaries or any of their respective ERISA Affiliates from a Multiemployer Plan sponsor concerning an ERISA Event; and (iii) copies of such other documents or governmental reports or filings relating to any Employee Benefit Plan of the Company or any of its Subsidiaries as any Holder of a Rollover Note shall reasonably request; (l) Financial Plans. as soon as practicable and in any event no later --------------- than 60 days following the end of each Fiscal Year, a Financial Plan including, (i) forecasted consolidated balance sheets and forecasted consolidated statements of income and cash flows of the Company and its Subsidiaries for such Fiscal Year, together with a projected Compliance Certificate for such Fiscal Year and an explanation of the assumptions on which such forecasts are based, (ii) forecasted consolidated statements of income and cash flows of the Company and its Subsidiaries for each Fiscal Quarter of such Fiscal Year, together with an explanation of the assumptions on which such forecasts are based, and (iii) such other information and projections as any Holder of a Rollover Note may reasonably request; (m) Insurance. as soon as practicable and in any event by the last --------- day of each Fiscal Year, a report in form and substance reasonably satisfactory to the Holders of the Rollover Notes outlining any change since the proceeding Fiscal Year in any material insurance coverage maintained by the Company and its Subsidiaries; (n) Board of Directors. with reasonable promptness, written notice of ------------------ any change in the Board of Directors of the Company; (o) New Subsidiaries or Change in Status of Subsidiaries. annually, ---------------------------------------------------- within 100 days of the end of each Fiscal Year, all of the data required to be set forth on Section 4.4(a) of the Bridge Note Disclosure Letter as of the Purchase Date with respect to all Subsidiaries of the Company and an Officer's Certificate, together with supporting documentation in form and substance satisfactory to the Required Holders, setting forth the aggregate gross revenues for the immediately preceding Fiscal Year of the Subsidiary Guarantors; (p) Subordinated Indebtedness Notices. promptly upon receipt by the --------------------------------- Company or any of its Subsidiaries of any notice with respect to any Subordinated Indebtedness, and promptly upon the giving of notice by the Company or any of its Subsidiaries with respect to any Subordinated Indebtedness, in each case relating to any default or payment or prepayment of principal of, premium, if any, redemption, purchase, retirement, defeasance (including in- substance or legal defeasance), sinking fund or similar payment with respect to such Subordinated Indebtedness, a copy of such notice; and 41 (q) Other Information. with reasonable promptness, such other ----------------- information and data with respect to the Company or any of its Subsidiaries as from time to time may be reasonably requested by any Holder of a Rollover Note. 8A.2. Corporate Existence, Etc. The Company will, and will cause each of its Subsidiaries to, at all times preserve and keep in full force and effect its corporate existence and all rights and franchises material to its business; provided, however, that neither the Company nor any of its Subsidiaries shall be required to preserve any such right or franchise if the Board of Directors of the Company or such Subsidiary shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company or such Subsidiary, as the case may be, and that the loss thereof is not disadvantageous in any material respect to the Company, such Subsidiary or the Holders of the Rollover Notes. 8A.3. Payment of Taxes and Claims; Tax Consolidation. The Company will, and will cause each of its Subsidiaries to, pay all taxes, assessments and other governmental charges imposed upon it or any of its properties or assets or in respect of any of its income, businesses or franchises before any penalty accrues thereon, and all claims (including, claims for labor, services, materials and supplies) for sums that have become due and payable and that by law have or may become a Lien upon any of its properties or assets, prior to the time when any penalty or fine shall be incurred with respect thereto, except where the failure to pay such taxes, assessments and governmental charges would not be likely to result in a Material Adverse Effect; provided that no such charge or claim need be paid if it is being contested in good faith by appropriate proceedings promptly instituted and diligently conducted, so long as such reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made therefor. 8A.4. Maintenance of Properties; Insurance. (a) Maintenance of Properties. The Company will, and will cause ------------------------- each of its Subsidiaries to, maintain or cause to be maintained in good repair, working order and condition, ordinary wear and tear excepted, all material properties used or useful in the business of the Company and its Subsidiaries (including all intellectual property) and from time to time will make or cause to be made all appropriate repairs, renewals and replacements thereof the failure of which would likely result in a Material Adverse Effect. (b) Insurance. The Company will maintain or cause to be --------- maintained, with financially sound and reputable insurers, such public liability insurance, third party property damage insurance, business interruption insurance and casualty insurance with respect to liabilities, losses or damage in respect of the assets, properties and businesses of the Company and its Subsidiaries as may customarily be carried or maintained under similar circumstances by 42 corporations of established reputation engaged in similar businesses, in each case in such amounts (giving effect to self-insurance), with such deductibles, covering such risks and otherwise on such terms and conditions as shall be customary for corporations similarly situated in the industry. 8A.5. Inspection Rights. The Company shall, and shall cause each of its Subsidiaries to, permit any authorized representatives designated by any Holder of a Rollover Note to visit and inspect any of the properties of the Company or of any of its Subsidiaries, to inspect, copy and take extracts from its and their financial and accounting records, and to discuss its and their affairs, finances and accounts with its and their officers and independent public accountants (provided that the Company may, if it so chooses, be present at or participate in any such discussion), all upon reasonable notice and at such reasonable times during normal business hours and as often as may reasonably be requested. 8A.6. Compliance with Laws, Etc. The Company shall comply, and shall cause each of its Subsidiaries to comply, with the requirements of all applicable laws, rules, regulations and orders of any Governmental Authority (including all Environmental Laws), noncompliance with which would be likely to cause, individually or in the aggregate, a Material Adverse Effect. The Company shall maintain and shall cause each Subsidiary Guarantor to maintain, at all times, each Governmental Authorization necessary in order to permit such Obligor fully to own or lease its respective property and assets and properly to conduct its respective business. The Company shall ensure and shall cause each Subsidiary Guarantor to ensure, that at all times, it will have the full intended benefits of and rights under each Governmental Authorization, unless the revocation, termination, cancellation, denial, impairment or modification of such Governmental Authorization, either individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. 8A.7. Execution of Subsidiary Guaranty by Certain Subsidiaries and Future Subsidiaries. (a) Execution of Subsidiary Guaranty. In the event that the aggregate -------------------------------- gross revenues of the Subsidiary Guarantors for any Fiscal Year, commencing with the Fiscal Year ending October 31, 1999, is less than 90% of the aggregate gross revenues of the Company and its Domestic Subsidiaries on a consolidated basis for such Fiscal Year, the Company will, within 100 days after the end of such Fiscal Year, cause one or more additional Domestic Subsidiaries acceptable to the Required Holders to execute and deliver to the Holders of the Rollover Notes a counterpart of the Subsidiary Guaranty such that the aggregate gross revenues of all Subsidiary Guarantors for such Fiscal Year shall be equal to at least 90% of the aggregate gross revenues of the Company and its Domestic Subsidiaries on a consolidated basis for such Fiscal Year; 43 provided, however, that notwithstanding the foregoing provision, the Company shall cause any Subsidiary that executes and delivers a guaranty with respect to the Senior Credit Agreement to execute and deliver to the Holders of the Rollover Notes a counterpart of the Subsidiary Guaranty. (b) Subsidiary Organizational Documents, Legal Opinions, Etc. The --------------------------------------------------------- Company shall deliver to each Holder of the Rollover Notes, together with a Subsidiary Guaranty, (i) certified copies of the Organizational Documents of each Subsidiary described in Section 8A.7(a), together with a good standing certificate from the Secretary of State of the jurisdiction of its incorporation and, to the extent generally available, a certificate or other evidence of good standing as to payment of any applicable franchise or similar taxes from the appropriate taxing authority of such jurisdiction, each to be dated a recent date prior to their delivery to each Holder of the Rollover Notes, (ii) a copy of such Subsidiary's bylaws, certified by its corporate secretary or an assistant secretary as of a recent date prior to their delivery to each Holder of the Rollover Notes, (iii) a certificate executed by the secretary or an assistant secretary of such Subsidiary as to (a) the fact that the attached resolutions of the Board of Directors of such Subsidiary approving and authorizing the execution, delivery and performance of the Subsidiary Guaranty are in full force and effect and have not been modified or amended and (b) the incumbency and signatures of the officers of such Subsidiary executing such Subsidiary Guaranty, and (iv) a favorable opinion of counsel to such Subsidiary, in form and substance reasonably satisfactory to the Required Holders of the Rollover Notes and its counsel, as to (a) the due organization and good standing of such Subsidiary, (b) the due authorization, execution and delivery by such Subsidiary of such Subsidiary Guaranty, (c) the enforceability of such Subsidiary Guaranty against such Subsidiary and (d) such other matters as the Required Holders of the Rollover Notes may reasonably request, all of the foregoing to be reasonably satisfactory in form and substance to the Required Holders of the Rollover Notes and their counsel. 8A.8. Refinancing of the Rollover Notes; Rule 144A. (a) The Company shall use its best efforts to effectuate a Refinancing as soon as practicable after the date of this Agreement for the purpose, among other things, of refinancing or redeeming the Rollover Notes then outstanding, which Refinancing shall yield an amount sufficient, and, if consummated, the proceeds of which shall be used, to repay the aggregate unpaid principal amount of the Rollover Notes in full plus accrued interest thereon to the date of repayment and all other amounts payable under the Note Documents. (b) The Company will take all necessary actions so that the Rollover Notes are eligible for resale under Rule 144A (or any successor rule) of the Securities Act. 8A.9. Payment of Rollover Notes. 44 The Company shall pay the principal of, premium, if any, and interest on the Rollover Notes on the dates and in the manner provided in the Rollover Notes and this Agreement. 8A.10. Global Notes. At the request of the Required Holders, the Company shall use its best efforts to issue Global Notes in replacement of the Rollover Notes. The Global Notes shall be registered in the name of DTC, be delivered to a paying agent for DTC if so requested by the Required Holders and otherwise be legended, have a "CUSIP" number, be subject to transfer restrictions and have other rights and attributes as are customary in similar financial transactions involving global notes. Without limiting the foregoing and in connection with any Global Note, the Company shall maintain in the Borough of Manhattan in the City of New York an office or agency where the Global Notes may be surrendered for registration of transfer or exchange an where notices and demands to of upon the Company may be served. 8A.11. Issuance of Warrants. On the date that is six months after the Rollover Date, the Company shall deliver to each Holder, dated such date and duly executed by each Person party thereto, executed counterparts of the Warrant Agreements, substantially in the form of Exhibit H hereto, representing in the aggregate 1.5% on a fully diluted basis of the common stock of the Company. 9. NEGATIVE COVENANTS (NOTES). From the date of this Agreement and, thereafter, so long as any of the Notes shall be outstanding or until the Rollover Date, the Company will perform and comply, and will cause each of its Subsidiaries to perform and comply, at all times with each of the following covenants: 9.1. Indebtedness. The Company shall not, and shall not permit any of its Subsidiaries or any Joint Venture in which the Company or any of its Subsidiaries has any interest to, directly or indirectly, create, incur, assume or guaranty, or otherwise become or remain directly or indirectly liable with respect to, any Indebtedness, except: (a) the Company and its Subsidiaries may become and remain liable with respect to their respective Obligations under the Note Documents; 45 (b) the Company, its Subsidiaries and Joint Ventures may become and remain liable with respect to Contingent Obligations permitted by Section 9.4 and, upon any matured obligations actually arising pursuant thereto, the Indebtedness corresponding to the Contingent Obligations so extinguished; (c) the Company may become and remain liable with respect to Indebtedness to any Subsidiary Guarantor, and any Subsidiary Guarantor may become and remain liable with respect to Indebtedness to the Company or any other Subsidiary Guarantor, provided that (i) all intercompany Indebtedness owed by the Company to any Subsidiary Guarantor and by any Subsidiary Guarantor to the Company shall be subordinated in right of payment to the payment in full of the Obligations of the Obligors under the Note Documents and (ii) any payment by any Subsidiary Guarantor under any guaranty of such Obligations shall result in a pro tanto reduction of the amount of any intercompany Indebtedness owed by such Subsidiary Guarantor to the Company or to any Subsidiary Guarantor for whose benefit such payment is made; (d) any Subsidiary of the Company (other than a Subsidiary Guarantor or an Inactive Subsidiary) may become and remain liable with respect to Indebtedness to the Company or any Subsidiary Guarantor to the extent such corresponding Investment by the Company or any such Subsidiary Guarantor is permitted under Section 9.3(m), provided that (i) all intercompany Indebtedness owed by any Subsidiary to the Company shall be subordinated in right of payment to the payment in full of the Obligations of the Obligors under the Note Documents and (ii) any payment by any Subsidiary under any guaranty of such Obligations shall result in a pro tanto reduction of the amount of any intercompany Indebtedness owed by such Subsidiary to the Company or to any Subsidiary Guarantor for whose benefit such payment is made; (e) any Foreign Subsidiary of the Company may become and remain liable with respect to Indebtedness to any other Foreign Subsidiary of the Company; (f) the Company may remain liable with respect to Indebtedness evidenced by the Senior Credit Agreement in a principal amount not to exceed $550,000,000; (g) Joint Ventures may become and remain liable with respect to Indebtedness to Persons other than the Company or any of its Subsidiaries, provided that such Indebtedness is nonrecourse to the Company, its Subsidiaries and their respective assets; (h) Joint Ventures may become and remain liable with respect to Indebtedness to the Company or any Subsidiary of the Company (other than an Inactive Subsidiary) to the extent such corresponding Investment by the Company or any such Subsidiary is permitted under Section 9.3(k); (i) Indebtedness (including the amount of any committed lines of credit) listed in Section 4.13 of the Bridge Note Disclosure Letter; 46 (j) the Company and its Domestic Subsidiaries may become and remain liable with respect to Indebtedness to Persons other than the Company or any of its Subsidiaries in an aggregate principal amount (not including the amount of any such Indebtedness and committed lines of credit listed in Section 4.13 of the Bridge Note Disclosure Letter) not to exceed $50,000,000 (less the aggregate amount of all Contingent Obligations permitted by Section 9.4(i)) at any time outstanding; (k) Foreign Subsidiaries of the Company may become and remain liable with respect to Indebtedness to Persons other than the Company or any of its Subsidiaries in an aggregate principal amount (including the amount of any such Indebtedness listed in Section 4.13 of the Bridge Note Disclosure Letter) not to exceed $30,000,000 at any time outstanding; and (l) any Target who becomes a Subsidiary or who is merged or consolidated into a Subsidiary after the date hereof pursuant to a Subsequent Acquisition permitted by Section 9.6(f) may remain liable with respect to Indebtedness existing immediately prior to the date of such Subsequent Acquisition; provided that (a) such Indebtedness was not incurred in connection with, or anticipation or contemplation of, such Subsequent Acquisition, (b) no Default or Event of Default shall have occurred and be continuing or would occur and be continuing or would occur as a result of such Subsequent Acquisition, and (c) neither the Company nor any of its Subsidiaries (other than such Target or the Subsidiary into which such Target is merged or consolidated) shall become liable with respect to such Indebtedness. 9.2. Liens and Related Matters. (a) Prohibition on Liens. The Company shall not, and shall not permit -------------------- any of its Subsidiaries to, directly or indirectly, create, incur, assume or permit to exist any Lien on or with respect to any property or asset of any kind (including any document or instrument in respect of goods or accounts receivable) of the Company or any of its Subsidiaries, whether now owned or hereafter acquired, or any income or profits therefrom, or file or permit the filing of, or permit to remain in effect, any financing statement or other similar notice of any Lien with respect to any such property, asset, income or profits under the UCC or under any similar recording or notice statute, except: (i) Permitted Encumbrances; (ii) Liens granted pursuant to the Senior Credit Agreement; (iii) Liens described on Section 9.2 of the Bridge Note Disclosure Letter; 47 (iv) Liens on property or assets acquired by the Company or any of its Subsidiaries after the date of this Agreement or on property or assets of any Person that becomes a Subsidiary of the Company after the date of this Agreement, provided that (A) such Liens exist at the time such property or assets or the stock of such Person is acquired, (B) such Liens were not created in contemplation of such acquisition and (C) any such Lien shall attach only to the property or assets so acquired; (v) Liens created to secure the purchase price of property or assets, provided that (A) any such Lien shall attach only to the property or assets so purchased, (B) the Indebtedness secured by any such Lien shall not exceed 100% of the purchase price of the property or assets purchased, and (C) any such Lien shall be created within 180 days following the acquisition of such property or assets; (vi) Liens on property or assets of any Foreign Subsidiary of the Company created to secure Indebtedness permitted under Section 9.1(k); (vii) Liens incurred in connection with the extension, renewal or refinancing of the Indebtedness secured by the Liens described in clauses (iv) and (v) above; and (viii) other Liens in an aggregate amount not to exceed $500,000 at any time. (b) No Further Negative Pledges. Neither the Company nor any of its --------------------------- Subsidiaries shall enter into any agreement prohibiting the creation or assumption of any Lien upon any of its properties or assets, whether now owned or hereafter acquired, except (i) restrictions contained in the Related Agreements as in effect on the Purchase Date, (ii) restrictions on the encumbrance of specific property encumbered to secure payment of particular Indebtedness or to be sold pursuant to an executed agreement with respect to an Asset Sale, and (iii) customary non-assignment provisions contained in leases, subleases, licenses and sublicenses permitted by this Agreement. (c) No Restrictions on Subsidiary Distributions to the Company or ------------------------------------------------------------- Other Subsidiaries. Except as provided herein and except for restrictions - ------------------ contained in the terms of any Indebtedness of Foreign Subsidiaries of the Company permitted by Section 9.1(k) if such restriction applies only in the event of a payment default in such Indebtedness or the Company determines that any such restriction will not materially affect the Company's ability to make principal or interest payments on the Notes and the restriction is not materially more disadvantageous to the Holders than is customary in comparable financings, the Company will not, and will not permit any of its Subsidiaries to, create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction of any kind on the ability of any such Subsidiary to (i) pay dividends or make any other distributions on any of such Subsidiary's capital stock owned by the Company or any other Subsidiary of the Company, (ii) repay or 48 prepay any Indebtedness owed by such Subsidiary to the Company or any other Subsidiary of the Company, (iii) make loans or advances to the Company or any other Subsidiary of the Company, except as provided in the Senior Credit Agreement or (iv) transfer any of its property or assets to the Company or any other Subsidiary of the Company, except for (a) restrictions contained in the Senior Credit Agreement, (b) customary non-assignment provisions contained in leases, subleases, licenses and sublicenses, (c) restrictions on the transfer of Joint Venture interests contained in the organizational documents of any Joint Venture, and (d) restrictions in an executed agreement with respect to an Asset Sale. 9.3. Investments; Joint Ventures. The Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, make or own any Investment in any Person, including any Joint Venture, except: (a) the Company and its Subsidiaries may make and own Investments in Cash Equivalents; (b) the Company and any Subsidiary Guarantor may make intercompany loans to the extent permitted under Sections 9.1(c) and (d); (c) the Company and its Subsidiaries (other than Inactive Subsidiaries) may make Consolidated Capital Expenditures permitted under Section 9.7; (d) the Company and the Merger Subsidiary may consummate the Merger; (e) the Company and its Subsidiaries may continue to own the Investments owned by them and described on Section 9.3 of the Bridge Note Disclosure Letter; (f) the Company and its Subsidiaries (other than Inactive Subsidiaries) may make and own Investments in wholly-owned Subsidiary Guarantors; (g) the Company and its Subsidiaries may own Investments received in connection with the restructuring or work-out of the obligations of or the bankruptcy of suppliers and customers or received pursuant to a plan of reorganization of any supplier or customer, in each case in settlement of delinquent obligations or disputes with such suppliers or customers; (h) the Company and its Subsidiaries (other than Inactive Subsidiaries) may make and own Investments in Joint Ventures in an aggregate amount not to exceed $5,000,000 at any time; (i) the Company or any of its Subsidiaries may make and own Investments consisting of non-cash consideration received in the form of securities, notes or similar 49 obligations in connection with an Asset Sale permitted pursuant to Section 9.6; provided that the aggregate amount of such non-cash consideration received in connection with such Asset Sale shall not exceed 10% of the total consideration received in connection with such Asset Sale. (j) any Foreign Subsidiary of the Company may make and own Investments in any other Foreign Subsidiary of the Company; (k) the Company and its Subsidiaries may make Subsequent Acquisitions permitted under Section 9.6(f); (l) any Target who becomes a Subsidiary or who is merged or consolidated into a Subsidiary after the date hereof pursuant to a Subsequent Acquisition permitted by Section 9.6(f) may continue to own Investments owned by such Target on the date of such Subsequent Acquisition; provided that (a) such Investment was not incurred in connection with, or anticipation or contemplation of, such Subsequent Acquisition, (b) no Default or Event of Default shall have occurred and be continuing or would occur as a result of such Subsequent Acquisition, and (c) neither the Company nor any of its Subsidiaries (other than such Target or the Subsidiary into which such Target is merged or consolidated) shall become liable with respect to such Investment; and (m) the Company and Subsidiary Guarantors may make and own Investments in Subsidiaries (other than wholly owned Subsidiary Guarantors and Inactive Subsidiaries) in an aggregate amount (including the amount of any such Investments listed in Section 9.3 of the Bridge Note Disclosure Letter) not to exceed $25,000,000 at any time. 9.4. Contingent Obligations. The Company shall not, and shall not permit any of its Subsidiaries or any Joint Venture in which the Company or any of its Subsidiaries has an interest to, directly or indirectly, create or become or remain liable with respect to any Contingent Obligation, except: (a) Subsidiaries of the Company may become and remain liable with respect to Contingent Obligations in respect of the Subsidiary Guaranty; (b) the Company may become and remain liable with respect to Contingent Obligations in respect of letters of credit under the Senior Credit Agreement; (c) the Company and its Subsidiaries may become and remain liable with respect to Contingent Obligations described in Section 9.4(c) of the Bridge Note Disclosure Letter; 50 (d) the Company and its Subsidiaries (other than Inactive Subsidiaries) may become and remain liable with respect to Contingent Obligations under currency agreements and interest rate agreements constituting hedge agreements in the ordinary course of business; (e) Subsidiaries of the Company may become and remain liable with respect to Contingent Obligations in respect of the guaranties contemplated by the Senior Credit Agreement; (f) the Company may become and remain liable with respect to Contingent Obligations in respect of any Indebtedness of any of its Domestic Subsidiaries (other than Inactive Subsidiaries) permitted by Section 9.1; (g) Joint Ventures may become and remain liable with respect to Contingent Obligations; provided that such Contingent Obligations are nonrecourse to the Company, its Subsidiaries and their respective assets; (h) the Company, its Subsidiaries (other than Inactive Subsidiaries) and Joint Ventures may become and remain liable with respect to Contingent Obligations in respect of performance bonds, bid bonds, appeal bonds, surety bonds and similar obligations provided in the ordinary course of business to support the obligations of such Subsidiaries and Joint Ventures; and (i) the Company and its Subsidiaries (other than Inactive Subsidiaries) may become and remain liable with respect to Contingent Obligations in an amount not to exceed $10,000,000 at any time. 9.5. Restricted Junior Payments. The Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, declare, order, pay, make or set apart any sum for any Restricted Junior Payment; provided that (a) the Company may make regularly scheduled payments of interest in respect of the Existing Subordinated Indebtedness, in accordance with the terms of, and only to the extent required by, and subject to the subordination provisions contained in, the Existing Subordinated Agreements, (b) the Company may make regularly scheduled sinking fund payments in accordance with the terms of, and only to the extent required by, the Existing Subordinated Note Indenture and may repay the outstanding principal amount of the Existing Senior Subordinated Notes on the stated maturity thereof, (c) the Company may exchange Company Series A Preferred Stock or Company Series C Preferred Stock for Company Series B Preferred Stock and may exchange Company Series A Preferred Stock, Company Series B Preferred Stock or Company Series C Preferred Stock for common stock of the Company, in each case as contemplated in the Securities Purchase Agreement, (d) the Company may repurchase common stock of the Company that constitutes odd lots pursuant to a program established by the 51 Company for the repurchase of such odd lots in an amount not to exceed $100,000, (e) the Company may purchase shares of DMG common stock from holders who have perfected their statutory appraisal rights, (f) any Subsidiary may declare and pay dividends to the Company or any wholly owned Subsidiary of the Company and (g) the Company and its Subsidiaries may purchase shares of capital stock of any Subsidiary owned by professional engineers in connection with licensing requirements in an amount not to exceed $500,000. 9.6. Restriction on Fundamental Changes; Asset Sales and Acquisitions. The Company shall not, and shall not permit any of its Subsidiaries to, alter the corporate, capital or legal structure of the Company or any of its Subsidiaries, or merge or consolidate, or liquidate, wind-up or dissolve itself (or suffer any liquidation or dissolution), or convey, sell, lease or sub-lease (as lessor or sublessor), transfer or otherwise dispose of, in one transaction or a series of transactions, all or any part of its business, property or assets, whether now owned or hereafter acquired, or acquire by purchase or otherwise all or substantially all the business, property or fixed assets of, or stock or other evidence of beneficial ownership of, any Person or any division or line of business of any Person, except: (a) the Company and the Merger Subsidiary may consummate the Tender Offer and the Merger; (b) any Subsidiary of the Company may be merged with or into the Company or any wholly-owned Subsidiary Guarantor, or be liquidated, wound up or dissolved, or all or any part of its business, property or assets may be conveyed, sold, leased, transferred or otherwise disposed of, in one transaction or a series of transactions, to the Company or any wholly-owned Subsidiary Guarantor; provided that, in the case of such a merger, the Company or such wholly-owned Subsidiary Guarantor shall be the continuing or surviving corporation; (c) the Company and its Subsidiaries may dispose of obsolete, worn out or surplus property in the ordinary course of business; (d) the Company and its Subsidiaries may sell or otherwise dispose of assets in transactions that do not constitute Asset Sales, provided that the consideration received for such assets shall be in an amount at least equal to the fair market value thereof; (e) the Company and its Subsidiaries may make Asset Sales of assets (other than the Tendered Shares) having a fair market value of not in excess of $10,000,000 during any Fiscal Year, provided that (a) the consideration received for such assets shall be in an amount at least equal to the fair market value thereof and shall be cash or non-cash consideration permitted by Section 9.3(i); and (b) the proceeds of such Asset Sales shall be applied as required by Sections 6.3(b) and (c); and 52 (f) subject to Section 8.7, after January 1, 2000, the Company and its Subsidiaries may acquire by purchase or otherwise (each, a "Subsequent Acquisition") all or substantially all the business, property or fixed assets of, or stock or other evidence of beneficial ownership of, any Person (other than DMG) or any division or line of business of any Person (other than DMG) (any such business, property, assets, stock, evidence of ownership, division or line of business, being a "Target") provided that the sum of the aggregate Total Purchase Price of all Subsequent Acquisitions does not exceed $60,000,000 in the aggregate during the term of this Agreement. (g) licenses or sublicenses by the Company and its Subsidiaries of software, trademarks, patents and other intellectual property in the ordinary course of business and which do not materially interfere with the business of the Company or any of its Subsidiaries; (h) transfers of condemned property to the respective Governmental Authority or agency that have condemned the same (whether by deed in lieu of condemnation or otherwise), and transfers of properties that have been subject to a casualty to the respective insurer of such property or its designee as part of an insurance settlement; and (i) the Company and its Subsidiaries may sell or otherwise dispose of Investments permitted to be made or owned by Section 9.3(a). 9.7. Consolidated Capital Expenditures. 53 The Company shall not, and shall not permit its Subsidiaries to, make or incur Consolidated Capital Expenditures, in any Fiscal Year indicated below, in an aggregate amount in excess of the corresponding amount (the "Maximum Consolidated Capital Expenditures Amount") set forth below opposite such Fiscal Year; provided that the Maximum Consolidated Capital Expenditures Amount for any Fiscal Year shall be increased by an amount equal to 50% of the excess, if any, of the Maximum Consolidated Capital Expenditures Amount for the previous Fiscal Year (without giving effect to any adjustment in accordance with this proviso) over the actual amount of Consolidated Capital Expenditures for such previous Fiscal Year:
Fiscal Year Maximum Consolidated Capital Expenditures ----------- ----------------------------------------- Amount ------ 2000 $34,000,000 2001 $36,000,000 2002 $38,000,000 2003 $40,000,000 2004 $42,000,000 2005 $44,000,000 2006 $46,000,000 thereafter $48,000,000
9.8. Sales and Lease-Backs. The Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, become or remain liable as lessee or as a guarantor or other surety with respect to any lease, whether an Operating Lease or a Capital Lease, of any property (whether real, personal or mixed), whether now owned or hereafter acquired, (i) that the Company or any of its Subsidiaries has sold or transferred or is to sell or transfer to any other Person (other than the Company or any of its Subsidiaries) or (ii) that the Company or any of its Subsidiaries intends to use for substantially the same purpose as any other property that has been or is to be sold or transferred by the Company or any of its Subsidiaries to any Person (other than the Company or any of its Subsidiaries) in connection with such lease. 9.9. Sale or Discount of Receivables. The Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, sell with recourse, discount or otherwise sell for less than the face value thereof, any of its Accounts Receivable. 9.10. Transactions with Shareholders and Affiliates. 54 The Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, enter into or permit to exist any transaction (including the purchase, sale, lease or exchange of any property or the rendering of any service) with any holder of 5% or more of any class of equity Securities of the Company or with any Affiliate of the Company or of any such holder, on terms that are less favorable to the Company or that Subsidiary, as the case may be, than those that might be obtained at the time from Persons who are not such a holder or Affiliate; provided that the foregoing restriction shall not apply to (a) any transaction between the Company and any of its wholly-owned Subsidiaries or between any of its wholly-owned Subsidiaries, (b) reasonable and customary fees paid to members of the Boards of Directors of the Company and its Subsidiaries or (c) existing related party transactions described in the Company's Annual Report on Form 10-K for the 1998 Fiscal Year or (d) the transactions contemplated by the Securities Purchase Agreement. 9.11. Conduct of Business. From and after the Purchase Date, the Company shall not, and shall not permit any of its Subsidiaries to, engage in any business other than (a) the businesses engaged in by the Company, DMG and their respective Subsidiaries on the Purchase Date and similar or related businesses and (b) such other lines of business as may be consented to by the Required Holders. 9.12. Amendments or Waivers of Related Agreements; Amendments of Documents Relating to Subordinated Indebtedness. (a) Amendments or Waivers of Related Agreements. Except as set forth ------------------------------------------- in Section 9.12 of the Bridge Note Disclosure Letter, neither the Company nor any of its Subsidiaries will agree to any material amendment to, or waive any of its material rights under, any Related Agreement (other than the Senior Credit Agreement and the Existing Subordinated Agreements, the Securities Purchase Agreement or the Company Certificates of Designation) after the Purchase Date without in each case obtaining the prior written consent of the Required Holders to such amendment or waiver. Neither the Company nor any of its Subsidiaries will agree to any amendment to, or waive any of its rights under, the Securities Purchase Agreement or the Company Certificates of Designation in any respect that would be adverse to the Company or the Holders of the Notes, after the Purchase Date without in each case obtaining the prior written consent of the Required Holders to such amendment or waiver. (b) Amendments of Documents Relating to Subordinated Indebtedness. ------------------------------------------------------------- The Company shall not, and shall not permit any of its Subsidiaries to, amend or otherwise change the terms of any Existing Subordinated Indebtedness or the Existing Subordinated Agreements, or make any payment consistent with an amendment thereof or change thereto. 55 9.13. Fiscal Year. The Company shall not change its Fiscal Year-end from October 31. 9A. NEGATIVE COVENANTS (ROLLOVER NOTES). From the Rollover Date and, thereafter, so long as any of the Rollover Notes shall be outstanding, the Company will perform and comply, and will cause each of its Subsidiaries to perform and comply, at all times with each of the following covenants (provided that capitalized terms used in this Section 9A shall have the meanings specified in Schedule III hereto): 9A.1. Restriction on Incurrence of Indebtedness. (a) The Company will not, and will not permit any of its Restricted Subsidiaries to, Incur any Indebtedness (other than the Rollover Notes, the Subsidiary Guaranties and other Indebtedness existing on the Rollover Date and permitted as of such Rollover Date under Section 9.1); provided that the Company or any Subsidiary Guarantor may Incur Indebtedness if, after giving effect to the Incurrence of such Indebtedness and the receipt and application of the proceeds therefrom, the Fixed Charge Coverage Ratio would be greater than 2:1. Notwithstanding the preceding, Company and any Restricted Subsidiary (except as specified below) may Incur each and all of the following: (1) Indebtedness of the Company or any Subsidiary Guarantor outstanding at any time pursuant to this clause (1) under the Senior Credit Agreement in an aggregate principal amount (together with refinancings thereof incurred under clause (3) of this paragraph) not to exceed $550 million, less any amount of such Indebtedness permanently repaid as provided in Section 9A.8; (2) Indebtedness owed (A) to the Company; provided that if such Indebtedness exceeds $500,000 it shall be evidenced by a promissory note, or (B) to any Restricted Subsidiary; provided that (x) any event that results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any subsequent transfer of such Indebtedness (other than to the Company or another Restricted Subsidiary) shall be deemed, in each case, to constitute an Incurrence of such Indebtedness not permitted by this clause (2) and (y) if the Company or any Subsidiary Guarantor is the obligor on such Indebtedness, such Indebtedness must be expressly subordinated in right of payment to the Rollover Notes, in the case of the Company, or the Subsidiary Guaranty, in the case of a Subsidiary Guarantor; 56 (3) Indebtedness issued in exchange for, or the net proceeds of which are used to refinance or refund, then outstanding Indebtedness and any refinancings thereof in an amount not to exceed the amount so refinanced or refunded (plus premiums, accrued interest, fees and expenses); provided that (a) Indebtedness the proceeds of which are used to refinance or refund the Rollover Notes or Indebtedness that is pari passu with, or subordinated in right of payment to, the Rollover Notes or the Subsidiary Guaranties shall only be permitted under this clause (3) if (x) in case the Rollover Notes are refinanced in part or the Indebtedness to be refinanced is pari passu with the Rollover Notes or any Subsidiary Guaranties, such new Indebtedness, by its terms or by the terms of any agreement or instrument pursuant to which such new Indebtedness is outstanding, is expressly made pari passu with, or subordinate in right of payment to, the remaining Rollover Notes or such Subsidiary Guaranties, or (y) in case the Indebtedness to be refinanced is subordinated in right of payment to the Rollover Notes or any Subsidiary Guaranties, such new Indebtedness, by its terms or by the terms of any agreement or instrument pursuant to which such new Indebtedness is issued or remains outstanding, is expressly made subordinate in right of payment to the Rollover Notes or such Subsidiary Guaranties at least to the extent that the Indebtedness to be refinanced is subordinated to the Rollover Notes or such Subsidiary Guaranties, (b) such new Indebtedness, determined as of the date of Incurrence of such new Indebtedness, does not mature prior to the Stated Maturity of the Indebtedness to be refinanced or refunded or the Stated Maturity of the Notes, if sooner, and the Average Life of such new Indebtedness is at least equal to the remaining Average Life of the Indebtedness to be refinanced or refunded, and (c) such new Indebtedness is Incurred by the Company or by the Restricted Subsidiary that is the obligor on the Indebtedness to be refinanced or refunded; (4) Guarantees of the Rollover Notes and Guarantees of Indebtedness of the Company or any Subsidiary Guarantor by any Restricted Subsidiary; provided that the Guarantee of such Indebtedness is not prohibited by and made in accordance with Section 9A.5; (5) Indebtedness of Foreign Subsidiaries in an aggregate principal amount outstanding at any time pursuant to this clause (5) (together with refinancings thereof) not to exceed the greater of (x) $40 million and (y) 70% of the consolidated book value of the Accounts Receivable of such Foreign Subsidiaries; (6) Guarantees of Indebtedness of any Foreign Subsidiary incurred under clause (5) above, by the Company or any Subsidiary Guarantor; provided that the aggregate amount of Indebtedness guaranteed pursuant to this clause (6) does not exceed $40 million; (7) Purchase Money Indebtedness of the Company or any Subsidiary Guarantor; provided that the aggregate amount of such Indebtedness outstanding at any 57 time pursuant to this clause (7) (together with refinancings thereof under clause (3) of this paragraph) shall not exceed $15 million; (8) Indebtedness of the Company or any Restricted Subsidiary in an aggregate principal amount outstanding pursuant to this clause (8) (together with refinancings thereof) not to exceed $5 million; (9) the D&M Financing; and (10) Indebtedness of the Company or any Subsidiary Guarantor (in addition to Indebtedness permitted under clauses (1) through (9) above), including Indebtedness under the Senior Credit Agreement, outstanding at any time pursuant to this clause (10) (together with refinancings thereof under clause (3) of this paragraph) in an aggregate principal amount (together with refinancings thereof) not to exceed $25 million. (b) Notwithstanding any other provision of this Section 9A.1, the maximum amount of Indebtedness that the Company or a Restricted Subsidiary may Incur or that is deemed to be outstanding pursuant to this Section 9A.1 shall not be affected by fluctuations in the exchange rates of currencies. (c) For purposes of determining any particular amount of Indebtedness under this Section 9A.1, (x) Indebtedness Incurred under the Senior Credit Agreement on or prior to the Rollover Date shall be treated as Incurred pursuant to Section 9A.1(a)(1), (y) Guarantees, Liens or obligations with respect to letters of credit supporting Indebtedness otherwise included in the determination of such particular amount shall not be included and (z) any Liens granted pursuant to the equal and ratable provisions referred to in Section 9A.7 shall not be treated as Indebtedness. For purposes of determining compliance with this Section 9A.1, in the event that an item of Indebtedness meets the criteria of more than one of the types of Indebtedness described above (other than Indebtedness referred to in clause (x) of the preceding sentence), the Company, in its sole discretion, shall classify, and from time to time may reclassify, such item of Indebtedness and shall only be required to include the amount and type of such Indebtedness in one of such clauses. 9A.2. Restriction on Senior Subordinated Indebtedness. The Company will not, and will not permit any Subsidiary Guarantor to Incur any Indebtedness that is subordinate in right of payment to any Senior Indebtedness unless such Indebtedness is pari passu with, or subordinated in right of payment to, the Rollover Notes or any Subsidiary Guaranty. 9A.3. Restriction on Restricted Payments. 58 Company will not, and will not permit any Restricted Subsidiary, directly or indirectly, (1) to declare or pay any dividend or make any distribution on or with respect to its Capital Stock held by persons other than Company or any of its Restricted Subsidiaries other than (x) dividends or distributions payable in shares of its Capital Stock (other than Disqualified Stock) or in options, warrants or other rights to acquire shares of such Capital Stock and (y) pro rata dividends or distributions on Common Stock of Restricted Subsidiaries, (2) to purchase, redeem, retire or otherwise acquire for value any shares of Capital Stock of the Company or any Subsidiary Guarantor (including options, warrants or other rights to acquire such shares of Capital Stock) held by any Person other than a Subsidiary Guarantor, (3) to make any voluntary or optional principal payment, or voluntary or optional redemption, repurchase, defeasance, or other voluntary or optional acquisition or retirement for value, of Indebtedness of the Company that is subordinated in right of payment to the Rollover Notes or any Indebtedness of a Subsidiary Guarantor that is subordinated in right of payment to the Subsidiary Guaranties or (4) to make any Investment, other than a Permitted Investment, in any Person (such payments or any other actions described in clauses (1) through (4) above being collectively "Restricted Payments") if, at the time of, and after giving effect to, the proposed Restricted Payment: (A) a Default or Event of Default shall have occurred and be continuing, (B) the Company could not Incur at least $1.00 of Indebtedness under the first paragraph of Section 9A.1(a) or (C) the aggregate amount of all Restricted Payments made after the Rollover Date shall exceed the sum of (1) 50% of the aggregate amount of the Adjusted Consolidated Net Income (or, if the Adjusted Consolidated Net Income is a loss, minus 100% of the amount of such loss) accrued on a cumulative basis during the period (taken as 59 one accounting period) beginning on the first day of the Fiscal Quarter beginning immediately following the Rollover Date and ending on the last day of the last Fiscal Quarter preceding the Transaction Date for which reports have been filed with the Commission or provided to the Holders plus (2) the aggregate Net Cash Proceeds received by the Company after the Rollover Date from (a) the issuance and sale of its Capital Stock (other than Disqualified Stock) to a Person who is not a Subsidiary of the Company, (b) an issuance or sale to a Person who is not a Subsidiary of the Company not prohibited by this Agreement of Indebtedness of the Company or a Subsidiary of the Company for cash subsequent to the Rollover Date upon the conversion or exchange of such Indebtedness into Capital Stock (other than Disqualified Stock) of the Company, (c) any exercise for, or exchange or conversion of, securities (including options, warrants, rights and convertible or exchangeable Indebtedness) of the Company or a Subsidiary of the Company into Capital Stock (other than Disqualified Stock) of the Company, and (d) the issuance or sale to a Person who is not a Subsidiary of the Company of any options, warrants or other rights to acquire Capital Stock of the Company (in each case, exclusive of any Disqualified Stock or any options, warrants or other rights that are redeemable at the option of the holder, or are required to be redeemed, prior to the Stated Maturity of the Rollover Notes) plus (3) an amount equal to the net reduction in Investments (other than reductions in Permitted Investments) in any Person resulting from distributions on or repayments of any Investments, including payments of interest on Indebtedness, dividends, repayments of loans or advances, or other distributions or transfers of assets, in each case to the Company or any Restricted Subsidiary or from the Net Cash Proceeds from the sale or other disposition of any such Investment (except, in each case, in order to avoid duplication to the extent any such payment or proceeds have been or would be included in the calculation of Adjusted Consolidated Net Income for purposes of Section 9A.3(4)(C)(1)), or from redesignations of Unrestricted Subsidiaries as Restricted Subsidiaries (valued in each case as provided in the definition of "Investments"), not to exceed, in each case, the amount of Investments previously made by the 60 Company or any Restricted Subsidiary in such Person or Unrestricted Subsidiary plus (4) $5 million. The amount of all Restricted Payments, if other than in cash, shall be the fair market thereof determined in good faith by the Board of Directors or a Senior Officer of the Company, whose determination shall be conclusive; provided that if the non cash amount of any single Restricted Payment or series of related Restricted Payments exceeds $25 million, such amount shall be determined in good faith by the Board of Directors, whose determination shall be conclusive and evidenced by a Board Resolution. The preceding provision shall not be violated by reason of: (1) the payment of any dividend within 60 days after the date of its declaration if, on the date of declaration, such payment would comply with the foregoing paragraph; (2) the making of any principal payment or the redemption, repurchase, defeasance or other acquisition or retirement for value of Indebtedness that is subordinated in right of payment to the Rollover Notes or any Subsidiary Guaranty including principal, premium, if any, and accrued and unpaid interest, with the proceeds of, or in exchange for, Indebtedness Incurred under Section 9A.1(a)(3); (3) the repurchase, redemption, retirement or other acquisition of Capital Stock of the Company, any Subsidiary Guarantor or an Unrestricted Subsidiary (or options, warrants or other rights to acquire such Capital Stock) in exchange for, or out of the proceeds of a substantially concurrent offering of, shares of Capital Stock (other than Disqualified Stock) of the Company (or options, warrants or other rights to acquire such Capital Stock; provided that such options, warrants or other rights are not redeemable prior to the Stated Maturity of the Rollover Notes); (4) the making of any principal payment or the repurchase, redemption, retirement, defeasance or other acquisition for value of Indebtedness that is subordinated in right of payment to the Rollover Notes or any Subsidiary Guaranty in exchange for, or out of the proceeds of, a substantially concurrent offering of, shares of the Capital Stock (other than Disqualified Stock) of the Company (or options, warrants or other rights to acquire such Capital Stock; provided that such options, warrants or other rights are not redeemable prior to the Stated Maturity of the Rollover Notes); (5) payments or distributions, to dissenting stockholders pursuant to applicable law, pursuant to or in connection with a consolidation, merger or transfer of assets that complies with the provisions of this Agreement applicable to mergers, consolidations and transfers of all or substantially all of the property and assets of the Company; provided that no 61 Default or Event of Default shall have occurred and be continuing or would occur as a consequence of such payment or distribution; (6) Investments acquired in exchange for, or out of the proceeds of a substantially concurrent offering of, Capital Stock (other than Disqualified Stock) of the Company; (7) the declaration or payment of dividends on Capital Stock (other than Disqualified Stock) of the Company in an aggregate annual amount not to exceed 6% of the Net Cash Proceeds received by the Company after the Rollover Date from the sale of such Capital Stock; provided that no Default or Event of Default shall have occurred and be continuing or would occur as a consequence of such action or payment; (8) any purchase of fractional shares of Common Stock of the Company in connection with the conversion of the Convertible Subordinated Debentures; (9) the D&M Acquisition; (10) loans or advances to employees of the Company or its Restricted Subsidiaries in the ordinary course of business to purchase Capital Stock (other than Disqualified Stock) of the Company in an aggregate amount outstanding at any time under this clause (10) not to exceed $10 million; (11) Investments in any Person the primary business of which is related, ancillary or complementary to the business of the Company and its Restricted Subsidiaries on the date of such Investment; provided that the aggregate amount of such Investments under this clause (11) does not exceed $20 million plus the net reduction in Investments made pursuant to this clause (11) resulting from distributions on or repayments of such Investments, including payments of interest on Indebtedness, dividends, repayments of loans or advances, or other distributions or other transfers of assets, in each case to the Company or any Restricted Subsidiary, or from the Net Cash Proceeds from the sale or other disposition of any such Investment (except, in each case, in order to avoid duplication to the extent any such payments or proceeds have been or would be included in the calculation of Adjusted Consolidated Net Income for purposes of Section 9A.3(4)(C)(1)) or from redesignations of Unrestricted Subsidiaries as Restricted Subsidiaries (valued in each case as provided in the definition of "Investments"); provided that the net reduction in any Investments from any person shall not exceed the amount of such Investments in such Person; provided further that no Default or Event of Default shall have occurred and be continuing or would occur as a consequence of such Investment; (12) repurchases of Capital Stock of the Company or a Subsidiary of the Company or options, warrants or other rights to acquire Capital Stock of the Company or a Subsidiary of the Company repurchased from employees (or their heirs or estates) of the 62 Company or its Subsidiaries upon the death, disability or termination of employment in an aggregate amount under this clause (12) to all employees (or their heirs or estates) that shall not during any one fiscal year exceed the sum of: (a) $2 million plus (b) the aggregate amount of repurchases that would have been permitted to be made during each preceding fiscal year pursuant to this clause (12) and were not so made; provided that no Default or Event of Default shall have occurred and be continuing or would occur as a consequence of such repurchase; (13) purchases of shares of Capital Stock of any Subsidiary Guarantor owned by professional engineers in connection with licensing requirements in an aggregate amount not to exceed $500,000; or (14) repurchases of shares of Capital Stock of the Company that constitute odd lots, pursuant to a program established by the Company for the repurchase of odd lots, in an aggregate amount during any Fiscal Year not to exceed the sum of $100,000 plus the aggregate amount of repurchases that would have been permitted to be made under this clause (14) during each preceding Fiscal Year and were not so made; (15) dividends on Preferred Stock of Restricted Subsidiaries permitted to be issued pursuant to Section 9A.1; or (16) other Restricted Payments in an aggregate amount not to exceed $10 million, measured by the fair market value thereof at the time made; provided that no Default or Event of Default shall have occurred and be continuing or would occur as a consequence of such Restricted Payment. Each Restricted Payment permitted pursuant to the preceding paragraph (other than the Restricted Payment referred to in clause (2) of such paragraph, an exchange of Capital Stock for Capital Stock or Indebtedness referred to in clause (3) or (4) of such paragraph, an Investment acquired in exchange for Capital Stock referred to in clause (6) of such paragraph and an Investment described in clause (9) or any loan or advance referred to in clause (10) of such paragraph, repurchases of Capital Stock referred to in clause (12) or clause (13) of such paragraph, dividends on Preferred Stock of Restricted Subsidiaries referred to in clause (15) of such paragraph or Restricted Payments referred to in clause (16) of such paragraph), and the Net Cash Proceeds from any issuance of Capital Stock referred to in clauses (3), (4) and (6), shall be included in calculating whether the conditions of Section 9A.3(4)(C) have been met with respect to any subsequent Restricted Payments. For purposes of determining compliance with this Section 9A.3, in the event that a Restricted Payment meets the criteria of more than one of the 63 types of Restricted Payments described in the above clauses, the Company, in its sole discretion, may order and classify, and from time to time may reclassify, such Restricted Payment if it would have been permitted at the time such Restricted Payment was made and at the time of such reclassification. 9A.4. Restriction on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries. The Company will not, and will not permit any Restricted Subsidiary to, create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction of any kind on the ability of any Restricted Subsidiary: (1) to pay dividends or make any other distributions permitted by applicable law on any Capital Stock of such Restricted Subsidiary owned by the Company or any other Restricted Subsidiary, (2) to pay any Indebtedness owed to the Company or any other Restricted Subsidiary, (3) to make loans or advances to the Company or any other Restricted Subsidiary or (4) to transfer any of its property or assets to the Company or any other Restricted Subsidiary. The preceding provisions shall not restrict any encumbrances or restrictions: (1) existing on the Rollover Date in the Senior Credit Agreement, this Agreement or any other agreements or Indebtedness in effect on the Rollover Date, and any extensions, refinancings, renewals or replacements of such agreements or Indebtedness; provided that the encumbrances and restrictions in any such extensions, refinancings, renewals or replacements are no less favorable in any material respect to the Holders than those encumbrances or restrictions that are then in effect and that are being extended, refinanced, renewed or replaced; (2) existing under or by reason of applicable law; (3) contained in any agreements binding upon or relating to any property, asset, business or any Person or the property, assets or businesses of such Person, in each case acquired by the Company or any Restricted Subsidiary and existing at the time of such acquisition and not incurred in contemplation of such acquisition; provided that such encumbrances or restrictions are not applicable to any property, asset, business or any Person or 64 the property, assets or businesses of such Person, other than the property, asset, business or Person or the property, assets or businesses of such Person so acquired; (4) in the case of this Section 9A.4(4), (A) that restrict in a customary manner the subletting, assignment or transfer of any property or asset that is a lease, license, conveyance or contract or similar property or asset, (B) existing by virtue of any transfer of, agreement to transfer, option or right with respect to, or Lien on, any property or assets of the Company or any Restricted Subsidiary not otherwise prohibited by this Agreement or (C) arising or agreed to in the ordinary course of business, not relating to any Indebtedness, and that do not, individually or in the aggregate, detract from the value of property or assets of the Company or any Restricted Subsidiary in any manner material to the Company or any Restricted Subsidiary; (5) with respect to a Restricted Subsidiary and imposed pursuant to an agreement that has been entered into for the sale or disposition of all or substantially all of the Capital Stock of, or property and assets of, such Restricted Subsidiary; (6) contained in the terms of any Indebtedness of the Company or any Subsidiary Guarantor; provided that such encumbrances or restrictions taken as a whole are no more restrictive in the aggregate than those contained in this Agreement, as determined in good faith by the Board of Directors, whose determination shall be conclusive; (7) contained in any agreement or instrument governing Senior Indebtedness not incurred in violation of Section 9A.1; provided that such encumbrances or restrictions taken as a whole are no more restrictive in the aggregate than those contained in the Senior Credit Agreement, as determined in good faith by the Board of Directors or a Senior Officer of the Company, whose determination shall be conclusive; (8) on cash or other deposits or net worth, imposed by customers under contracts entered into in the ordinary course of business; (9) with respect to any Restricted Subsidiary, contained in the terms of any Indebtedness or Preferred Stock or any agreement pursuant to which such Indebtedness or Preferred Stock was issued if: (A) the encumbrance or restriction applies only in the event of a payment default or a default with respect to a financial covenant contained in such Indebtedness or agreement, (B) the encumbrance or restriction is not materially more disadvantageous to the Holders of the Rollover Notes than is customary in comparable financings (as determined by the Company) and (C) the Company determines that any such encumbrance or restriction will not materially affect the Company's ability to make principal or interest payments on 65 the Rollover Notes, as determined in good faith by the Board of Directors or a Senior Officer of the Company, whose determination shall be conclusive; (10) with respect to any property or assets acquired with Purchase Money Indebtedness and imposed by such Purchase Money Indebtedness; (11) contained in any extensions, refinancings, renewals or replacements of any of the agreements or instruments referred to in the preceding clauses of this paragraph; provided that the encumbrances and restrictions in any such extensions, refinancings, renewals or replacements taken as a whole and not materially less favorable to the Holders than those encumbrances or restrictions that are then in effect and that are being extended, refinanced, renewed or replaced, as determined in good faith by the Board of Directors or a Senior Officer of the Company, whose determination shall be conclusive; (12) with respect to any Foreign Subsidiary, contained in the terms of any Indebtedness or Preferred Stock or any agreement pursuant to which such Indebtedness or Preferred Stock was issued if: (A) either (i) the encumbrance or restriction applies only in the event of a payment default or a default with respect to a financial covenant in such Indebtedness or agreement or (ii) the Company determines that any such encumbrance or restriction will not materially affect the Company's ability to make principal or interest payments on the Rollover Notes, as determined in good faith by the Board of Directors or a Senior Officer of the Company, whose determination shall be conclusive, and (B) the encumbrance or restriction is not materially more disadvantageous to the Holders of the Rollover Notes than is customary in comparable financings (as determined by the Company). Nothing contained in this Section 9A.4 shall prevent the Company or any Restricted Subsidiary from (1) creating, incurring, assuming or suffering to exist any Liens otherwise permitted in Section 9A.7 or (2) restricting the sale or other disposition of property or assets of the Company or any of its Restricted Subsidiaries that secure Indebtedness of the Company or any of its Restricted Subsidiaries. 9A.5. Restriction on Issuances of Guarantees by Restricted Subsidiaries. The Company will not permit any Restricted Subsidiary that is not a Subsidiary Guarantor, directly or indirectly, to Guarantee any Indebtedness of the Company or any other Restricted Subsidiary other than a Foreign Subsidiary, unless (1) such Restricted Subsidiary simultaneously executes and delivers a supplement to the Subsidiary Guaranty by such Restricted Subsidiary substantially in the form of Exhibit D hereto, and (2) such Restricted 66 Subsidiary waives and will not in any manner whatsoever claim or take the benefit or advantage of, any rights of reimbursement, indemnity or subrogation or any other rights against the Company or any other Restricted Subsidiary as a result of any payment by such Restricted Subsidiary under its Subsidiary Guaranty. The Subsidiary Guaranty may be subordinated to the Senior Indebtedness of the Subsidiary Guarantor to the same extent as the Rollover Notes are subordinated to Senior Indebtedness of the Company. Notwithstanding the preceding, any Subsidiary Guaranty by a Restricted Subsidiary may provide by its terms that it shall be automatically and unconditionally released and discharged upon (x) any sale, exchange or transfer, to any Person (other than the Company or any other Restricted Subsidiary), of all of the Company's and each Restricted Subsidiary's Capital Stock in, or all or substantially all the assets of, such Restricted Subsidiary (which sale, exchange or transfer is not prohibited by this Agreement) or (y) the release or discharge of the Guarantee that resulted in the creation of such Subsidiary Guaranty, except a discharge or release by or as a result of payment under such Guarantee. 9A.6. Restriction on Transactions with Shareholders and Affiliates. The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, enter into, renew or extend any transaction (including, without limitation, the purchase, sale, lease or exchange of property or assets, or the rendering of any service) with any holder (or any Affiliate of such holder) of 5% or more of any class of Capital Stock of the Company or with any Affiliate of the Company or any Restricted Subsidiary, except upon fair and reasonable terms no less favorable to the Company or such Restricted Subsidiary than could be obtained, at the time of such transaction or, if such transaction is pursuant to a written agreement, at the time of the execution of the agreement providing therefor, in a comparable arm's-length transaction with a Person that is not such a holder or an Affiliate. The preceding limitation does not limit, and shall not apply to: (1) transactions (A) approved by a majority of the disinterested members of the Board of Directors, if there are any such disinterested members or (B) for which Company or a Restricted Subsidiary delivers to the Holders a written opinion of a nationally recognized investment banking, accounting, appraisal firm, or valuation stating that the transaction is fair to the Company or such Restricted Subsidiary from a financial point of view; (2) any transaction solely between Company and any of its Wholly Owned Restricted Subsidiaries or solely between Wholly Owned Restricted Subsidiaries; (3) the payment of reasonable and customary regular fees to directors of the Company who are not employees of the Company and indemnification arrangements entered into by the Company in the ordinary course of business; 67 (4) any payments or other transactions pursuant to any tax-sharing agreement between Company and any other Person with which Company files a consolidated tax return or with which Company is part of a consolidated group for tax purposes; (5) any sale of shares of Capital Stock (other than Disqualified Stock) of the Company; (6) management and administrative services provided in the ordinary course of business by the Company or any Restricted Subsidiary to any Restricted Subsidiary or any Person in which Company or any Restricted Subsidiary has an Investment; (7) any employment agreement entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of business; (8) payments to Richard C. Blum or Richard C. Blum & Associates, L.P., under consulting agreements in an aggregate amount not to exceed $150,000 in any Fiscal Year; or (9) any Permitted Investments and any Restricted Payments not prohibited by Section 9A.3. Notwithstanding the preceding, any transaction or series of related transactions covered by the first paragraph of this Section 9A.6 and not covered by clauses (2) through (9) of this paragraph, (a) the aggregate amount of which exceeds $10 million in value, must be approved or determined to be fair in the manner provided for in clause (1)(A) or (B) above and (b) the aggregate amount of which exceeds $15 million in value, must be determined to be fair in the manner provided for in clause (1)(B) above. 9A.7. Restriction on Liens. The Company will not, and will not permit any Subsidiary Guarantor to, Incur any Indebtedness secured by a Lien ("Secured Indebtedness") that is not Senior Indebtedness unless contemporaneously with such Incurrence effective provision is made to secure the Rollover Notes or the Subsidiary Guaranties equally and ratably with (or, if the Secured Indebtedness is subordinated in right of payment to the Rollover Notes or the Subsidiary Guaranties, prior to) such Secured Indebtedness for so long as such Secured Indebtedness is secured by a Lien. The preceding limitation does not apply to: (1) any interest or title of a lessor in the property subject to any Capitalized Lease; 68 (2) Liens on shares of Capital Stock of any Unrestricted Subsidiary to secure Indebtedness of such Unrestricted Subsidiary; (3) Liens on cash set aside at the time of the Incurrence of any Indebtedness, or government securities purchased with such cash, in either case to the extent that such cash or government securities prefund the payment of interest on such Indebtedness and are held in an escrow account or similar arrangements to be applied for such purpose; (4) Liens on assets or property purchased with Purchase Money Indebtedness securing such Indebtedness; and (5) Liens in favor of the Company. 9A.8. Restriction on Asset Sales. The Company will not, and will not permit any Restricted Subsidiary to, consummate any Asset Sale, unless (1) the consideration received by the Company or such Restricted Subsidiary is at least equal to the fair market value of the assets sold or disposed of and (2) at least 75% of the consideration received consists of (a) cash or Temporary Cash Investments, (b) the assumption of Indebtedness of the Company or any Restricted Subsidiary (other than Indebtedness to the Company or any Restricted Subsidiary), provided that the Company or such Restricted Subsidiary is irrevocably and unconditionally released from all liability under such Indebtedness or (c) Replacement Assets. In the event and to the extent that the Net Cash Proceeds received by the Company or any of its Restricted Subsidiaries from one or more Asset Sales occurring on or after the Rollover Date in any period of 12 consecutive months exceed $5 million, then Company shall or shall cause the relevant Restricted Subsidiary: (1) within 12 months after the date Net Cash Proceeds so received exceed $5 million, (A) to apply an amount equal to such excess Net Cash Proceeds permanently to repay Senior Indebtedness of the Company or of any Subsidiary Guarantor or Indebtedness of any other Restricted Subsidiary, in each case owing to a Person other than Company or any of its Restricted Subsidiaries, or (B) to invest an equal amount, or the amount not so applied pursuant to clause (A) (or enter into a definitive agreement committing to so invest within 12 months after the date of such agreement), in Replacement Assets, and (2) to apply (no later than the end of the 12-month period referred to in clause (1)) an amount equal to such excess Net Cash Proceeds (to the extent not applied or 69 committed to be applied pursuant to clause (1)) as provided in the following paragraph of this Section 9A.8. The amount of such excess Net Cash Proceeds required to be applied (or to be committed to be applied) during such 12-month period as set forth in clause (1) of the preceding sentence and not applied as so required by the end of such period shall constitute "Excess Proceeds". 10. EVENTS OF DEFAULT. 10.1. Events of Default. An "Event of Default" shall exist if any of the following conditions or events shall occur and be continuing (each, an "Event of Default"): (a) the Company defaults in the payment of any principal of or premium, if any, on any Note or Rollover Note when the same becomes due and payable, whether by scheduled maturity or at a date fixed for redemption or repurchase or by declaration, demand or otherwise or the Company fails to deliver the respective Rollover Notes, the Warrant Agreements or the Rollover Notes Registration Rights Agreements on the Rollover Date; or (b) the Company defaults in the payment of any interest on any Note, or the Company or any Significant Subsidiary defaults in the payment of any other amount owing under or in respect of any of the Note Documents, and such default shall continue for at least five days after the same becomes due and payable, whether by scheduled maturity or at a date fixed for prepayment, redemption or repurchase or by declaration, demand or otherwise; or (c) the Company defaults in the performance of or compliance with any term, covenant or agreement contained in Section 8.1(h), 8.2, 8.12, 8.15, 8A.1(h), 8A.2, or any of Sections 9.1 through 9.14 or 9A.1 through 9A.6 hereof; or (d) any Obligor defaults in the performance of or compliance with any term, covenant or agreement contained in any of the Note Documents on its part to be performed or complied with that is not referred to in Section 10.1(a), 10.1(b) or 10.1(c), and (i) prior to the Rollover Date, such default shall remain unremedied for at least 30 consecutive days after the earlier of the first date on which (A) a Responsible Officer becomes aware of such default and (B) the Company receives notice of such default from any Holder of a Note, and (ii) after the Rollover Date, such default shall remain unremedied for at least 30 consecutive days after the Company receives notice of such default from any Holder of a Rollover Note or any representative thereof; or 70 (e) any representation or warranty made or deemed made on any Purchase Date by or on behalf of any Obligor or by any officer of any Obligor under or in connection with this Agreement or any of the other Note Documents or in any writing furnished to you in connection with this Agreement or any of the other Note Documents proves to have been false or incorrect in any material respect on the date as of which it was made or deemed to have been made; or (f) any Obligor shall fail to pay any principal of, premium or interest on or any other amount payable in respect of, any Indebtedness that is outstanding in a principal or notional amount of at least $5,000,000 (or the equivalent thereof in one or more other currencies) prior to the Rollover Date and at least $15,000,000 (or the equivalent thereof in one or more other currencies) on or after the Rollover Date, either individually or in the aggregate (but excluding Indebtedness outstanding hereunder), of any Obligor, when the same becomes due and payable (whether by scheduled maturity, required prepayment, redemption or repurchase, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in any agreement or instrument relating to such Indebtedness; or any other event shall occur or condition shall exist under any agreement or instrument evidencing, securing or otherwise relating to any such Indebtedness and shall continue after the applicable grace period, if any, specified in such agreement or instrument; and in either case any such Indebtedness shall be declared to be due and payable or required to be prepaid, redeemed or repurchased (other than by a regularly scheduled required prepayment or redemption), purchased or defeased, or an offer to prepay, redeem, repurchase, purchase or defease such Indebtedness shall be required to be made, in each case prior to the stated maturity thereof or any date fixed for prepayment, redemption or repurchase thereunder; or (g) any Obligor shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against any Obligor, seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee or other similar official for it or for any substantial part of its property and assets and, in the case of any such proceeding instituted against it (but not instituted by it) that is being diligently contested by it in good faith, either such proceeding shall remain undismissed or unstayed for a period of 60 consecutive days or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or any substantial part of its property and assets) shall occur; or any Obligor shall take any action to authorize any of the actions set forth above in this Section 10.1(g); or (h) one or more judgments or orders for the payment of money aggregating $5,000,000 (or the equivalent thereof in one or more other currencies) (or $15,000,000 with 71 respect to any date of determination occurring on or after the Rollover Date) or more are rendered against one or more of the Obligors and remain unsatisfied and either (i) enforcement proceedings shall have been commenced by any creditor upon any such judgment or order or (ii) there shall be a period of at least 60 consecutive days after entry thereof during which a stay of enforcement of any such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; provided, however, that any such judgment or order shall not give rise to an Event of Default under this Section 10.1(h) if and for so long as (A) the amount of such judgment or order is covered by a valid and binding policy of insurance between the defendant and the insurer covering full payment thereof and (B) such insurer has been notified, and has not disputed the claim made for payment, of the amount of such judgment or order; or (i) any material provision of any of the Note Documents after delivery thereof shall for any reason (other than pursuant to the express terms thereof) cease to be valid and binding on or enforceable against any of the Obligors intended to be a party to it or shall cease to give you any of the rights, powers or privileges purported to be created thereunder, or any such Obligor shall so state any of the foregoing in writing; or (j) there shall occur one or more ERISA Events that individually or in the aggregate results in or might reasonably be expected to result in liability of any Obligor or any of its ERISA Affiliates in excess of $5,000,000 (or $15,000,000 with respect to any date of determination occurring on or after the Rollover Date) during the term of this Agreement; or there shall exist an amount of unfunded benefit liabilities (as defined in Section 4001(a)(18) of ERISA), individually or in aggregate for all Pension Plans of the Company and its Subsidiaries (excluding for purposes of such computation any such Pension Plans with respect to which assets exceed benefit liabilities) that exceeds $5,000,000 (or $15,000,000 with respect to any date of determination occurring on or after the Rollover Date); or (k) the Merger shall not be consummated in accordance with the Merger Agreement or the Merger shall be unwound, reversed or otherwise rescinded in whole or in part for any reason. 10.2. Acceleration. (a) If an Event of Default described in Section 10.1(g) shall occur, all of the Notes or Rollover Notes then outstanding shall automatically become immediately due and payable. (b) If any other Event of Default shall occur and be continuing, the Required Holders may at any time, at their option, by notice or notices to the Company, declare all of the Notes or Rollover Notes then outstanding to be immediately due and payable. 72 (c) If any Event of Default described in Section 10.1(a) or 10.1(b) has occurred and is continuing, any Holder or Holders of the Notes or Rollover Notes at the time outstanding affected by such Event of Default may at any time, at its or their option, by notice or notices to the Company, declare all of the Notes or Rollover Notes held by it or them to be immediately due and payable. If any Holder of the Notes or Rollover Notes shall exercise its rights under this Section 10.2(c) at any time, the Company will give prompt notice thereof to the Holders of all other Notes or Rollover Notes at such time outstanding and each such Holder may (whether or not such notice is given or received), by notice to the Company, declare the aggregate principal amount of all Notes or Rollover Notes held by it to be, and the same shall forthwith become, due and payable. (d) Upon any Notes or Rollover Notes becoming due and payable under this Section 10.2, whether automatically or by declaration, such Notes or Rollover Notes will forthwith mature and the entire unpaid principal amount of such Notes or Rollover Notes, plus all accrued and unpaid interest thereon and all other amounts due and payable to the Holder thereof under the Note Documents and, in the case of a Holder of a Fixed Rate Rollover Note, the respective premium provided for optional prepayment in Section 6.1 as if the date such Fixed Rate Rollover Notes were due and payable under this Section 10.2 were the proposed prepayment date under Section 6.1, shall be immediately due and payable, in each and every case without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Company. 10.3. Other Remedies. If one or more Events of Default shall occur and be continuing, and if, irrespective of whether any of the Notes or Rollover Notes have become or have been declared immediately due and payable under Section 10.2, any Holder of the Notes or Rollover Notes (or representative thereof) at the time outstanding may proceed to protect and enforce its rights by an action at law, suit in equity or other appropriate proceeding, for payment of the Obligations of the Obligors owed to it hereunder, under the Notes or Rollover Notes or under any Note Document. 10.4. Rescission. At any time after any Notes or Rollover Notes have been declared due and payable pursuant to Section 10.2(c) or 10.2(d), as the case may be, the Required Holders, by notice to the Company, may rescind and annul any such declaration and its consequences if (a) the Company has paid all overdue interest on the Notes or Rollover Notes, all principal of and premium, if any, on the Notes or Rollover Notes that are due and payable and are unpaid other than by reason of such declaration, and all interest on such overdue principal and (to the fullest extent permitted by applicable law) any overdue interest in respect of the Notes or Rollover Notes, at the Default Rate, (b) all Defaults and Events of Default, other than nonpayment of 73 amounts that have become due solely by reason of such declaration, have been remedied or have been waived pursuant to Section 15 and (c) no judgment or decree has been entered for the payment of any monies due pursuant to the Notes or Rollover Notes or any of the other Note Documents. No rescission and annulment under this Section 10.4 will extend to or affect any subsequent Default or Event of Default or impair any right, power or remedy consequent thereon. 10.5. Restoration of Rights and Remedies. If any Holder of the Notes or Rollover Notes has instituted any proceeding to enforce any right or remedy under this Agreement or any of the other Note Documents and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to such Holder, then, and in each such case, the Obligors and the Holders of Notes or Rollover Notes shall, subject to any determination in such proceeding, be restored severally to their respective former positions hereunder and under the other Note Documents and, thereafter, all rights and remedies of the Holders of the Notes or Rollover Notes shall continue as though no such proceeding had been instituted. 10.6. No Waivers or Election of Remedies, Expenses, Etc. No course of dealing and no delay on the part of any Holder of the Notes or Rollover Notes in exercising any right, power or remedy shall operate as a waiver thereof or otherwise prejudice such Holder's rights, powers or remedies. No right, power or remedy conferred by this Agreement or any of the other Note Documents upon any Holder of the Notes or Rollover Notes shall be exclusive of any other right, power or remedy referred to herein or therein or now or hereafter available at law, in equity, by statute or otherwise. Without limiting the obligations of the Company under Section 13.1, the Company will pay to the Holder of each Note or Rollover Note, upon demand, such further amount as shall be sufficient to cover all costs and expenses of such Holder incurred in any enforcement or collection under this Section 10, including, without limitation, reasonable attorneys' fees, expenses and disbursements. 11. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES. 11.1. Registration of Notes. The Company shall keep at its principal executive office a register for the registration and registration of transfers of Notes or Rollover Notes. The name and address of each Holder of one or more Notes or Rollover Notes, each transfer thereof and the name, address, place of payment and account for payment of each transferee of one or more Notes or Rollover 74 Notes shall be registered in such register. Prior to due presentment for registration of transfer, the Person in whose name any Note or Rollover Note shall be registered shall be deemed and treated as the owner and Holder thereof for all purposes of this Agreement and the other Note Documents, and the Company shall not be affected by any notice or knowledge to the contrary. The Company shall give to any Holder of the Notes or Rollover Notes that is an Institutional Investor, promptly upon request therefor, a complete and correct copy of the names and addresses of all registered Holders of Notes or Rollover Notes. 11.2. Transfer and Exchange of Notes. (a) The Purchasers agree that any transfer of any Note or Rollover Note shall be made in compliance with all applicable laws. Upon surrender of any Note or Rollover Note at the principal executive office of the Company for registration of transfer or exchange (and, in the case of a surrender for registration of transfer, duly endorsed or accompanied by a written instrument of transfer duly executed by the registered Holder of such Note or Rollover Note or its attorney duly authorized in writing and accompanied by the address for notices of each transferee of such Note or Rollover Note or part thereof), the Company shall execute and deliver, at the Company's expense, one or more new Notes or Rollover Notes (as requested by the Holder thereof) in exchange therefor, in an aggregate principal amount equal to the unpaid principal amount of the surrendered Notes or Rollover Notes. Each such new Note or Rollover Note shall be payable to such Person as such Holder may request and shall be in substantially the form of Exhibit A or Exhibit B hereto, respectively. Each such new Note or Rollover Note shall be dated and bear interest from the date to which interest shall have been paid on the surrendered Notes or Rollover Notes or dated the date of the surrendered Notes or Rollover Notes if no interest shall have been paid thereon. The Company may require payment of a sum sufficient to cover any stamp tax or other governmental charge imposed in respect of any such transfer of Notes or Rollover Notes. Notes or Rollover Notes shall not be transferred in denominations of less than $100,000; provided that, if necessary to enable the registration of transfer by a Holder of its entire holding of Notes or Rollover Notes, one Note or Rollover Note may be in a denomination of less than $100,000 and that any notes issued in connection with the registration statement referred to in Section 7.3 shall not be transferred in denominations less than $1,000. (b) Any transferee, by its acceptance of a Note or Rollover Note registered in its name (or the name of its nominee), shall be deemed to (i) have made the representations set forth in Section 5 hereof and (ii) confirm to and agree with the transferor and the other parties hereto as follows: (A) other than as provided in any written instrument of transfer executed by the transferor and such transferee, such transferor makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or any of the other Note Documents, or the execution, legality, validity, enforceability, genuineness, sufficiency or 75 value of, this Agreement or any of the other Note Documents or any other instrument or document furnished pursuant hereto or thereto; (B) such transferor makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Company or any other Obligor or the performance or observance by any Obligor of any of its Obligations under this Agreement or any of the other Note Documents or any other instrument or document furnished pursuant thereto; (C) such transferee confirms that it has received a copy of this Agreement, together with copies of the financial statements referred to in Section 8.1 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to purchase the Note or Rollover Note or Notes or Rollover Notes being purchased thereby; (D) such transferee will, independently and without reliance upon the transferor or any other Holder of the Notes or Rollover Notes and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; and (E) such transferee agrees that it will perform in accordance with their terms all of the obligations which by the terms of this Agreement are required to be performed by it as a Holder of the Notes or Rollover Notes. 11.3. Replacement of Notes. Upon receipt by the Company of evidence reasonably satisfactory to it of the ownership and the loss, theft, destruction or mutilation of any Note or Rollover Note (which evidence shall be, in the case of an Institutional Investor, notice from such Institutional Investor of such ownership and such loss, theft, destruction or mutilation), and (a) in the case of loss, theft or destruction, of indemnity reasonably satisfactory to it; provided that if the Holder of such Note or Rollover Note is, or is a nominee for, an original Purchaser of any of the Notes or Rollover Notes or any other Institutional Investor, such Person's own unsecured agreement of indemnity shall be deemed to be satisfactory, or (b) in the case of mutilation, upon surrender and cancellation thereof, the Company, at its own expense, shall execute and deliver, in lieu thereof, a new Note or Rollover Note, dated and bearing interest from the date to which interest shall have been paid on 76 such lost, stolen, destroyed or mutilated Note or Rollover Note or dated the date of such lost, stolen, destroyed or mutilated Note or Rollover Note if no interest shall have been paid thereon. 12. PAYMENTS ON NOTES. 12.1. Place of Payment. Subject to Section 12.2 as to the place of payment, each payment required to be made under this Agreement and under the Notes or Rollover Notes shall be made not later than 12:00 (noon) New York City time in same day funds in New York City, New York at the office of the Company in such jurisdiction. The Company may at any time, by notice to each Holder of a Note or Rollover Note, change the place of payment of the Notes or Rollover Notes so long as such place of payment shall be either the principal office of the Company in such jurisdiction or the principal office of a bank or trust company in such jurisdiction. 12.2. Home Office Payment. So long as you or your nominee shall be the Holder of any Note or Rollover Note, and notwithstanding anything contained in Section 12.1 or in such Note or Rollover Note to the contrary, the Company will pay all sums becoming due on such Note or Rollover Note for principal, premium, if any, and interest by the method and at the address specified for such purpose below your name on Schedule I hereto, or by such other method or at such other address as you shall have from time to time specified to the Company for such purpose, without the presentation or surrender of such Note or Rollover Note or the making of any notation thereon, except that upon the request of the Company made concurrently with or reasonably promptly after payment or prepayment in full of any Note or Rollover Note, you shall surrender such Note or Rollover Note for cancellation, reasonably promptly after any such request, to the Company at its principal executive office or at the place of payment most recently designated by the Company pursuant to Section 12.1. Prior to any permitted sale, transfer or other disposition of any Note or Rollover Note held by you or your nominee, you will, at your election, either endorse thereon the amount of principal paid thereon and the last date to which interest has been paid thereon or surrender such Note or Rollover Note to the Company in exchange for a new Note or Rollover Note or Notes or Rollover Notes pursuant to Section 11.2. The Company will afford the benefits of this Section 12.2 to any Institutional Investor that is the direct or indirect transferee of any Note or Rollover Note purchased by you under this Agreement and that has made the same agreement relating to such Note or Rollover Note as you have made in this Section 12.2 and in Section 18. 77 13. EXPENSES, INCREASED COSTS AND INDEMNIFICATION, ETC. 13.1. Transaction Expenses. Whether or not any of the transactions contemplated hereby are consummated, the Company will pay, within 10 days of each demand therefor (such demand to be accompanied by supporting documentation in reasonable detail), all reasonable costs and expenses incurred by you (including, without limitation, reasonable attorneys' fees of a special counsel and, if reasonably required, local or other counsel for you) in connection with the preparation, execution, delivery and administration of this Agreement, the Notes or Rollover Notes and the other Note Documents and in connection with any amendments, waivers or consents under or in respect of this Agreement, the Notes or Rollover Notes or any of the other Note Documents (whether or not such amendment, waiver or consent becomes effective), including, without limitation: (a) the reasonable costs and expenses incurred in enforcing or defending (or determining whether or how to enforce or defend) any rights under this Agreement, the Notes or Rollover Notes or any of the other Note Documents or in responding to any subpoena or other legal process or informal investigative demand issued in connection with this Agreement, the Notes or Rollover Notes or any of the other Note Documents, and (b) the reasonable costs and expenses incurred in connection with the insolvency or bankruptcy of any Obligor or any of its Subsidiaries or in connection with any work-out, renegotiation or restructuring of any of the transactions contemplated hereby, by the Notes or Rollover Notes or by the other Note Documents. The Company will pay, and will save you and each other Holder of the Notes or Rollover Notes harmless from, all claims in respect of any fees, costs or expenses, if any, of brokers and finders (other than those retained by you or any such Holder). 13.2. Indemnity. (a) In addition to the payment of costs and expenses pursuant to Section 13.1, the Company agrees to indemnify, pay and hold each Purchaser and each other Person who is or was at any time a Holder and each other Person in whose name or for whose benefit such Person holds or at any time held Notes, and your and their Affiliates and your and their respective officers, directors, employees, attorneys, agents and other advisors (each, an "Indemnified Party"), harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits and claims, and all reasonable costs, expenses and disbursements, of any kind or nature whatsoever (including, without limitation, reasonable fees and disbursements of counsel for such Indemnified Parties) that may be incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or by reason of, or in connection with the preparation for a defense of, any investigation, litigation or proceeding arising out of, related to, or in connection with (i) this Agreement, the Notes or Rollover Notes, the other Note Documents or any of the transactions contemplated hereby or thereby, (ii) any use 78 or intended use of the proceeds of any of the Notes or Rollover Notes or (iii) the actual or alleged presence of Hazardous Materials on any property of the Company or any of its Subsidiaries or any Environmental Claim relating in any way to the Company or any of its Subsidiaries, in each case whether or not such investigation, litigation or proceeding is brought by the Company, any of its Subsidiaries, its directors, shareholders or creditors or an Indemnified Party or any Indemnified Party is otherwise a party thereto and whether or not any sale and purchase of the Notes or Rollover Notes pursuant to this Agreement is effected (collectively, the "Indemnified Liabilities"); provided that the Company shall not have any obligation to any Indemnified Party hereunder with respect to any Indemnified Liabilities arising from the gross negligence or bad faith of such Indemnified Party as determined in a final, nonappealable judgment by a court of competent jurisdiction. (b) The Company also agrees not to assert any claim against any Purchaser, any Holder or any other Person in whose name or for whose benefit such Person holds or at any time held any Notes or Rollover Notes, or any of your or their Affiliates, or any of your or their respective officers, directors, employees, attorneys, agents and other advisors, on any theory of liability, for special, indirect, consequential or punitive damages arising out of or otherwise relating to (i) this Agreement, the Notes or Rollover Notes or any of the other Note Documents, or any of the transactions contemplated hereby or thereby, (ii) any Purchaser's agreement to purchase the Notes or Rollover Notes or (iii) any use or intended use of the proceeds of any of the Notes or Rollover Notes. (c) If and to the extent that the undertaking to indemnify, pay and hold harmless the Indemnified Parties set forth in this Section 13.2 is judicially determined to be unavailable to an Indemnified Party in respect of, or is insufficient with respect to, any liabilities, obligations, losses, damages, penalties, actions, judgments, suits or claims referred to herein, then, in lieu of indemnifying such Indemnified Party hereunder, the Company shall contribute to the amount paid or payable by such Indemnified Party as a result of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits or claims (and reasonable costs, expenses and disbursements relating thereto) (i) in such proportion as is appropriate to reflect the relative benefits to the Company and its Subsidiaries, on the one hand, and such Indemnified Party, on the other hand, from this Agreement and the sale and purchase of the Notes or (ii) if the allocation provided by clause (i) of this subsection (c) is not available, in such proportion as is appropriate to reflect not only the relative benefits referred to in such clause (i) but also the relative fault of each of the Company and its Subsidiaries, on the one hand, and such Indemnified Party, on the other hand, in connection with such liabilities, obligations, losses, damages, penalties, actions, judgments, suits or claims, as well as any other relevant equitable considerations. (d) Upon receipt by an Indemnified Party of actual notice of any action, claim, suit, investigation or proceeding (each, an "Action") against such Indemnified Party with respect to which indemnity may be sought under this Agreement, such Indemnified Party shall promptly notify the Company in writing; provided, however, that failure to so notify the Company shall 79 not relieve the Company from any liability that it may have on account of this indemnity or otherwise, except to the extent that it is materially prejudiced by such failure. As long as (i) no Default or Event of Default shall have occurred and be continuing and (ii) the Company continues diligently to prosecute the defense of such Action, the Company shall be entitled to participate at its own expense in the defense of any Action brought to enforce any claim or liability of any Indemnified Party resulting from any such Action and, if it so elects, the Company shall be entitled to assume the defense of such Action at its expense, including the employment of counsel reasonably satisfactory to such Indemnified Party (in which case the Company will not thereafter be responsible for the fees, costs and expenses of any separate counsel retained by an Indemnified Party). Notwithstanding the foregoing, an Indemnified Party shall have the right to employ separate counsel in the defense of an Action, and the Company shall bear the reasonable fees, costs and expenses of such separate counsel if (A) the use of counsel chosen by the Company to represent the Indemnified Party would present such counsel with a conflict of interest; (B) such Indemnified Party has reasonably concluded that the representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them; (C) the Company shall not have employed counsel satisfactory to the Indemnified Party in the exercise of the Indemnified Party's reasonable judgment to represent the Indemnified Party, within a reasonable time after notice of the institution of such Action; or (D) the Company authorizes the Indemnified Party to employ separate counsel at its expense. In no event shall the Company be responsible for the fees and expenses of more than one counsel (together with appropriate local counsel, if any) for all Indemnified Parties in connection with an Action. Without the prior written consent of the Indemnified Parties, the Company shall not settle or compromise any Action or permit a default or consent to the entry of any judgment in respect thereof unless such settlement, compromise or consent includes, as an unconditional term thereof, the giving by the claimant to each of the Indemnified Parties of an unconditional and irrevocable release from all liability in respect of such Action, with no admission of guilt or liability by any Indemnified Party. 13.3. Taxes. (a) Any and all payments by or on behalf of the Company hereunder or under the Notes or Rollover Notes and the Note Documents shall be made, in accordance with the terms of the Notes or Rollover Notes and the other applicable Note Documents, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings with respect thereto imposed by the United States of America, any political subdivision thereof or any other jurisdiction from which a payment under the Note Documents is made by or on behalf of the Company, excluding net income taxes and branch profits taxes that are imposed by the United States of America and net income taxes and franchise taxes (whether based on income or capital) that are imposed on such Holder of the Notes or Rollover Notes by the state or foreign jurisdiction under the laws of which such Holder of the Notes or Rollover Notes is organized or any political subdivision thereof (all such nonexcluded taxes, levies, imposts, deductions, charges, withholdings and liabilities in respect of payments hereunder, 80 under the Notes or Rollover Notes or the Note Documents being hereinafter referred to as "Taxes"). If the Company shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder, under any Note or Notes or Rollover Note or any of the Note Documents to any Holder of the Notes or Rollover Notes, (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 13.3) such Holder of the Notes or Rollover Notes receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Company shall make such deductions and (iii) the Company shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. (b) In addition, the Company shall pay any present or future transfer, stamp, documentary or other similar taxes, assessments, charges or levies that arise from any payment made hereunder or under the Notes or Rollover Notes or the other Note Documents or from the execution, delivery or registration of, performance under, or otherwise with respect to, this Agreement, any Note or Rollover Note or any of the other Note Documents, and all reasonable costs, expenses, taxes, assessments and other charges incurred in connection with any filing or perfection of any lien, pledge or security interest contemplated under any of the other documents referred to herein or therein (hereinafter referred to as "Other Taxes"). (c) The Company agrees to indemnify, pay and hold each Holder of the Notes or Rollover Notes harmless from and against the full amount of Taxes and Other Taxes, and for the full amount of taxes of any kind imposed by any jurisdiction on amounts payable under this Section 13.3, imposed on or paid by such Holder of the Notes or Rollover Notes as a result of receiving any payment by or on behalf of the Company hereunder or under any Notes or Rollover Notes and any penalties, additions to tax and interest) arising therefrom or with respect thereto. This indemnification shall be made within 60 days from the date such Holder of the Notes or Rollover Notes makes written demand therefor. (d) Within 60 days after the date of any payment of Taxes, the Company shall furnish to each Holder of the Notes or Rollover Notes, at its address referred to in Section 16, the original receipt of payment thereof or a certified copy of such receipt. In the case of any payment hereunder or under any Note or Rollover Note or any of the other Note Documents by or on behalf of the Company through an account or branch outside the United States or by or on behalf of the Company by a payor that is not a United States person, if the Company determines that no Taxes are payable in respect thereof, the Company shall furnish, or shall cause such payor to furnish, to each Holder of the Notes, at such address, an opinion of counsel acceptable to each Holder of the Notes or Rollover Notes stating that such payment is exempt from Taxes. For purposes of this subsection (d) and subsection (e) of this Section 13.3, the terms "United States" and "United States person" shall have the meanings specified in Section 7701 of the Internal Revenue Code. (e) Each Holder of the Notes or Rollover Notes organized under the laws of a jurisdiction outside the United States shall, on or prior to the date of its execution and delivery of this Agreement, in the case of each original Purchaser of the Notes or Rollover Notes, and on the 81 date on which it becomes a Holder of the Notes or Rollover Notes, in the case of each subsequent Holder of the Notes or Rollover Notes, and from time to time thereafter as requested in writing by the Company (but only so long thereafter as such Holder of the Notes or Rollover Notes remains lawfully able to do so), provide the Company with two original Internal Revenue Service forms 1001 or 4224 or, (in the case of a Holder of the Notes or Rollover Notes that has certified in writing to the Company that it is not a "bank" (as defined in Section 881(c)(3)(A) of the Internal Revenue Code), form W-8 (and, if such Holder of the Notes or Rollover Notes delivers a form W-8, a certificate representing that such Holder of the Notes or Rollover Notes is not a "bank" for purposes of Section 881(c) of the Internal Revenue Code, is not a 10-percent shareholder (within the meaning of Section 871(h)(3)(B) of the Internal Revenue Code) of the Company and is not a controlled foreign corporation related to the Company (within the meaning of Section 864(d)(4) of the Internal Revenue Code)), as appropriate, or any successor or other form prescribed by the Internal Revenue Service, certifying that such Holder of the Notes or Rollover Notes is exempt from or entitled to a reduced rate of United States withholding tax on payments pursuant to this Agreement, the Notes or Rollover Notes held thereby or the other Note Documents or, in the case of a Holder of the Notes or Rollover Notes that has provided a form W-8, certifying that such Holder of the Notes is a foreign corporation, partnership, estate or trust. If the form provided by a Holder of the Notes or Rollover Notes pursuant to this subsection (e) at the time such Holder of the Notes or Rollover Notes first becomes a party to this Agreement indicates a United States interest withholding tax rate in excess of zero, withholding tax at such rate shall be considered excluded from Taxes unless and until such Holder of the Notes or Rollover Notes provides the appropriate form certifying that a lesser rate applies, whereupon withholding tax at such lesser rate only shall be considered excluded from Taxes for periods governed by such form. If any form or document referred to in this subsection (e) requires the disclosure of information, other than information necessary to compute the tax payable and information required on the date hereof by Internal Revenue Service form 1001, 4224 or W-8 (or the related certificate described above) that the Holder of the Notes or Rollover Notes reasonably considers to be confidential, the Holder of the Notes or Rollover Notes shall give notice thereof to the Company and shall not be obligated to include in such form or document such confidential information. (f) For any period with respect to which a Holder of the Notes or Rollover Notes has failed to provide the Company with the appropriate form or document described in subsection (e) of this Section 13.3 (other than if such failure is due to a change in law occurring after the date on which a form originally was required to be provided or if such form otherwise is not required under such subsection (e)), such Holder of the Notes or Rollover Notes shall not be entitled to additional amounts or indemnification under Section 13.3(a), (b) or (c) with respect to Taxes imposed by the United States or any political subdivision thereof by reason of such failure; provided, however, that should a Holder of the Notes or Rollover Notes become subject to Taxes because of its failure to deliver a form required hereunder, the Company shall take such steps as such Holder of the Notes or Rollover Notes shall reasonably request to assist such Holder of the Notes or Rollover Notes to recover such Taxes at such Holder's expense. 82 (g) Any Holder of the Notes or Rollover Notes claiming any additional amounts payable pursuant to this Section 13.3 shall use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to file any certificate or document reasonably requested by the Company or to change the jurisdiction of its applicable lending office if the making of such a filing or such change would avoid the need for or reduce the amount of any such additional amounts that may thereafter accrue and would not, in the sole determination of such Holder, be otherwise disadvantageous to such Holder. (h) If the Company reasonably believes that any Taxes or Other Taxes it has paid or deducted from any payment made hereunder were not correctly or legally asserted, the Holder of Notes or Rollover Notes on whose behalf such Taxes or Other Taxes were paid or deducted, shall take all reasonable actions requested by the Company to obtain a refund of such Taxes or Other Taxes. If a Holder of Notes or Rollover Notes shall become aware that it is entitled to receive a refund in respect of Taxes or Other Taxes, it shall promptly notify the Company of the availability of such refund and shall, within 15 days after receipt of a request by the Company pursue or timely claim such refund at the Company's expense. If any Holder of Notes or Rollover Notes receives a refund in respect of any Taxes or Other Taxes for which such Holder has received payment from the Company hereunder, such Holder shall promptly repay such refund (plus any interest received) to the Company (but only to the extent of payments made or additional amounts paid by the Company under Section 13.3(a), (b) or (c) with respect to the Taxes or Other Taxes giving rise to such refund) within 10 days of receipt thereof, provided that the Company, upon the request of such Holder, agrees to return such refund (plus any interest or other charges received) to such Holder in the event such Holder is required to repay such refund to the relevant taxing authority. (i) In the event that a Holder of Notes or Rollover Notes reasonably determines that any payment of additional amounts to or on behalf of a Holder of Notes or Rollover Notes under Section 13.3(a) hereof, or indemnification for Taxes under Section 13.3(c) hereof, resulted in a tax credit becoming available to such Holder of Notes or Rollover Notes, the Holder of Notes or Rollover Notes shall promptly notify the Company and pay to the Company an amount equal to the actual tax benefit resulting from such credit. 13.4. Increased Costs. (a) If, due to either (i) the introduction of or any change in or in the interpretation of any law or regulation or (ii) the compliance with any guideline or request from any central bank or other Governmental Authority (whether or not having the force of law), there shall be any increase in the cost to any Holder of Notes or Rollover Notes of agreeing to make or of making, funding or maintaining their investment in (or their commitment hereunder to invest in) the Notes or Rollover Notes arising from such Holder actually match funding Notes or Rollover Notes that accrue interest based on the interest rate for Eurodollar deposits (excluding for purposes of this Section 13.4 any such increased costs resulting from (i) Taxes or Other Taxes (as to which Section 13.3 shall govern) and (ii) changes in the basis of taxation of overall 83 net income or overall gross income by the United States of America or by the foreign jurisdiction or state under the laws of which such Holder of Notes or Rollover Notes is organized or any political subdivision thereof), then the Company shall from time to time, upon demand by such Holder of Notes or Rollover Notes, pay to such Holder of Notes or Rollover Notes additional amounts sufficient to compensate such Holder of Notes or Rollover Notes in full for such increased cost. A certificate as to the amount of such increased cost, submitted to the Company by such Holder of Notes or Rollover Notes, shall be conclusive and binding for all purposes, absent manifest error. (b) If any Holder of Notes or Rollover Notes determines that compliance with any law or regulation or any guideline, directive or request from any central bank or other Governmental Authority (whether or not having the force of law) affects or would affect the amount of capital required or expected to be maintained by such Holder of Notes or Rollover Notes or any corporation controlling such Holder of Notes or Rollover Notes and that the amount of such capital is increased by or based upon the existence of such Holder's investment in (or its commitment hereunder to invest in) the Notes or Rollover Notes arising from such Holder actually match funding Notes or Rollover Notes that accrue interest based on the interest rate for Eurodollar deposits, then, upon demand by such Holder of Notes or Rollover Notes, the Company shall pay to such Holder of Notes or Rollover Notes, from time to time as specified by such Holder of Notes or Rollover Notes, additional amounts sufficient to compensate such Holder of Notes or Rollover Notes in the light of such circumstances, to the extent that such Holder of Notes or Rollover Notes reasonably determines such increase in capital to be allocable to the existence of such Holder's investment in (or its commitment hereunder to invest in) the Notes or Rollover Notes. A certificate as to such amounts submitted to the Company by such Holder of Notes or Rollover Notes shall be conclusive and binding for all purposes, absent manifest error. 13.5. Survival. The Obligations of the Company under this Section 13 shall survive the payment or transfer of any Note or Rollover Note, the enforcement, amendment or waiver of any provision of this Agreement, the Notes or Rollover Notes or any of the other Note Documents, and the termination of this Agreement and any commitment to purchase Notes or Rollover Notes hereunder and, in respect of any Person who was at any time a Holder or in whose name or for whose benefit such Person held any Note or Rollover Note, the date on which such Person no longer holds, or no longer holds in the name of or for the benefit of any other Person, any Note or Rollover Note. 14. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT 84 All representations and warranties contained herein and in the other Note Documents, and in any certificate or other instrument delivered by or on behalf of any Obligor pursuant to this Agreement or any of the other Note Documents, shall survive the execution and delivery of this Agreement and the Notes or Rollover Notes, the purchase or transfer by you of any Notes or Rollover Notes or portion thereof or interest therein, issuance of Notes or Rollover Notes and the payment of any Notes or Rollover Notes and may be relied upon by any subsequent Holder of the Notes or Rollover Notes as of the date made or deemed made. All statements contained in any certificate or other instrument delivered by or on behalf of any Obligor pursuant to this Agreement or any of the other Note Documents shall be deemed representations and warranties of the Company under this Agreement. Subject to the immediately preceding sentence and Section 20.6, this Agreement, the Notes or Rollover Notes and the other Note Documents embody the entire agreement and understanding between you and the Obligors and supersede all prior agreements and understandings relating to the subject matter hereof. 15. AMENDMENT AND WAIVER. 15.1. Requirements. This Agreement and the Notes or Rollover Notes may be amended, and the observance of any term hereof or of the Notes or Rollover Notes may be waived (either retroactively or prospectively), with and only with the written consent of the Company and the Required Holders, except that (a) no amendment or waiver of any of the provisions of Section 1, 2, 3, 5 or 19 will be effective as to you unless consented to in writing by you and (b) no such amendment or waiver shall, without the written consent of the Holder of each Note or Rollover Note at the time outstanding, do any of the following at any time: (i) subject to the provisions of Section 10 relating to acceleration or rescission, change the amount or the time of any redemption or payment of principal of, or reduce the rate, or change the time fixed for any payment or change the method of computation of interest or premium on, the Notes or Rollover Notes; (ii) change the percentage of the aggregate principal amount of the Notes or Rollover Notes the Holders of which are required to consent to any such amendment or waiver; (iii) release any Subsidiary Guarantor, except as provided herein; or (iv) amend Section 10.1, 15.1 or 20, and, after the Rollover Date, Section 6, 7.2 or 7.6. 85 Notwithstanding any of the foregoing provisions of this Section 15.1, none of the defined terms set forth in Schedule II hereto shall be amended, supplemented or otherwise modified in any manner that would change the meaning, purpose or effect of this Section 15.1 or any Section referred to herein unless such amendment or modification is agreed to in writing by the Holders of the Notes or Rollover Notes otherwise required to amend or waive such Section under the terms of this Section 15.1. 15.2. Solicitation of Holders of Notes. (a) Solicitation. The Company will provide each Holder of the Notes ------------ or Rollover Notes (irrespective of the amount of Notes or Rollover Notes then owned or otherwise held by it at the time) with sufficient information, reasonably far in advance of the date a decision is required, to enable such Holder to make an informed and considered decision with respect to any proposed amendment, waiver or consent in respect of any of the provisions of this Agreement or any of the other Note Documents. The Company will deliver executed or true and correct copies of each amendment, waiver or consent effected pursuant to the provisions of this Section 15 to each Holder of outstanding Notes or Rollover Notes promptly following the date on which it is executed and delivered by, or receives the consent or approval of, the requisite Holders of the Notes or Rollover Notes. (b) Payment. The Company will not directly or indirectly pay or ------- cause to be paid any remuneration, whether by way of supplemental or additional interest, fee or otherwise, or grant any security, to any Holder of Notes or Rollover Notes as consideration for or as an inducement to the entering into by any Holder of Notes or Rollover Notes of any waiver or amendment of any of the terms and provisions of this Agreement or any of the other Note Documents, unless such remuneration is concurrently paid, or security is concurrently granted, on the same terms, ratably to each Holder of Notes or Rollover Notes then outstanding even if such Holder did not consent to such waiver or amendment. 15.3. Binding Effect, Etc. Any amendment or waiver consented to as provided in this Section 15 applies equally to all Holders of Notes or Rollover Notes and is binding upon them, upon each future Holder of any Note or Rollover Note and upon each Obligor without regard to whether such Note or Rollover Note has been marked to indicate such amendment or waiver. No such amendment or waiver will extend to or affect any obligation, covenant, agreement, Default or Event of Default not expressly amended or waived or impair any right, power or remedy consequent thereon. No course of dealing nor any delay on the part of any Holder of any Note or Rollover Note in exercising any right, power or remedy hereunder or under any of the other Note Documents shall operate as a waiver of any right, power or remedy of any Holder of such Note 86 or Rollover Note; nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy. The remedies provided under this Agreement and the other Note Documents are cumulative and not exclusive of any rights, powers or remedies provided by applicable law. 15.4. Notes Held by the Company, Etc. Solely for the purpose of determining whether the Holders of the requisite percentage of the aggregate principal amount of Notes or Rollover Notes then outstanding approved or consented to any amendment, waiver or consent to be given under this Agreement or any of the other Note Documents, or have directed the taking of any action provided for herein or in any of the other Note Documents to be taken upon the direction of the Holders of a specified percentage of the aggregate principal amount of Notes or Rollover Notes then outstanding, Notes or Rollover Notes directly or indirectly owned by the Company or any of its Affiliates shall be deemed not to be outstanding. 16. NOTICES. (a) All notices and other communications provided for hereunder shall be in writing and delivered by telecopier or (if expressly permitted under the applicable provisions hereof) by telephone, if the sender on the same day sends a confirming copy of such notice by a recognized overnight delivery service (charges prepaid), by registered or certified mail with return receipt requested (postage prepaid) or by a recognized overnight delivery service (with charges prepaid). Any such notice must be sent: (i) if to you or your nominee, to you or it at the address specified for such communications in Schedule I hereto, or at such other address as you or it shall have specified to the Company in writing; (ii) if to any other Holder of any Note or Rollover Note, to such Holder at such address as such other Holder shall have specified to the Company in writing; or (iii) if to the Company, to the Company at its address set forth on the first page of this Agreement (Telecopier No. (415) 398-1905) to the attention of Kent P. Ainsworth, or at such other address as the Company shall have specified to the Holder of each Note in writing with a copy to John E. Mendez, Esq., Skadden, Arps, Slate, Meagher & Flom LLP, 300 South Grand Avenue, 34th Floor, Los Angeles, California 90071 (Telecopier No. (213) 687-5600). 87 All notices and other communications provided for under this Section 16 will be deemed given and effective only when actually received. (b) If any notice required under this Agreement or any of the other Note Documents is permitted to be made, and is made, by telephone, actions taken or omitted to be taken in reliance thereon by you shall be binding upon the Company notwithstanding any inconsistency between the notice provided by telephone and any subsequent writing in confirmation thereof provided to you; provided that any such action taken or omitted to be taken by you shall have been in good faith and in accordance with the terms of this Agreement. 17. REPRODUCTION OF DOCUMENTS. This Agreement, each of the other Note Documents and all other agreements, certificates and other documents relating thereto, including, without limitation, (a) amendments, waivers and consents of or to this Agreement or any other Note Document that may hereafter be executed, (b) documents received by you on the Purchase Date (except the Notes themselves) and (c) financial statements, certificates and other information previously or hereafter furnished to you, may be reproduced by you by any photographic, photostatic, microfilm, microcard, miniature photographic or other similar process. The Company agrees and stipulates that, to the extent permitted by applicable law, any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding (whether or not the original is in existence and whether or not such reproduction was made by you in the regular course of business) and any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence. This Section 17 shall not prohibit the Company or any other Holder of Notes or Rollover Notes from contesting any such reproduction to the same extent that it could contest the original, or from introducing evidence to demonstrate the inaccuracy of any such reproduction. 18. CONFIDENTIAL INFORMATION. You hereby agree to maintain, and to cause each of the Persons referred to in clause (a) of this Section 18 to which you deliver or disclose Confidential Information to maintain, the confidentiality of all Confidential Information in accordance with procedures adopted by you in good faith to protect confidential information obtained from the Company; provided that you may deliver or disclose Confidential Information to (a) your Affiliates and your and their respective directors, officers, employees, agents, attorneys and other advisors who agree to hold confidential the Confidential Information substantially in accordance with the terms of this Section 18, (b) your counsel and your financial and other professional advisors who agree to hold confidential the Confidential Information substantially in accordance with the terms of 88 this Section 18, (c) any other Holder of any Note or Rollover Note, (d) any Institutional Investor to which you sell or offer to sell any Notes or Rollover Notes or any part thereof or any participation therein (if such Person has agreed in writing prior to its receipt of such Confidential Information to be bound by provisions similar to the provisions of this Section 18), (e) any federal or state regulatory authority having jurisdiction over you, or (f) any other Person to which such delivery or disclosure may be necessary (i) in order to effect compliance with any Requirement of Law applicable to you, (ii) in response to any subpoena or other legal process, (iii) in connection with any litigation to which you or any other Holder of any Notes or Rollover Notes are a party or (iv) if an Event of Default shall have occurred and be continuing, to the extent you may reasonably determine such delivery and disclosure to be necessary in the enforcement or for the protection of the rights and remedies afforded to you under your Notes or Rollover Notes, this Agreement and the other Note Documents; provided that, unless specifically prohibited by the applicable law or court order, you shall reasonably notify the Company of any request by any governmental agency or representative thereof (other than any such request in connection with any examination of your financial condition by such government agency) for disclosure of any such non-public information prior to disclosure of such information. Each Holder of a Note or Rollover Note, by its acceptance of a Note or Rollover Note, will be deemed to have agreed to be bound by and to be entitled to the benefits of this Section 18 as though it were a party to this Agreement. Upon the reasonable request of the Company in connection with the delivery to any Holder of a Note or Rollover Note of information required to be delivered to such Holder under this Agreement or requested by such Holder (other than a Holder that is a party to this Agreement or its nominee), such Holder will enter into an agreement with the Company embodying the provisions of this Section 18. Nothing in this Section 18 shall obligate you or any other Holder of the Notes or Rollover Notes to return any Confidential Information furnished by or on behalf of the Company or any of its Subsidiaries to the Company or any such Subsidiary. 19. SUBSTITUTION OF PURCHASER. You shall have the right to substitute any one of your United States Affiliates that constitutes an Institutional Investor as the Purchaser of the Notes that you have agreed to purchase hereunder, by notice to the Company, which notice shall be signed by both you and such Affiliate, shall contain such Affiliate's agreement to be bound by this Agreement and shall contain a confirmation by such Affiliate of the accuracy with respect to it of the representations set forth in Section 5. Upon receipt of such notice, wherever the word "you" is used in this Agreement (other than in this Section 19), such word shall be deemed to refer to such Affiliate in lieu of you. In the event that such Affiliate is so substituted as a Purchaser hereunder and such Affiliate thereafter transfers to you all of the Notes then held by such Affiliate, upon receipt by the Company of notice of such transfer, wherever the word "you" is used in this Agreement (other than in this Section 19), such word shall no longer be deemed to refer to such Affiliate, but 89 shall refer to you, and you shall have all of the rights of an original Holder of the Notes under this Agreement. 20. SUBORDINATION OF THE NOTES AND ROLLOVER NOTES. 20.1. Notes or Rollover Notes Subordinated to Senior Indebtedness. The Company covenants and agrees and each Holder of a Note or Rollover Note, by its acceptance thereof, likewise covenants and agrees, that, to the extent and in the manner hereinafter set forth in this Section 20, the principal of, premium, if any, and interest on the Notes or Rollover Notes and all other monetary obligations of the Company under the Note Documents are hereby expressly made subordinate and subject in right of payment as provided in this Section 20 to the prior payment in full in cash or Cash Equivalents of all Senior Indebtedness. 20.2. Payment Over of Proceeds Upon Bankruptcy. In the event of (a) any insolvency or bankruptcy case or proceeding, or any receivership, liquidation, reorganization or other similar case or proceeding in connection therewith, relative to the Company or to its assets, or (b) any liquidation, dissolution or other winding up of the Company, whether voluntary or involuntary and whether or not involving insolvency or bankruptcy, or (c) any assignment for the benefit of creditors or any other marshalling of assets or liabilities of the Company, then and in any such event the holders of Senior Indebtedness shall be entitled to receive payment in full in cash or Cash Equivalents of all Senior Indebtedness, or provision shall be made for such payment in cash or Cash Equivalents, before the Holders of the Notes or Rollover Notes are entitled to receive any payment or distribution of any kind or character (excluding equity or debt securities of the Company or any other corporation provided for by a plan of reorganization or readjustment that, in the case of such debt securities, are subordinated in right of payment to all Senior Indebtedness that may at the time be outstanding to substantially the same extent as, or to a greater extent than, the Notes or Rollover Notes are so subordinated as provided in this Section 20 (such equity securities or subordinated securities being hereinafter referred to as "Permitted Junior Securities")) on account of principal of or interest on the Notes or Rollover Notes, and to that end the holders of Senior Indebtedness shall be entitled to receive, for application to the payment thereof, any payment or distribution of assets of the Company of any kind or character (excluding Permitted Junior Securities) that may be payable or deliverable in respect of the Notes or Rollover Notes in any such case, proceeding, dissolution, liquidation or other winding up or event. 90 In the event that, notwithstanding the foregoing provisions of this Section 20.2, any Holder of a Note or Rollover Note shall have received any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, in respect of principal, premium or interest on the Notes or Rollover Notes before all Senior Indebtedness is paid in full in cash or Cash Equivalents or payment thereof provided for in cash or Cash Equivalents, then and in such event such payment or distribution (excluding Permitted Junior Securities) shall be paid over or delivered forthwith to the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or other Person making payment or distribution of assets of the Company for application to the extent necessary to pay all Senior Indebtedness in full in cash or Cash Equivalents, after giving effect to any concurrent payment or distribution to or for the benefit of the holders of Senior Indebtedness. 20.3. Suspension of Payment When Senior Indebtedness in Default. (a) Unless Section 20.2 shall be applicable, upon the occurrence of a Payment Event of Default, no payment or distribution of any assets of the Company of any kind or character (excluding Permitted Junior Securities) shall be made by the Company on account of principal of, premium or interest on the Notes or Rollover Notes or any other amount payable hereunder, under the Notes or Rollover Notes or under the other Note Documents unless and until such Payment Event of Default shall have been cured or waived in writing or shall have ceased to exist or such Senior Indebtedness shall have been discharged, after which the Company shall resume making any and all required payments in respect of the Notes or Rollover Notes, including any missed payments; provided, however, that this Section 20.3(a) shall not prohibit any payment or prepayment of the principal of, or accrued interest on, the Notes or Rollover Notes or any other amount payable hereunder or under the Notes or Rollover Notes or under the other Note Documents, which payment is made from the net proceeds of the sale of Refinancing Securities or other debt or equity securities to the extent such payment is otherwise required to be made under the terms of this Agreement. (b) Unless Section 20.2 or 20.3(a) shall be applicable, upon (i) the occurrence of a Non-payment Event of Default and (ii) receipt by each Holder (or their representative for such notices if one has been appointed) of written notice from the Bank Agent or other representative of the lenders under the Senior Credit Agreement of such occurrence, then no payment or distribution of any assets of the Company of any kind or character (excluding Permitted Junior Securities) shall be made by the Company on account of principal of, premium or interest on the Notes or Rollover Notes or any other amount payable hereunder, under the Notes or Rollover Notes or under the other Note Documents for a period (the "Payment Blockage Period") commencing on the date of receipt of such notice unless and until (subject to any blockage of payments that may then be in effect under Section 20.3(a)) (x) more than 179 days shall have elapsed since receipt of such written notice by each Holder (or their representative for such notices if one has been appointed), (y) such Non-payment Event of Default shall have been cured or waived in writing or shall have ceased to exist or such Senior 91 Indebtedness shall have been discharged or (z) such Payment Blockage Period shall have been terminated by written notice to the Company and each Holder (or their representative for such notices if one has been appointed) from the Bank Agent or other representative of the lenders under the Senior Credit Agreement initiating such Payment Blockage Period, after which, in the case of clause (x), (y) or (z), the Company shall resume making any and all required payments in respect of the Notes or Rollover Notes, including any missed payments; provided, however, that this Section 20.3(b) shall not prohibit any payment or prepayment of the principal of, or accrued interest on, the Notes or Rollover Notes or any other amount payable hereunder, under the Notes or Rollover Notes or under the other Note Documents, which payment is made from the proceeds of the sale of Refinancing Securities or other debt or equity securities to the extent such payment is otherwise required to be made under the terms of this Agreement. No event of default with respect to Senior Indebtedness (other than an event of default pursuant to the financial maintenance covenants of the Senior Credit Agreement) that existed or was continuing on the date of the commencement of any Payment Blockage Period shall be, or be made, the basis for the commencement of a second Payment Blockage Period whether or not within a period of 365 consecutive days unless such event of default shall have been cured or waived for a period of not less than 90 consecutive days (it being acknowledged that any subsequent action that would give rise to an event of default pursuant to any provisions under which an event of default previously existed or was continuing shall constitute a new event default for this purpose). Notwithstanding any other provision of this Agreement, only one Payment Blockage Period may be commenced within any consecutive 365-day period, and in no event will a Payment Blockage Period pursuant to this Section 20.3(b) extend beyond 179 days. (c) In the event that, notwithstanding the foregoing, the Company shall make any payment or distribution of assets of any kind or character, whether in cash, property or securities, to any Holder of the Notes or Rollover Notes prohibited by the foregoing provisions of this Section 20.3, then and in such event such payment or distribution shall be held in trust for the benefit of, and paid over and delivered to, the Bank Agent or other representative of the lenders under the Senior Credit Agreement for application to the payment of Senior Indebtedness remaining unpaid until all Senior Indebtedness has been paid in full in cash or Cash Equivalents, after giving effect to any concurrent payment, distribution or provision therefor to or for the benefit of the holders of the Senior Indebtedness. 20.4. Payment Permitted If No Default. Nothing contained in this Section 20 or elsewhere in this Agreement or in the Notes or Rollover Notes shall prevent the Company, at any time except in the circumstances described in Section 20.2 or under the conditions described in Section 20.3, from making payments at any time of principal of or interest on the Notes or Rollover Notes. 20.5. Subrogation to Rights of Holders of Senior Indebtedness. 92 Subject to the payment in full of all Senior Indebtedness, the Holders of the Notes or Rollover Notes shall be subrogated (equally and ratably with the holders of all indebtedness of the Company that by its express terms is subordinated to the Senior Indebtedness of the Company to the same extent as the Notes or Rollover Notes are subordinated and is entitled to like rights of subrogation) to the rights of the holders of such Senior Indebtedness to receive payments and distributions of cash, property and securities applicable to the Senior Indebtedness until the principal of and interest on the Notes or Rollover Notes and all other amounts payable under this Agreement and the other Note Documents shall be paid in full. For purposes of such subrogation, no payments or distributions to the holders of the Senior Indebtedness of any cash, property or securities to which the Holders of the Notes or Rollover Notes would be entitled except for the provisions of this Section 20, and no payments over pursuant to the provisions of this Section 20 to the holders of Senior Indebtedness by the Holders of the Notes or Rollover Notes, shall, as among the Company, its creditors other than holders of Senior Indebtedness and the Holders of the Notes or Rollover Notes, be deemed to be a payment or distribution by the Company to or on account of the Notes or Rollover Notes. 20.6. Provisions Solely to Define Relative Rights. The provisions of this Section 20 are and are intended solely for the purpose of defining the relative rights of the Holders of the Notes or Rollover Notes, on the one hand, and the holders of Senior Indebtedness, on the other hand. Nothing contained in this Section 20 or elsewhere in this Agreement, in the Notes or Rollover Notes or in any other Note Documents is intended to or shall (a) impair, as among the Company and its creditors other than holders of Senior Indebtedness and the Holders of the Notes or Rollover Notes, the obligation of the Company, which is absolute and unconditional, to pay the Holders of the Notes or Rollover Notes the principal of and interest on the Notes or Rollover Notes and all other amounts payable under this Agreement and the other Note Documents as and when the same shall become due and payable, all in accordance with the terms hereof and of the Notes or Rollover Notes; (b) affect the relative rights against the Company of the Holders of the Notes or Rollover Notes and creditors of the Company other than the holders of Senior Indebtedness; (c) prevent the Holders of the Notes or Rollover Notes from exercising all remedies otherwise permitted by applicable law upon default under this Agreement or in any other Note Documents, subject to the rights, if any, under this Section 20 of the holders of Senior Indebtedness (i) in any case, proceeding, dissolution, liquidation or other winding up or assignment for the benefit of creditors of the Company referred to in Section 20.2, to receive, pursuant to and in accordance with such Section, cash, property and securities otherwise payable or deliverable to the Holders of the Notes or Rollover Notes or (ii) under the conditions specified in Section 20.3, to prevent any payment prohibited by such Section; or (d) limit the right of the Holders of the Notes or Rollover Notes to take any action to accelerate the maturity of the Notes or Rollover Notes pursuant to Section 10 or to pursue any rights or remedies hereunder or under applicable law. 93 20.7. No Waiver of Subordination Provisions. (a) No right of any present or future holder of any Senior Indebtedness to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Company with the terms, provisions and covenants of this Agreement, regardless of any knowledge thereof any such holder may have or be otherwise charged with. (b) Without in any way limiting the generality of Section 20.7(a), the holders of Senior Indebtedness may, at any time and from time to time, without the consent of or notice to the Holders of the Notes and the Rollover Notes, without incurring responsibility to the Holders of the Notes and the Rollover Notes and without impairing or releasing the subordination provided in this Section 20 or the obligations hereunder of the Holders of the Notes and the Rollover Notes to the holders of Senior Indebtedness, do any one or more of the following: (1) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, Senior Indebtedness or any instrument evidencing the same or any agreement under which Senior Indebtedness is outstanding; (2) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Indebtedness; (3) release any Person liable in any manner for the collection of Senior Indebtedness; and (4) exercise or refrain from exercising any rights against the Company and any other Person. 20.8. Reliance on Judicial Order or Certificate of Liquidating Agent. Upon any payment or distribution of assets of the Company referred to in this Section 20, the Holders of the Notes and the Rollover Notes shall be entitled to rely upon any order or decree entered by any court of competent jurisdiction in which such insolvency, bankruptcy, receivership, liquidation, reorganization, dissolution, winding up or similar case or proceeding is pending, or a certificate of the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit of creditors, agent or other Person making such payment or distribution, delivered to the Holders of the Notes and the Rollover Notes, for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of the Senior Indebtedness and other Indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Section 20. 20.9. Notice to the Holders of the Notes and the Rollover Notes. The Holders of the Notes and the Rollover Notes shall not be charged with knowledge of the existence of any fact that would prohibit the making of any payment to the Holders of the Notes and the Rollover Notes under this Agreement or the Notes, the Rollover 94 Notes or any other Note Documents, unless and until the Holders of the Notes and the Rollover Notes shall have received written notice thereof as contemplated hereby; and, prior to the receipt of any such written notice, the Holders of the Notes and the Rollover Notes shall be entitled in all respects to assume that no such fact exists. 20.10. Proof of Claim. (a) If any proceeding referred to in Section 10.1(g) above is commenced by or against any Obligor, the Holders of the Notes and the Rollover Notes shall duly and promptly take such action as the Bank Agent may reasonably request to file appropriate claims or proofs of claim in respect of the Subordinated Indebtedness. (b) If any Holder of the Notes or the Rollover Notes does not file a proper claim or proof of claim in the form required in any proceeding referred to in Section 10.1(g) hereof at least 30 days before the expiration of the time to file such claim, the Bank Agent is hereby authorized to file an appropriate claim for and on behalf of the Holders of the Notes and the Rollover Notes. (c) Nothing herein contained shall be deemed to authorize the Bank Agent, any holder of Senior Indebtedness or any representative thereof to authorize or consent to, or accept or adopt on behalf of any Holder of Notes and the Rollover Notes, any plan of reorganization, arrangement or composition affecting the Notes, the Rollover Notes or the rights of any Holder thereof, or to authorize the Bank Agent, any holder of Senior Indebtedness, or any representative thereof to vote in respect of the claim of any Holder of the Notes and the Rollover Notes in any such proceeding. 21. MISCELLANEOUS. 21.1. Successors and Assigns. Each Purchaser shall have the right to resell in a manner consistent with applicable law and the terms and conditions of this Agreement the Notes or Rollover Notes to one or more third parties, whether by transfer, assignment or participation, which right is unconditional. All covenants and other agreements contained in this Agreement or any of the other Note Documents by or on behalf of any of the parties hereto bind and inure to the benefit of their respective successors and assigns (including, without limitation, any subsequent Holder of a Note or Rollover Note), whether or not so expressed. 95 21.2. Payments Due on Non-Business Days. Anything in this Agreement or the Notes or the Rollover Notes to the contrary notwithstanding, any payment of principal of, or premium, if any, or interest on, any Note or Rollover Note that is due on a date other than a Business Day shall be made on the next succeeding Business Day and such extension of time shall in such case be included in the computation of payment of interest thereunder. 21.3. Satisfaction Requirement. Except as otherwise provided herein or in any of the other Note Documents, if any agreement, certificate or other writing, or any action taken or to be taken, is by the terms of this Agreement or any of the other Note Documents required to be satisfactory to you or to the Required Holders, the determination of such satisfaction shall be made by you or the Required Holders, as the case may be, in the judgment (exercised reasonably and in good faith) of the Person or Persons making such determination. 21.4. Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall (to the full extent permitted by applicable law) not invalidate or render unenforceable such provision in any other jurisdiction. 21.5. Construction; Accounting Terms, Etc. (a) Each covenant contained herein shall be construed (absent express provision to the contrary) as being independent of each other covenant contained herein, so that compliance with any one covenant shall not (absent such an express contrary provision) be deemed to excuse compliance with any other covenant. Where any provision herein refers to action to be taken by any Person, or which such Person is prohibited from taking, such provision shall be applicable whether such action is taken directly or indirectly by such Person. (b) Except as otherwise expressly provided in this Agreement or any of the other Note Documents, all accounting terms used herein or therein shall be interpreted, and all financial statements and certificates and reports as to financial matters required to be delivered to you hereunder shall be prepared, in accordance with GAAP. 96 21.6. Computation of Time Periods. In this Agreement, in the computation of periods of time from a specific date to a later specified date, the word "from" means "from and including", the word "through" means "through and including", and the words "to" and "until" each mean "to but excluding". 21.7. Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by telecopier shall be effective as delivery of a manually executed counterpart of this Agreement. 21.8. GOVERNING LAW; SUBMISSION TO JURISDICTION, ETC. (a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. (b) THE COMPANY HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY AND ASSETS, TO THE NONEXCLUSIVE JURISDICTION OF ANY NEW YORK STATE COURT OR FEDERAL COURT OF THE UNITED STATES OF AMERICA SITTING IN NEW YORK CITY, NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE NOTES OR ROLLOVER NOTES OR THE OTHER NOTE DOCUMENTS, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, AND THE COMPANY HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH NEW YORK STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT. THE COMPANY HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF COPIES OF ANY SUMMONS AND COMPLAINT AND ANY OTHER PROCESS WHICH MAY BE SERVED IN ANY SUCH ACTION OR PROCEEDING BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, OR BY DELIVERING A COPY OF SUCH PROCESS TO THE COMPANY, AT ITS ADDRESS SPECIFIED IN SECTION 16 OR BY ANY OTHER METHOD PERMITTED BY LAW. THE COMPANY HEREBY AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN 97 ANY OTHER MANNER PROVIDED BY APPLICABLE LAW. NOTHING IN THIS AGREEMENT SHALL AFFECT THE RIGHT OF ANY HOLDER OF NOTES OR ROLLOVER NOTES TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR ANY RIGHT THAT ANY HOLDER OF THE NOTES OR ROLLOVER NOTES MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT, THE NOTES OR THE ROLLOVER NOTES OR THE OTHER NOTE DOCUMENTS IN THE COURTS OF ANY JURISDICTION. (c) THE COMPANY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE NOTES OR THE ROLLOVER NOTES OR THE OTHER NOTE DOCUMENTS IN ANY NEW YORK STATE OR FEDERAL COURT. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT. [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] 98 21.9. WAIVER OF JURY TRIAL. EACH OF THE COMPANY AND THE HOLDERS OF THE NOTES OR THE ROLLOVER NOTES HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE NOTES (AND ROLLOVER NOTES) OR ANY OF THE OTHER NOTE DOCUMENTS, ANY DOCUMENT DELIVERED UNDER THE NOTE DOCUMENTS OR THE ACTIONS OF ANY HOLDER OF THE NOTES IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF. Very truly yours, URS CORPORATION By /s/ Kent P. Ainsworth ---------------------------------------- Name: Kent P. Ainsworth Title: Executive Vice President and Chief Financial Officer * * * * * S-99 If you are in agreement with the foregoing, please sign in the appropriate space provided below and return it to the Company, whereupon the foregoing shall become a binding agreement between you and the Company. Very truly yours, MORGAN STANLEY SENIOR FUNDING, INC. By /s/ Michael Hart --------------------------------------- Name: Michael Hart Title: Principal S-100 WELLS FARGO BANK, NATIONAL ASSOCIATION By /s/ Abraham B. Mintz ---------------------------------------- Name: Abraham B. Mintz Title: Senior Vice President S-101 SCHEDULE I ---------- COMMITMENT AMOUNTS AND INFORMATION RELATING TO THE PURCHASERS -------------------------------------- Name of Purchaser: Commitment - ------------------------------------------------------------------- Morgan Stanley Senior Funding, Inc. $180,000,000 Name(s) for Registration of Notes Purchased: Morgan Stanley Senior Funding, Inc. Mailing Address: 1585 Broadway New York, New York 10036 Attention: James Morgan Telephone No.: (212) 761-4866 Telecopier No.: (212) 761-0592 Wire Instructions (including ABA No. and Account No.) For Payment of Principal and Interest: To: CITIBANK, N.A. NEW YORK, NY 10043 ABA No. 021000089 In Favor of: Morgan Stanley Senior Funding, Inc. Attention: James Morgan Account #: 40699776 United States Tax Identification No. (if any): 13-3888640 Physical Delivery Instructions: 1585 Broadway New York, New York 10036 Attention: James Morgan Name of Purchaser: Commitment - -------------------------------------------------------------------------- Wells Fargo Bank, National Association $20,000,000 Name(s) for Registration of Notes Purchased: Wells Fargo Bank, National Association Mailing Address: 420 Montgomery Street San Francisco, California 94163 Attention: [_________] Telephone No.: (415) [___-____] Telecopier No.: (415) [___-____] Wire Instructions (including ABA No. and Account No.) For Payment of Principal and Interest: To: Wells Fargo Bank, National Association 420 Montgomery Street San Francisco, California 94163 ABA #: [_________] In Favor of: Wells Fargo Bank, National Association Attention: [________] Account #: ____________ United States Tax Identification No. (if any): [__________] Physical Delivery Instructions: 420 Montgomery Street San Francisco, California 94163] Attention: [________] I-2 SCHEDULE II - ----------- DEFINED TERMS ------------- Except as set forth in Section 9A of this Agreement, as used in this Agreement, the following terms shall have the respective meanings set forth below (such meanings to be equally applicable to both the singular and plural forms of the term defined): "Account" means an account indicated in Schedule I hereto or otherwise provided in writing to the Company. "Account Receivable" means any right to payment for goods sold or leased or for services rendered. "Affiliate" as applied to any Person, means any other Person directly or indirectly controlling, controlled by, or that is under common control with, that Person or is a director or officer of such Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling", "controlled by" and "under common control with"), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person, whether through the ownership of voting securities or by contract or otherwise. Any Person, other than a Holder, who owns beneficially or of record Securities representing more than 5% of the total outstanding Securities of the Company shall be an Affiliate of the Company. "Agreement" means this Note Purchase Agreement, as such agreement may be amended, supplemented or otherwise modified from time to time in accordance with the terms of Section 15. "Asset Sale", as applied to any Person, means the sale by such Person or any of its Subsidiaries to any other Person of (a) any of the stock of any Subsidiary of such Person (other than any stock sold to licensed professionals employed by such Person or its Subsidiaries in order to comply with licensing laws or any stock sold to qualify directors if required by applicable law), (b) substantially all of the assets of any division or line of business of such Person or any of its Subsidiaries (other than the assets of any division or line of business to the extent that the aggregate value of such assets is less than $1,000,000) or (c) any other assets (whether tangible or intangible) of such Person or any of its Subsidiaries (other than any assets to the extent that the aggregate value of such assets sold in any single transaction or related series of transactions during any Fiscal Year is less than $1,000,000). "Bank Agent" means Wells Fargo or any successor thereto. "Bridge Note Disclosure Letter" means the letter dated the Purchase Date delivered to the Purchasers by the Company containing information with respect to the Company and its Subsidiaries and DMG and its Subsidiaries. "Business Day" means any day other than a Saturday, a Sunday or any other day on which commercial banks are required or authorized by law to be closed in New York, New York or San Francisco, California. "Capital Lease", as applied to any Person, means any lease of any property (whether real, personal or mixed) by that Person as lessee that, in conformity with GAAP, is accounted for as a capital lease on the balance sheet of that Person. "capital stock" means (a) in the case of a corporation, corporate stock, (b) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, (c) in the case of a partnership, partnership interests (whether general or limited), (d) in the case of a limited liability company, membership interests, and (e) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distribution of assets of, the issuing Person. "Cash Equivalents" means, as at any date of determination, (a) marketable securities (i) issued or directly and unconditionally guaranteed as to interest and principal by the United States Government or (ii) issued by any agency of the United States of America the obligations of which are backed by the full faith and credit of the United States of America, in each case maturing within one year after such date; (b) marketable direct obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof, in each case maturing within one year after such date and having, at the time of the acquisition thereof, the highest rating obtainable from either Standard & Poor's Ratings Group ("S&P") or Moody's Investors Service, Inc. ("Moody's"); (c) commercial paper maturing no more than one year from the date of creation thereof and having, at the time of the acquisition thereof, a rating of at least A-1 from S&P or at least P-1 from Moody's; (d) certificates of deposit or bankers' acceptances maturing within one year after such date and issued or accepted by any commercial bank organized under the laws of the United States of America or any state thereof or the District of Columbia or any foreign country recognized by the United States of America and which bank (i) is at least "adequately capitalized" (as defined in the regulations of its primary Federal banking regulator), (ii) has Tier 1 capital (as defined in such regulations) of not less than $100,000,000 or the foreign currency equivalent thereof, and (iii) has outstanding debt that is rated "A" (or such similar equivalent rating) or higher by at least one nationally recognized statistical rating organization (as defined in Rule 436 under the Securities Act); and (e) shares of any money market mutual fund that (i) has at least 95% of its assets invested continuously in the types of investments referred to in clauses (a) and (b) above, (ii) has net assets of not less than $500,000,000 and (iii) has the highest rating obtainable from either S&P or Moody's. "Change of Control" means such time as (i) a "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act) other than RCBA and its Affiliates becomes the ultimate "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of Voting Interests representing 35% or more of the total voting power of the Voting Interests of the Company, on a fully diluted basis or (ii) individuals who on the Purchase Date constitute the Board of Directors of the Company (together with any new directors whose election by the Board of Directors of the Company or whose nomination by the Board of Directors of the Company for election by the Company's stockholders was approved by a vote of at least one-half of the members of the Board of Directors of the Company then in office who either were members of the Board of Directors of the Company on June 9, 1999 or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the members of the Board of Directors of the Company then in office. "Change of Control Payment" has the meaning specified in Section 6.2(a). "Change of Control Repurchase Date" has the meaning specified in Section 6.2(b). "Commitment" means, with respect to any Purchaser at any time, the amount set forth opposite such Purchaser's name on Schedule I hereto under the caption "Commitment" with respect to the Notes. "Commitment Letter" means that certain letter and attached term sheets dated May 3, 1999 from MS to the Company, as such letter may be amended, supplemented or otherwise modified from time to time in accordance with its terms. "Company" has the meaning specified on page one of this Agreement. "Company Certificates of Designation" means the Certificates of Designation for the Company Series A Preferred Stock, the Company Series B Preferred Stock and the Company Series C Preferred Stock, in the form delivered to MS on May 3, 1999, as such Certificate of Designation may be further amended from time to time to the extent permitted under Section 9.13. "Company Series A Preferred Stock" means the Series A Preferred Stock, $0.01 par value per share, of the Company. II-3 "Company Series B Preferred Stock" means the Series B Convertible Exchangeable Preferred Stock, $0.01 par value per share, of the Company. "Company Series C Preferred Stock" means the Series C Preferred Stock, $0.01 par value per share, of the Company. "Compliance Certificate" means a certificate substantially in the form of Exhibit F hereto delivered to the Holders of the Notes by the Company pursuant to Section 8.1(c). "Confidential Information" means materials, documents and other information delivered to you by or on behalf of the Company or any of its Subsidiaries in connection with any of the transactions contemplated by or otherwise pursuant to this Agreement or any of the other Note Documents, whether before or after the date of this Agreement, that is proprietary in nature and that was clearly marked, labeled or otherwise adequately identified when received by any Holder as being confidential information of the Company or such Subsidiary, but does not include any such information that (a) is or was generally available to the public (other than as a result of a breach of your confidentiality obligations hereunder) or (b) becomes known or available to any Holder on a nonconfidential basis other than through disclosure by the Company or any of its Subsidiaries. "Consolidated Capital Expenditures" means, for any period, the sum, without duplication, of (a) the aggregate of all expenditures (whether paid in cash or other consideration or accrued as a liability and including that portion of Capital Leases that is capitalized on the consolidated balance sheet of the Company and its Subsidiaries) by the Company and its Subsidiaries during that period for fixed assets and leasehold improvements of the Company and its Subsidiaries plus (b) to the extent not covered by clause (a) of this definition, the aggregate of all expenditures by the Company and its Subsidiaries during that period to purchase or develop computer software or systems (but only to the extent such expenditures are capitalized on the consolidated balance sheet of the Company and its Subsidiaries in conformity with GAAP) minus (c) to the extent included in clause (a) of this definition, the total cash consideration expended by the Company and its Subsidiaries during such period to acquire (by purchase or otherwise) the business, property or fixed assets of any Person, or the stock or other evidence of beneficial ownership of any Person that, as a result of such acquisition, becomes a Subsidiary of the Company. "Contingent Obligation", as applied to any Person, means any direct or indirect liability, contingent or otherwise, of that Person (a) with respect to any Indebtedness, lease, dividend or other obligation of another if the primary purpose or intent thereof by the Person incurring the Contingent Obligation is to provide assurance to the obligee of such obligation of another that such obligation of another will be paid or discharged, or that any agreements relating thereto will be complied with, or that the Holders of such II-4 obligation will be protected (in whole or in part) against loss in respect thereof, (b) with respect to any letter of credit issued for the account of that Person or as to which that Person is otherwise liable for reimbursement of drawings or (c) under "Hedge Agreements" under the Senior Credit Agreement. Contingent Obligations shall include (i) the direct or indirect guaranty, endorsement (otherwise than for collection or deposit in the ordinary course of business), co-making, discounting with recourse or sale with recourse by such Person of the obligation of another, (ii) the obligation to make take-or-pay or similar payments if required regardless of non-performance by any other party or parties to an agreement, and (iii) any liability of such Person for the obligation of another through any agreement (contingent or otherwise) (A) to purchase, repurchase or otherwise acquire such obligation or any security therefor, or to provide funds for the payment or discharge of such obligation (whether in the form of loans, advances, stock purchases, capital contributions or otherwise) or (B) to maintain the solvency or any balance sheet item, level of income or financial condition of another if, in the case of any agreement described under subclauses (A) or (B) of this sentence, the primary purpose or intent thereof is as described in the preceding sentence. The amount of any Contingent Obligation in the form of a letter of credit or a guaranty of a specified amount shall be equal to the face amount of the letter of credit or the amount of the obligation so guaranteed or otherwise supported, as the case may be, or, if less, the amount to which such Contingent Obligation is specifically limited. The amount of any Contingent Obligation that is not in the form of a guaranty of a specified amount shall be equal to the reasonably anticipated maximum amount of such Contingent Obligation as determined by the Company in good faith. "Contractual Obligation", as applied to any Person, means any provision of any Security issued by that Person or of any material indenture, mortgage, deed of trust, contract, undertaking, agreement or other instrument to which that Person is a party or by which it or any of its properties is bound or to which it or any of its properties is subject. "Default" means any Event of Default or any event or condition that would constitute an Event of Default but for the requirement that notice be given or time elapse or both. "Default Rate" means 2% per annum above the rate of interest stated in clause (a) of the second paragraph of the Notes. "Discounted Value" means, with respect to any Fixed Rate Rollover Note, the amount obtained by discounting (a) the principal amount of such Fixed Rate Rollover Note from its scheduled maturity date and (b) each interest payment due in respect of such Fixed Rate Rollover Note from its respective payment date to, in each case, the proposed redemption or repayment date, in accordance with accepted financial practice and at a discount factor (applied on the same periodic basis as that on which interest on the Fixed Rate Rollover Notes is payable) equal to the Reinvestment Yield with respect to the principal amount of such Fixed Rate Rollover Note. II-5 "DMG" means Dames & Moore Group, a Delaware corporation. "DMG Fiscal Year" means, prior to the consummation of the Merger, the fiscal year of DMG and its Subsidiaries ending on the last Friday in March in each calendar year. "Domestic Subsidiary" means any Subsidiary organized or incorporated under the laws of a state of the United States of America. "DTC" has the meaning specified in Section 8.14. "Employee Benefit Plan", as applied to any Person, means any "employee benefit plan" as defined in Section 3(3) of ERISA that is maintained or contributed to by such Person, any of its Subsidiaries or any of their respective ERISA Affiliates. "Environmental Claim" means any investigation, notice, notice of violation, claim, action, suit, proceeding, demand, abatement order or other order or directive (conditional or otherwise), by any Governmental Authority or any other Person, arising (a) pursuant to or in connection with any actual or alleged violation of any Environmental Law, (b) in connection with any Hazardous Materials or any actual or alleged Hazardous Materials Activity or (c) in connection with any actual or alleged damage, injury, threat or harm to health, safety, natural resources or the environment. "Environmental Laws" means any and all current or future statutes, ordinances, orders, rules, regulations, guidance documents, judgments, Governmental Authorizations, or any other requirements of Governmental Authorities relating to (i) environmental matters, including those relating to any Hazardous Materials Activity, (ii) the generation, use, storage, transportation or disposal of Hazardous Materials, or (iii) occupational safety and health, industrial hygiene, land use or the protection of human, plant or animal health or welfare, in any manner applicable to the Company or any of its Subsidiaries or any Facility, including the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. (S) 9601 et seq.), the Hazardous Materials Transportation Act (49 U.S.C. (S) 1801 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. (S) 6901 et seq.), the Federal Water Pollution Control Act (33 U.S.C. (S) 1251 et seq.), the Clean Air Act (42 U.S.C. (S) 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. (S) 2601 et seq.), the Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. (S) 136 et seq.), the Occupational Safety and Health Act (29 U.S.C. (S) 651 et seq.), the Oil Pollution Act (33 U.S.C. (S) 2701 et seq.) and the Emergency Planning and Community Right-to-Know Act (42 U.S.C. (S) 11001 et seq.), each as amended or supplemented, any analogous present or future state or local statutes or laws, and any regulations promulgated pursuant to any of the foregoing. II-6 "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor thereto. "ERISA Affiliate", as applied to any Person, means (a) any corporation that is a member of a controlled group of corporations within the meaning of Section 414(b) of the Internal Revenue Code of which that Person is a member; (b) any trade or business (whether or not incorporated) that is a member of a group of trades or businesses under common control within the meaning of Section 414(c) of the Internal Revenue Code of which that Person is a member; and (c) any member of an affiliated service group within the meaning of Section 414(m) or (o) of the Internal Revenue Code of which that Person, any corporation described in clause (a) above or any trade or business described in clause (b) above is a member. Any former ERISA Affiliate of the Company or any of its Subsidiaries shall continue to be considered an ERISA Affiliate of the Company or such Subsidiary within the meaning of this definition with respect to the period such entity was an ERISA Affiliate of the Company or such Subsidiary and with respect to liabilities arising after such period for which Company or such Subsidiary could be liable under the Internal Revenue Code or ERISA. "ERISA Event" means (a) a "reportable event" within the meaning of Section 4043 of ERISA and the regulations issued thereunder with respect to any Pension Plan of the Company or any of its Subsidiaries (excluding those for which the provision for 30-day notice to the PBGC has been waived by regulation); (b) the failure to meet the minimum funding standard of Section 412 of the Internal Revenue Code with respect to any Pension Plan of the Company or any of its Subsidiaries (whether or not waived in accordance with Section 412(d) of the Internal Revenue Code) or the failure by the Company or any of its Subsidiaries to make by its due date a required installment under Section 412(m) of the Internal Revenue Code with respect to any Pension Plan or the failure by the Company or any of its Subsidiaries to make any required contribution to a Multiemployer Plan; (c) the provision by the administrator of any Pension Plan of the Company or any of its Subsidiaries pursuant to Section 4041(a)(2) of ERISA of a notice of intent to terminate such plan in a distress termination described in Section 4041(c) of ERISA; (d) the withdrawal by the Company, any of its Subsidiaries or any of their respective ERISA Affiliates from any Pension Plan with two or more contributing sponsors or the termination of any such Pension Plan resulting in liability pursuant to Section 4063 or 4064 of ERISA; (e) the institution by the PBGC of proceedings to terminate any Pension Plan of the Company or any of its Subsidiaries, or the occurrence of any event or condition that might constitute grounds under ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan of the Company or any of its Subsidiaries; (f) the imposition of liability on the Company, any of its Subsidiaries or any of their respective ERISA Affiliates pursuant to Section 4062(e) or 4069 of ERISA or by reason of the application of Section 4212(c) of ERISA; (g) the withdrawal of the Company, any of its Subsidiaries or any of their respective ERISA Affiliates in a complete or partial withdrawal (within the meaning of Sections 4203 and 4205 of II-7 ERISA) from any Multiemployer Plan if there is any potential liability therefor, or the receipt by the Company, any of its Subsidiaries or any of their respective ERISA Affiliates of notice from any Multiemployer Plan that it is in reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA, or that it intends to terminate or has terminated under Section 4041A or 4042 of ERISA; (h) the occurrence of an act or omission that could give rise to the imposition on the Company, any of its Subsidiaries or any of their respective ERISA Affiliates of fines, penalties, taxes or related charges under Chapter 43 of the Internal Revenue Code or under Section 409, Section 502(c), (i) or (l), or Section 4071 of ERISA in respect of any Employee Benefit Plan; (i) the assertion of a material claim (other than routine claims for benefits) against any Employee Benefit Plan of the Company or any of its Subsidiaries other than a Multiemployer Plan or the assets thereof, or against the Company, any of its Subsidiaries or any of their respective ERISA Affiliates in connection with any Employee Benefit Plan; (j) receipt from the Internal Revenue Service of notice of the failure of any Pension Plan of the Company or any of its Subsidiaries (or any other Employee Benefit Plan of the Company or any of its Subsidiaries intended to be qualified under Section 401(a) of the Internal Revenue Code) to qualify under Section 401(a) of the Internal Revenue Code, or the failure of any trust forming part of any Pension Plan of the Company or any of its Subsidiaries to qualify for exemption from taxation under Section 501(a) of the Internal Revenue Code; or (k) the imposition of a Lien pursuant to Section 401(a)(29) or 412(n) of the Internal Revenue Code or pursuant to ERISA with respect to any Pension Plan of the Company or any of its Subsidiaries. "Event of Default" has the meaning specified in Section 10.1. "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, and the regulations promulgated and the rulings issued from time to time thereunder. "Existing Senior Subordinated Note Indenture" means the Indenture, dated as of March 16, 1989, between Thortec International, Inc. and MTrust Corp, National Association, as amended by Amendment Number 1 and Amendment Number 2, as such indenture may be further amended from time to time to the extent permitted under Section 9.13(b). "Existing Senior Subordinated Notes" means the Company's 8 5/8% Senior Subordinated Notes due 2004 in the original aggregate principal amount of $36,814,500 and the remaining aggregate principal amount of $6,455,000 as of the Closing Date. "Existing Subordinated Agreements" means, collectively, the Existing Senior Subordinated Note Indenture and the Existing Subordinated Note Indenture. II-8 "Existing Subordinated Indebtedness" means, collectively, the Existing Senior Subordinated Notes and the Existing Subordinated Notes. "Existing Subordinated Note Indenture" means the Indenture, dated as of February 15, 1987, between the Company and The Bank of New York as assignee of First Interstate Bank of California, as amended by Amendment Number 1, as such indenture may be further amended from time to time to the extent permitted under Section 9.13(b). "Existing Subordinated Notes" means the Company's 6 1/2% Convertible Subordinated Notes due 2012 in the original aggregate principal amount of $57,500,000 and the remaining aggregate principal amount of $1,833,000 as of the Closing Date. "Facilities" means any and all real property (including all buildings, fixtures or other improvements located thereon) now, hereafter or heretofore owned, leased, operated or used by the Company or any of its Subsidiaries or any of their respective predecessors or Affiliates. "Financial Plan" has the meaning assigned to that term in Section 8.1(l). "Fiscal Quarter" means a fiscal quarter of any Fiscal Year. "Fiscal Year" means the fiscal year of the Company and its Subsidiaries ending on October 31 of each calendar year. For purposes of this Agreement, any particular Fiscal Year shall be designated by reference to the calendar year in which such Fiscal Year ends. "Fixed Rate Rollover Notes" has the meaning assigned to that term in Section 7.6. "Foreign Subsidiary" means any Subsidiary formed or organized under the laws of a jurisdiction other than a state of the United States of America. "GAAP" means generally accepted accounting principles in effect in the United States of America and applied on a consistent basis. "Global Note" has the meaning specified in Section 8.14. "Governmental Authority" means any nation or government, any state, province, city, municipal entity or other political subdivision thereof, and any governmental, executive, legislative, judicial, administrative or regulatory agency, department, authority, instrumentality, commission, board or similar body, whether federal, state, provincial, territorial, local or foreign. II-9 "Governmental Authorization" means any authorization, approval, consent, franchise, license, covenant, order, ruling, permit, certification, exemption, notice, declaration or similar right, undertaking or other action of, to or by, or any filing, qualification or registration with, any Governmental Authority necessary in order for the Company or any of its Subsidiaries (a) to own or lease and operate their respective property and assets or to conduct their respective businesses, (b) to issue and sell the Notes pursuant to the terms of this Agreement, and to perform their other Obligations under or in respect of the Note Documents and (c) to consummate the Refinancing. "Hazardous Materials" means (a) any chemical, material or substance at any time defined as or included in the definition of "hazardous substances", "hazardous wastes", "hazardous materials", "extremely hazardous waste", "acutely hazardous waste", "radioactive waste", "biohazardous waste", "pollutant", "toxic pollutant", "contaminant", "restricted hazardous waste", "infectious waste", "toxic substances", or any other term or expression intended to define, list or classify substances by reason of properties harmful to health, safety or the indoor or outdoor environment (including harmful properties such as ignitability, corrosivity, reactivity, carcinogenicity, toxicity, reproductive toxicity, "TCLP toxicity" or "EP toxicity" or words of similar import under any applicable Environmental Laws); (b) any oil, petroleum, petroleum fraction or petroleum derived substance; (c) any drilling fluids, produced waters and other wastes associated with the exploration, development or production of crude oil, natural gas or geothermal resources; (d) any flammable substances or explosives; (e) any radioactive materials; (f) any asbestos- containing materials; (g) urea formaldehyde foam insulation; (h) electrical equipment that contains any oil or dielectric fluid containing polychlorinated biphenyls; (i) pesticides; and (j) any other chemical, material or substance, exposure to which is prohibited, limited or regulated by any Governmental Authority or that may or could pose a hazard to the health and safety of the owners, occupants or any Persons in the vicinity of any Facility or to the indoor or outdoor environment. "Hazardous Materials Activity" means any past, current, proposed or threatened activity, event or occurrence involving any Hazardous Materials, including the use, manufacture, possession, storage, holding, presence, existence, location, Release, threatened Release, discharge, placement, generation, transportation, processing, construction, treatment, abatement, removal, remediation, disposal, disposition or handling of any Hazardous Materials, and any corrective action or response action with respect to any of the foregoing. "Holder" means, with respect to any Note or Rollover Note, the Person in whose name such Note or Rollover Note is registered in the register maintained by the Company pursuant to Section 11.1. "Inactive Subsidiary" has the meaning assigned to that term in Section 4.4(c). II-10 "Indebtedness", as applied to any Person, means (a) all indebtedness for borrowed money, (b) that portion of obligations with respect to Capital Leases that is properly classified as a liability on a balance sheet in conformity with GAAP, (c) notes payable and drafts accepted representing extensions of credit whether or not representing obligations for borrowed money, (d) any obligation owed for all or any part of the deferred purchase price of property or services (excluding any such obligations incurred under ERISA), which purchase price is (i) due more than six months from the date of incurrence of the obligation in respect thereof or (ii) evidenced by a note or similar written instrument, excluding, in the case of both clauses (i) and (ii), accounts receivable from the Company and its Subsidiaries arising in the ordinary course of business and (e) all indebtedness secured by any Lien on any property or asset owned or held by that Person regardless of whether the indebtedness secured thereby shall have been assumed by that Person or is nonrecourse to the credit of that Person. Obligations under "Interest Rate Agreements" and "Currency Agreements" constitute (A) in the case of "Hedge Agreements" (as those terms are defined in the Senior Credit Agreement), Contingent Obligations, and (B) in all other cases, Investments, and in neither case constitute Indebtedness. "Indemnified Liabilities" has the meaning specified in Section 13.2(a). "Indemnified Party" has the meaning specified in Section 13.2(a). "Institutional Investor" means any bank, trust company, savings and loan association or other financial institution, any pension plan, any investment company, any insurance company, any broker or dealer or any other similar financial institution or entity, regardless of legal form that meets the definition of a "qualified institutional buyer" under Rule 144A of the Securities Act. "Interest Payment Date" has the meaning specified therefor in the respective Note or Rollover Note. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated and the rulings issued from time to time thereunder. "Investment" means (a) any direct or indirect purchase or other acquisition by the Company or any of its Subsidiaries of, or of a beneficial interest in, any Securities of any other Person (including any Subsidiary of the Company), (b) any direct or indirect redemption, retirement, purchase or other acquisition for value, by any Subsidiary of the Company from any Person other than the Company or any of its Subsidiaries, of any equity Securities of such Subsidiary, (c) any direct or indirect loan, advance (other than advances to employees for moving, entertainment and travel expenses, drawing accounts and similar expenditures in the ordinary course of business) or capital contribution by the II-11 Company or any of its Subsidiaries to any other Person, including all indebtedness and accounts receivable from that other Person that, in the case of accounts receivable from Persons other than the Company and its Subsidiaries, are not current assets or did not arise from sales to that other Person in the ordinary course of business and, in the case of accounts receivable from the Company and its Subsidiaries, did not arise in the ordinary course of business, or (d) "Interest Rate Agreements" or "Currency Agreements" not constituting "Hedge Agreements" (as those terms are defined in the Senior Credit Agreement). The amount of any Investment shall be the original cost of such Investment plus the cost of all additions thereto, without any adjustments for increases or decreases in value, or write-ups, write-downs or write-offs with respect to such Investment and minus the amount of any return of capital contributed in respect of any Investment (not to exceed the original cost of such Investment plus the cost of all additions thereto). "Joint Venture" means a joint venture, partnership or other similar arrangement, whether in corporate, partnership or other legal form; provided that in no event shall any Subsidiary of any Person be considered to be a Joint Venture to which such Person is a party. "Lien" means any lien, mortgage, pledge, assignment, security interest, charge or encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof, and any agreement to give any security interest) and any option, trust or other preferential arrangement having the practical effect of any of the foregoing. "Make-Whole Premium" means, with respect to any Fixed Rate Rollover Note, an amount equal to the excess, if any, of the Discounted Value of the unpaid principal amount of such Fixed Rate Rollover Note and of the interest payments due in respect of such Fixed Rate Rollover Note to be paid from the proposed redemption or repayment date to the respective scheduled payment or maturity date thereof over such principal amount. "Material Adverse Effect" means (a) a material adverse effect upon the business, financial condition, operations, performance, properties or prospects of the Company and its Subsidiaries, taken as a whole, or (b) the material impairment of the ability of any Obligor to perform, or of any Holder of a Note or Rollover Note to enforce, the Obligations of the Obligors under the Note Documents. "Merger" means the merger between the Merger Subsidiary and DMG in which DMG will be the surviving corporation and a wholly-owned Subsidiary of the Company. "Merger Agreement" means that certain Agreement and Plan of Merger by and among DMG, the Company and the Merger Subsidiary, dated as of May 5, 1999 in the form delivered to the Holders of the Notes prior to their execution of this Agreement and II-12 as such agreement may be amended from time to time thereafter to the extent permitted under Section 9.13(a). "Merger Subsidiary" means Demeter Acquisition Corporation, a Delaware corporation, and a wholly-owned Subsidiary of the Company. "MS" means Morgan Stanley Senior Funding, Inc. "Multiemployer Plan" means any Employee Benefit Plan that is a "multiemployer plan" as defined in Section 3(37) of ERISA. "Net Cash Proceeds" means, with respect to the issuance or incurrence of any Indebtedness by any Person, or any Asset Sale, as the case may be, the aggregate amount of cash received from time to time (whether as initial consideration or through payment or disposition of deferred consideration) by or on behalf of such Person for its own account in connection with any such transaction, after deducting therefrom only (a) brokerage commissions, underwriting fees and discounts, legal fees, finder's fees and other similar fees and commissions, (b) the amount of taxes payable in connection with or as a result of such transaction, in each case to the extent, but only to the extent, that the amounts so deducted are, at the time of receipt of such cash, actually paid or payable to a Person that is not an Affiliate of such Person and are properly attributable to such transaction or to the property or asset that is the subject thereof and (c) payment of the outstanding principal amount of, premium or penalty, if any, and interest on any Indebtedness (other than the Indebtedness under the Senior Credit Agreement) that is secured by a Lien on the assets in question and that is to be repaid under the terms thereof as a result of such Asset Sale. "Net Equity Securities Proceeds" means the cash proceeds, net of underwriting discounts and commissions and other reasonable costs and expenses associated therewith, including without limitation, reasonable legal fees and expenses of the sale or issuance by any Person of any shares of its capital stock (or other ownership or profit interests therein), any securities convertible into or exchangeable for shares of its capital stock (or other ownership or profit interests therein) or any warrants, options or other rights for the purchase or acquisition of any shares of its capital stock (or other ownership or profit interests therein). "Non-payment Event of Default" means any event (other than a Payment Event of Default) the occurrence of which entitles one or more Persons to accelerate the maturity of any Senior Indebtedness. "Note Documents" means, collectively, this Agreement, the Notes, the Rollover Notes, the Secondary Notes, the Rollover Notes Registration Rights Agreement, the Warrant Agreements, the Warrants, and the Subsidiary Guaranties and all other II-13 agreements, instruments and other documents evidencing any Obligation of any of the Obligors, in each case as such agreement, instrument or other document may be amended, supplemented or otherwise modified hereafter from time to time in accordance with the terms thereof and Section 15. "Notes" has the meaning specified in Section 1. "Obligation" means, with respect to any Person, any payment, performance or other obligation of such Person of any kind, including, without limitation, any liability of such Person on any claim, whether or not the right of any creditor to payment in respect of such claim is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, disputed, undisputed, legal, equitable, secured or unsecured, and whether or not such claim is discharged, stayed or otherwise affected by any proceeding referred to in Section 10.1(g). Without limiting the generality of the foregoing, the Obligations of the Obligors under the Note Documents include the obligation to pay principal, interest, premiums, charges, expenses, fees, reasonable attorneys' fees and disbursements, indemnities and other amounts payable by any of the Obligors under any of the Note Documents. "Obligors" means, collectively, the Company and each Subsidiary Guarantor. "Officer's Certificate" means, as applied to any corporation, a certificate executed on behalf of such corporation by its president or by its chief financial officer; provided that every Officer's Certificate with respect to the compliance with a condition precedent to the purchase of any Notes hereunder shall include: (a) a statement that the officer making or giving such Officer's Certificate has read such condition and any definitions or other provisions contained in this Agreement relating thereto, (b) a statement that, in the opinion of the signer, he or she has made or has caused to be made such examination or investigation as is necessary to enable such signer to express an informed opinion as to whether or not such condition has been complied with, and (c) a statement as to whether, in the opinion of the signer, such condition has been complied with. "Operating Lease" as applied to any Person, means any lease (including leases that may be terminated by the lessee at any time) of any property (whether real, personal or mixed) that is not a Capital Lease other than any such lease under which that Person is the lessor. "Organizational Documents" means (a) with respect to any corporation, its certificate or articles of incorporation and its bylaws, (b) with respect to any limited partnership, its certificate of limited partnership and its partnership agreement, (c) with respect to any general partnership, its partnership agreement, (d) with respect to any limited liability company, its articles or certificate of organization and its operating II-14 agreement and (e) with respect to any other entity, its equivalent organizational, governing documents. "Other Taxes" has the meaning specified in Section 13.3(b). "Payment Blockage Period" has the meaning specified in Section 20.3(b). "Payment Event of Default" means any default in the payment of any principal of, or premium, if any, or interest on, Senior Indebtedness beyond any applicable grace period with respect thereto, whether at stated maturity or as the result of acceleration or otherwise. "PBGC" means the Pension Benefit Guaranty Corporation referred to and defined in ERISA, or any successor thereto. "Pension Plan" means any Employee Benefit Plan, other than a Multiemployer Plan, that is subject to Section 412 of the Internal Revenue Code or Section 302 of ERISA. "Permitted Encumbrances" means the following types of Liens (excluding any such Lien imposed pursuant to Section 401(a)(29) or 412(n) of the Internal Revenue Code or by ERISA, any such Lien relating to or imposed in connection with any Environmental Claim: (a) Liens for taxes, assessments or governmental charges or claims the payment of which is not, at the time, required by Section 8.3; (b) statutory Liens of landlords, statutory Liens of banks and rights of set-off, statutory Liens of carriers, warehousemen, mechanics, repairmen, workmen and materialmen, and other Liens imposed by law, in each case incurred in the ordinary course of business (i) for amounts not yet overdue or (ii) for amounts that are overdue and that (in the case of any such amounts overdue for a period in excess of five days) are being contested in good faith by appropriate proceedings, so long as such reserves or other appropriate provisions, if any, as shall be required by GAAP shall have been made for any such contested amounts; (c) Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security, or to secure the performance of tenders, statutory obligations, surety, bid and appeal bonds, bids, leases, government contracts, trade contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money); II-15 (d) any attachment or judgment Lien not constituting an Event of Default under Section 10.1(h) or (i); (e) leases or subleases granted to third parties not interfering in any material respect with the ordinary conduct of the business of the Company or any of its Subsidiaries; (f) easements, rights-of-way, restrictions, encroachments, and other minor defects or irregularities in title, in each case that do not and will not interfere in any material respect with the ordinary conduct of the business of the Company or any of its Subsidiaries; (g) any (i) interest or title of a lessor or sublessor under any lease not prohibited by this Agreement, (ii) restriction or encumbrance that the interest or title of such lessor or sublessor may be subject to, or (iii) subordination of the interest of the lessee or sublessee under such lease to any restriction or encumbrance referred to in the preceding clause (ii), so long as the holder of such restriction or encumbrance agrees to recognize the rights of such lessee or sublessee under any such material lease; (h) Liens arising from filing UCC financing statements relating solely to leases and Liens permitted by this Agreement; (i) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods; (j) any zoning or similar law or right reserved to or vested in any governmental office or agency to control or regulate the use of any real property; and (k) licenses of patents, trademarks and other intellectual property rights granted by the Company or any of its Subsidiaries in the ordinary course of business and not interfering in any material respect with the ordinary conduct of the business of the Company or such Subsidiary. "Permitted Junior Securities" has the meaning specified in Section 20.2. "Person" means and includes natural persons, corporations, limited partnerships, general partnerships, limited liability companies, limited liability partnerships, joint stock companies, Joint Ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts or other organizations, whether or not legal entities, and governments (whether federal, state or local, domestic or foreign, and including political subdivisions thereof) and agencies or other administrative or regulatory bodies thereof. II-16 "PIK Portion" has the meaning specified in Section 1. "Pre-Commitment Information" means all of the information furnished to any Purchaser or any of its Affiliates, or any of its respective officers, directors, employees, advisors or other representatives, on or prior to May 3, 1999 by or on behalf of, or obtained by any of the foregoing Persons on or prior to May 3, 1999 from, the Company or any of its Subsidiaries or other Affiliates (including, without limitation, presentations by or on behalf of the Company and discussions among the Company or any of its Affiliates or other authorized representatives with any of the foregoing Persons) relating to the Company or any of its Subsidiaries or other Affiliates, the sale and purchase of the Notes, the consummation of the Merger or any of the other transactions contemplated hereby or thereby, or to any of the legal, structural, financial, accounting, managerial, tax or operational aspects of any of the foregoing (both prior to and after giving effect to the sale and purchase of the Notes). "Proceedings" has the meaning assigned to that term in subsection 8.1(i). "property" or "properties" means, unless otherwise expressly stated in this Agreement, real or personal property of any kind, tangible or intangible, choate or inchoate. "Purchase Date" has the meaning specified in Section 2.2. "Purchasers" means, collectively, MS and Wells Fargo. "RCBA" means RCBA Strategic Partners, L.P., a Delaware limited partnership. "RCBA Registration Rights Agreement" means the Registration Rights Agreement dated as of the initial Purchase Date between the Company and RCBA, as such agreement may be amended from time to time to the extent permitted under Section 9.13(a). "Refinancing" means the private placement or public offering and sale by the Company of Refinancing Securities in an amount of at least $200,000,000 in gross proceeds prior to the Rollover Date and $205,500,000 in gross proceeds thereafter. "Refinancing Securities" means high-yield debt securities, including redeemable preferred stock, of the Company. "Reinvestment Yield" means, with respect to the principal amount of any Fixed Rate Rollover Note, 0.50% over the yield to maturity implied by (i) the yields reported, as of 10:00 a.m. (New York City time) on the second Business Day preceding the proposed redemption or repayment date with respect to such principal amount, on the display designated as "Page 678" on the Dow Jones Telerate Screen (or such other display II-17 as may replace Page 678 on the Dow Jones Telerate Screen) for actively traded U.S. Treasury securities having a maturity closest to the maturity of such Fixed Rate Rollover Note as of such date, or (ii) if such yields are not reported as of such time or the yields reported as of such time are not ascertainable, the Treasury Constant Maturity Series Yields reported, for the latest day for which such yields have been so reported as of the second Business Day preceding such date with respect to such principal amount, in Federal Reserve Statistical Release H.15 (519) (or any comparable successor publication) for actively traded U.S. Treasury securities having a maturity closest to the maturity of such Fixed Rate Rollover Note as of such date. Such implied yield will be determined, if necessary, by (a) converting U.S. Treasury bill quotations to bond- equivalent yields in accordance with accepted financial practice and (b) interpolating linearly between (1) the actively traded U.S. Treasury security with the maturity closest to and greater than the maturity of such Fixed Rate Rollover Note and (2) the actively traded U.S. Treasury security with the maturity closest to and less than the maturity of such Fixed Rate Rollover Note. "Related Agreements" means, collectively, the Merger Agreement, the Senior Credit Agreement (and any guaranty thereof), the Securities Purchase Agreement, the Company Certificates of Designation and the RCBA Registration Rights Agreement. "Release" means any release, spill, emission, leaking, pumping, pouring, injection, escaping, deposit, disposal, discharge, dispersal, dumping, leaching or migration of Hazardous Materials into the indoor or outdoor environment (including, without limitation, the abandonment or disposal of any barrels, containers or other closed receptacles containing any Hazardous Materials), including the movement of any Hazardous Materials through the air, soil, surface water or groundwater. "Required Holders" means, at any time, the Holders of at least a majority in interest of the aggregate principal amount of all of the Notes or Rollover Notes outstanding at such time (excluding from any calculation thereof any Notes or Rollover Notes then owned or held by the Company or any of its Subsidiaries or other Affiliates). "Requirements of Law" means, with respect to any Person, all laws, constitutions, statutes, treaties, ordinances, rules and regulations, all orders, writs, decrees, injunctions, judgments, determinations or awards of an arbitrator, a court or any other Governmental Authority, and all Governmental Authorizations, binding upon or applicable to such Person or to any of its properties, assets or businesses. "Responsible Officer" means, with respect to any Person, the chief executive officer, the chief financial officer, the president, the general counsel or any other employee who is a member of the Board of Directors of such Person. II-18 "Restricted Junior Payment" means (a) any dividend or other distribution, direct or indirect, on account of any shares of any class of stock of the Company now or hereafter outstanding, except a dividend payable solely in shares of that class of stock to the holders of that class, (b) any redemption, retirement, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any shares of any class of stock of the Company now or hereafter outstanding, (c) 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 stock of the Company now or hereafter outstanding and (d) any payment or prepayment of principal of, premium, if any, or interest on, or redemption, purchase, retirement, defeasance (including in-substance or legal defeasance), sinking fund or similar payment with respect to, any Subordinated Indebtedness. "Rollover" has the meaning specified in Section 7.1. "Rollover Date" means June 9, 2000. "Rollover Notes" has the meaning specified in Section 7.1 and shall include if applicable all Secondary Notes issued in respect of Rollover Notes or such Secondary Notes and any Fixed Rate Rollover Notes and any Rollover Notes issued in substitution for any of the foregoing pursuant to Section 11 of this Agreement. "Rollover Notes Registration Rights Agreement" has the meaning specified in Section 7.3. "Secondary Notes" has the meaning specified in Section 1. "Securities" means any stock, shares, partnership interests, voting trust certificates, certificates of interest or participation in any profit-sharing agreement or arrangement, options, warrants, bonds, debentures, notes, or other evidences of indebtedness, secured or unsecured, convertible, subordinated or otherwise, or in general any instruments commonly known as "securities" or any certificates of interest, shares or participations in temporary or interim certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire, any of the foregoing. "Securities Act" means the Securities Act of 1933, as amended from time to time. "Securities Purchase Agreement" means the Securities Purchase Agreement dated as of May 5, 1999 by and between RCBA and Company, in the form delivered to the Purchasers prior to their execution of this Agreement and as such agreement may be amended from time to time thereafter to the extent permitted under Section 9.13(a). "Senior Credit Agreement" means the Credit Agreement dated as of June 9, 1999 among the Company, Wells Fargo, the financial institutions party thereto as "Lenders" II-19 from time to time, Wells Fargo, as Co-Lead Arranger and Administrative Agent, and MS, as Co-Lead Arranger and Syndication Agent (and any amendments thereto and any refinancing, renewal, extension or replacement thereof) that provides for credit facilities in an aggregate principal amount not to exceed $550,000,000. "Senior Financial Officer" means, with respect to any Person, the chief financial officer, the principal accounting officer, the treasurer or the controller of such Person. "Senior Indebtedness" means whether outstanding on the Purchase Date or thereafter issued (i) prior to the Rollover Date, all obligations arising under the Senior Credit Agreement (including any guaranty thereof) including interest (including interest accruing on or after the filing of, or that would have accrued but for the filing of, any petition in bankruptcy or for reorganization relating to the Company or any of its Subsidiaries whether or not a claim for post-filing interest is allowed in such proceeding) and premium, if any, thereon, and other monetary amounts (including fees, expenses, reimbursement obligations under letters of credit and indemnities) owing in respect thereof and (ii) after the Rollover Date, all obligations referred to in subclause (i) hereof plus all additional Indebtedness arising under the Senior Credit Agreement provided that such Indebtedness can be incurred in compliance with Section 9A.1. "Significant Subsidiary" means, at any date of determination, any Subsidiary of the Company that, together with its Subsidiaries, (a) for the most recent Fiscal Year of the Company, accounted for more than 10% of the consolidated revenues of the Company and its Subsidiaries or (b) as of the end of such Fiscal Year, was the owner of more than 10% of the consolidated assets of the Company and its Subsidiaries, all as set forth on the most recently available consolidated financial statements of the Company for such Fiscal Year. "Stockholder Rights Agreement" means the Rights Agreement dated as of March 28, 1997 between Dames & Moore, Inc. and ChaseMellon Shareholder Services LLC. "Subordinated Indebtedness" means any Indebtedness of the Company or any of its Subsidiaries subordinated in right of payment to the Obligations of any Obligor under the Note Documents pursuant to documentation containing maturities, amortization schedules, covenants, defaults, remedies, subordination provisions and other material terms in form and substance reasonably satisfactory to the Required Holders. "Subsequent Acquisition" has the meaning assigned to that term in Section 9.6(f). "Subsidiary" means, with respect to any Person, any corporation, partnership, limited liability company, association, or other business entity of which more than 50% of the total voting power of shares of stock or other ownership interests entitled (without regard to the occurrence of any contingency) to vote in the election of the Person or Persons (whether directors, managers, trustees or other Persons performing similar II-20 functions) having the power to direct or cause the direction of the management and policies 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; provided that in no event shall any Joint Venture be considered to be a Subsidiary of any Person. "Subsidiary Guarantor" means any Domestic Subsidiary of the Company that executes and delivers a Subsidiary Guaranty on the Purchase Date or from time to time thereafter pursuant to Section 8.7. "Subsidiary Guaranty" means the Subsidiary Guaranty executed and delivered by the Subsidiary Guarantors on the Purchase Date and from time to time thereafter in accordance with Section 8.7 substantially in the form of Exhibit D hereto, as such Subsidiary Guaranty may hereafter be amended, supplemented or otherwise modified from time to time. "Target" has the meaning specified in Section 9.6(f). "Taxes" has the meaning specified in Section 13.3(a). "Tender Offer" means the offer to purchase for cash all of the outstanding shares of capital stock of DMG by the Company pursuant to the Tender Offer Materials. "Tender Offer Materials" means the Tender Offer Statement on Schedule 14D-1 filed by Merger Subsidiary on May 11, 1999 with the Securities and Exchange Commission pursuant to Section 14(d)(1) of the Exchange Act, together with all exhibits thereto, including the form of "Offer to Purchase For Cash", set forth in Exhibit (a)(1) thereto, and any amendments prior to the date of this Agreement that relate only to any extension of time during which the offer to purchase remains outstanding or to the results of the Tender Offer and other amendments that are approved by the Required Holders. "Tendered Shares" means all shares of capital stock of DMG tendered to and purchased by the Merger Subsidiary pursuant to the Tender Offer. "Total Commitment" means an amount equal to the aggregate Commitments of all Purchasers hereunder. "Total Purchase Price" means, with respect to any Subsequent Acquisition, (a) the sum, without duplication, of (i) the aggregate amount of all consideration payable by or on behalf of the Company or any of its Subsidiaries in connection with such Subsequent Acquisition in cash, property (including Securities of the Company), services, notes, bonds, debentures or other debt instruments, (ii) the aggregate principal amount of all Indebtedness assumed by the Company or any or its Subsidiaries in connection with such Subsequent Acquisition, (iii) the reasonable estimate of the amount of any II-21 Contingent Obligation of the Company or any of its Subsidiaries incurred in connection with such Subsequent Acquisition, and (iv) the aggregate amount of any Indebtedness incurred by the Company or any Subsidiary in connection with such Subsequent Acquisition minus (b) all cash and Cash Equivalents acquired by the Company or any of its Subsidiaries as a result of such Subsequent Acquisition. "Transaction" means, collectively, the Tender Offer, the Merger, this Agreement, the Senior Credit Agreement, the Securities Purchase Agreement and the transactions contemplated hereby or thereby. "Warrant Agreements" means the Warrant Agreements in the form of Exhibit H hereto to be issued pursuant to Section 7 of this Agreement. "Warrants" means the warrants issued and to be issued by the Company pursuant to the Warrant Agreements. "Wells Fargo" means Wells Fargo Bank, National Association. II-22 SCHEDULE III - ------------ DEFINED TERMS (NEGATIVE COVENANTS FOR ROLLOVER NOTES) --------------------------------------- Solely with respect to Section 9A of this Agreement and as otherwise specified in this Agreement, the following terms shall have the respective meanings set forth below (such meanings to be equally applicable to both the singular and plural forms of the term defined): "Acquired Indebtedness" means Indebtedness of a Person existing at the time such Person becomes a Restricted Subsidiary or assumed in connection with an Asset Acquisition by a Restricted Subsidiary; provided that Indebtedness of such Person which is redeemed, defeased, retired or otherwise repaid at the time of or immediately upon consummation of the transactions by which such Person becomes a Restricted Subsidiary or such Asset Acquisition shall not be Acquired Indebtedness. "Adjusted Consolidated Net Income" means, for any period, the aggregate net income (or loss) of the Company and its Restricted Subsidiaries for such period determined in conformity with GAAP; provided that the following items shall be excluded in computing Adjusted Consolidated Net Income (without duplication): (1) the net income (or loss) of any Person that is not a Restricted Subsidiary, except to the extent of the amount of dividends or other distributions actually paid to the Company or any Restricted Subsidiary by such Person during such period; (2) solely for purposes of calculating the amount of Restricted Payments that may be made pursuant to Section 9A.3(4)(C), the net income (or loss) of any Person accrued prior to the date it becomes a Restricted Subsidiary or is merged into or consolidated with the Company or any of its Restricted Subsidiaries or all or substantially all of the property and assets of such Person are acquired by the Company or any of its Restricted Subsidiaries; (3) the net income of any Restricted Subsidiary to the extent that the declaration or payment of dividends or similar distributions by such Restricted Subsidiary of such net income is not at the time permitted by the operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to such Restricted Subsidiary; (4) any gains or losses (in each case on an after-tax basis) attributable to sales of assets outside the ordinary course of business of the Company and its Restricted Subsidiaries; (5) solely for purposes of calculating the amount of Restricted Payments that may be made pursuant to Section 9A.3(4)(C), any amount paid or accrued as dividends on Preferred Stock of the Company owned by Persons other than the Company and any of its Restricted Subsidiaries; (6) any non-cash compensation expense incurred in connection with the exercise of or paid or payable with Capital Stock (other than Disqualified Stock) of the Company or any options, warrants or other rights to acquire Capital Stock (other than Disqualified Stock) of the Company; (7) writeoffs of intangible assets, including research and development, relating to assets acquired by the Company and its Restricted Subsidiaries if such writeoffs are done in accordance with GAAP at the time of, or within one year after, such acquisition; and (8) all extraordinary gains and extraordinary losses (in each case on an after-tax basis). "Affiliate" means, as applied to any Person, any other Person directly or indirectly controlling, controlled by, or under direct or indirect common control with, such Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise. "Asset Acquisition" means (1) an investment by the Company or any of its Restricted Subsidiaries in any other Person pursuant to which such Person shall become a Restricted Subsidiary or shall be merged into or consolidated with the Company or any of its Restricted Subsidiaries; provided that such Person's primary business is related, ancillary or complementary to the businesses of the Company and its Restricted Subsidiaries on the date of such investment as determined in good faith by the Board of Directors or a Senior Officer of the Company, whose determination shall be conclusive, or (2) an acquisition by the Company or any of its Restricted Subsidiaries of the property and assets of any Person other than Company or any of its Restricted Subsidiaries that constitute substantially all of a division or line of business of such Person; provided that the property and assets acquired are related, ancillary or complementary to the businesses of the Company and its Restricted Subsidiaries on the date of such acquisition as determined in good faith by the Board of Directors or a Senior Officer of the Company, whose determination shall be conclusive. "Asset Disposition" means the sale or other disposition by the Company or any of its Restricted Subsidiaries (other than to the Company or another Restricted Subsidiary) of (1) all or substantially all of the Capital Stock of any Restricted Subsidiary or (2) all or substantially all of the assets that constitute a division or line of business of the Company or any of its Restricted Subsidiaries. "Asset Sale" means any sale, transfer or other disposition (including by way of merger, consolidation or sale-leaseback transaction) in one transaction or a series of related transactions by the Company or any of its Restricted Subsidiaries to any Person other than the Company or any of its Restricted Subsidiaries of (1) all or any of the Capital Stock of any Restricted Subsidiary, (2) all or substantially all of the property and assets of an operating unit or business of the Company or any of its Restricted Subsidiaries or (3) any other property and assets (other than the Capital Stock or other Investment in an Unrestricted Subsidiary) of the Company or any of its Restricted Subsidiaries outside the ordinary course of business of the Company or such Restricted Subsidiary and in each case, that is not governed by the provisions of this Agreement applicable to mergers, consolidations and sales of assets of the Company; provided that "Asset Sale" shall not include (a) any sales or other dispositions of inventory, receivables and other current assets, including cash and Temporary Cash Investments, (b) any sale, transfer, assignment or other disposition of damaged, worn out or other obsolete property in the ordinary course of business, (c) any sale, transfer, assignment or other disposition of assets having a fair market value of less than $1 million, or (d) any sales, transfers, assignments or other dispositions of assets constituting a Permitted Investment or Restricted Payment permitted to be made under Section 9A.3. "Average Life" means, at any date of determination with respect to any debt security, the quotient obtained by dividing (1) the sum of the products of (a) the number of years from such date of determination to the dates of each successive scheduled III-3 principal payment of such debt security and (b) the amount of such principal payment by (2) the sum of all such principal payments. "Board of Directors" means the board of directors of the Company or any committee thereof duly authorized to act for such board of directors. "Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Holders. "Capital Stock" means, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated, whether voting or non-voting) in equity of such Person, whether outstanding on the Rollover Date or issued thereafter, including, without limitation, all Common Stock and Preferred Stock. "Capitalized Lease" means, as applied to any Person, any lease of any property (whether real, personal or mixed) of which the discounted present value of the rental obligations of such Person as lessee, in conformity with GAAP, is required to be capitalized on the balance sheet of such Person. "Capitalized Lease Obligations" means the discounted present value of the rental obligations under a Capitalized Lease to the extent such obligation would appear as a liability upon the consolidated balance sheet of such Person in accordance with GAAP. "Consolidated EBITDA" means, for any period, Adjusted Consolidated Net Income for such period plus, to the extent such amount was deducted in calculating such Adjusted Consolidated Net Income: (1) Consolidated Interest Expense; (2) income taxes (other than income taxes (either positive or negative) attributable to extraordinary gains or losses or sales of assets); (3) depreciation expense; (4) amortization expense; and (5) all other non-cash items reducing Adjusted Consolidated Net Income (other than items that will require cash payments and for which an accrual or reserve is, or is required by GAAP to be, made), less all non-cash items increasing Adjusted Consolidated Net Income, all as determined on a consolidated basis for the Company and its Restricted Subsidiaries in conformity with GAAP; III-4 provided that, if any Restricted Subsidiary is not a Wholly Owned Restricted Subsidiary, Consolidated EBITDA shall be reduced (to the extent not otherwise reduced in accordance with GAAP) by an amount equal to (a) the amount of the Adjusted Consolidated Net Income attributable to such Restricted Subsidiary multiplied by (b) the percentage ownership interest in the income of such Restricted Subsidiary not owned on the last day of such period by the Company or any of its Restricted Subsidiaries. "Consolidated Interest Expense" means, for any period, the aggregate amount of interest in respect of Indebtedness (including, without limitation, amortization of original issue discount on any Indebtedness and the interest portion of any deferred payment obligation, calculated in accordance with the effective interest method of accounting; all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing; the net costs associated with Interest Rate Agreements; and Indebtedness that is Guaranteed or secured by the Company or any of its Restricted Subsidiaries), Preferred Stock dividends in respect of Preferred Stock of a Restricted Subsidiary, and all but the principal component of rentals in respect of Capitalized Lease Obligations paid, accrued or scheduled to be paid or to be accrued by the Company and its Restricted Subsidiaries during such period; excluding, however, (1) any amount of such interest of any Restricted Subsidiary if the net income of such Restricted Subsidiary is excluded in the calculation of Adjusted Consolidated Net Income pursuant to clause (3) of the definition thereof (but only in the same proportion as the net income of such Restricted Subsidiary is excluded from the calculation of Adjusted Consolidated Net Income pursuant to clause (3) of the definition thereof) and (2) any premiums, fees and expenses (and any amortization thereof) payable in connection with the D&M Acquisition and the financing of the D&M Acquisition, all as determined on a consolidated basis (without taking into account Unrestricted Subsidiaries) in conformity with GAAP. For purposes of the preceding sentence, Preferred Stock dividends shall be deemed to be an amount equal to the actual dividends paid divided by one minus the combined federal, state, local and foreign income tax rate applicable to the Company and its Subsidiaries (expressed as a decimal). "Convertible Subordinated Debentures" means the 6 1/2% Convertible Subordinated Debentures due 2012 of the Company issued pursuant to an Indenture dated as of February 15, 1987 between the Company and First Interstate Bank of California, as amended, and outstanding on the Rollover Date. "Currency Agreement" means any foreign exchange contract, currency swap agreement or other similar agreement or arrangement. "D&M Acquisition" means the consummation of the Tender Offer and the Merger. III-5 "D&M Financing" means the transactions entered into by the Company and its Restricted Subsidiaries to finance the D&M Acquisition, including (w) the sale of the Notes or Rollover Notes, (x) the Senior Credit Agreement, (y) the Securities Purchase Agreement and (z) the repayment of Indebtedness in connection with the D&M Acquisition and sale of the Notes or Rollover Notes. "Disqualified Stock" means any class or series of Capital Stock of any Person that by its terms or otherwise is (1) required to be redeemed prior to the Stated Maturity of the Rollover Notes, (2) redeemable at the option of the holder of such class or series of Capital Stock at any time prior to the Stated Maturity of the Rollover Notes or (3) convertible into or exchangeable for Capital Stock referred to in clause (1) or (2) above or Indebtedness having a scheduled maturity prior to the Stated Maturity of the Rollover Notes; provided that any Capital Stock that would not constitute Disqualified Stock but for provisions thereof giving holders thereof the right to require such Person to repurchase or redeem such Capital Stock upon the occurrence of an "asset sale" or "change of control" occurring prior to the Stated Maturity of the Rollover Notes shall not constitute Disqualified Stock if the "asset sale" or "change of control" provisions applicable to such Capital Stock are no more favorable to the holders of such Capital Stock than the provisions contained in Sections 6.2 and 9A.9 and such Capital Stock specifically provides that such Person will not repurchase or redeem any such stock pursuant to such provision prior to the Company's repurchase of such Rollover Notes as are required to be repurchased pursuant to Sections 6.2 and 9A.9. "fair market value" means the price that would be paid in an arm's- length transaction between an informed and willing seller under no compulsion to sell and an informed and willing buyer under no compulsion to buy, as determined in good faith by the Board of Directors or an Officer of the Company, whose determination shall be conclusive; provided that if the non cash amount is in excess of $10 million, such amount shall be determined in good faith by the Board of Directors, whose determination shall be conclusive if evidenced by a Board Resolution. "Fixed Charge Coverage Ratio" means, on any Transaction Date, the ratio of (1) the aggregate amount of Consolidated EBITDA for the then most recent four Fiscal Quarters prior to such Transaction Date for which reports have been filed with the Commission or provided to the Holders (the "Four Quarter Period") to (2) the aggregate Consolidated Interest Expense during such Four Quarter Period. In making the preceding calculation, (A) pro forma effect shall be given to any Indebtedness Incurred or repaid during the period (the "Reference Period") commencing on the first day of the Four Quarter Period and ending on and including the Transaction Date (other than Indebtedness Incurred or repaid under a revolving credit or similar arrangement to the extent of the commitment thereunder (or under any III-6 predecessor revolving credit or similar arrangement) in effect on the last day of such Four Quarter Period unless any portion of such Indebtedness is projected, in the reasonable judgment of the senior management of the Company, to remain outstanding for a period in excess of 12 months from the date of the Incurrence thereof), in each case as if such Indebtedness had been Incurred or repaid on the first day of the Reference Period; (B) Consolidated Interest Expense attributable to interest on any Indebtedness (whether existing or being Incurred) computed on a pro forma basis and bearing a floating interest rate shall be computed as if the rate in effect on the Transaction Date (taking into account any Interest Rate Agreement applicable to such Indebtedness if such Interest Rate Agreement has a remaining term in excess of 12 months or, if shorter, at least equal to the remaining term of such Indebtedness) had been the applicable rate for the entire period; (C) pro forma effect shall be given to Asset Dispositions and Asset Acquisitions (including giving pro forma effect to the application of proceeds of any Asset Disposition) that occur during such Reference Period as if they had occurred and such proceeds had been applied on the first day of such Reference Period; and (D) pro forma effect shall be given to asset dispositions and asset acquisitions (including giving pro forma effect to the application of proceeds of any asset disposition) that have been made by any Person that has become a Restricted Subsidiary or has been merged with or into the Company or any Restricted Subsidiary during such Reference Period and that would have constituted Asset Dispositions or Asset Acquisitions had such transactions occurred when such Person was a Restricted Subsidiary as if such asset dispositions or asset acquisitions were Asset Dispositions or Asset Acquisitions that occurred on the first day of such Reference Period; provided that to the extent that clause (C) or (D) of this sentence requires that pro forma effect be given to an Asset Acquisition or Asset Disposition, such pro forma calculation shall be based upon the four full Fiscal Quarters immediately preceding the Transaction Date of the Person, or division or line of business of the Person, that is acquired or disposed for which financial information is available. "Foreign Subsidiary" means any Subsidiary of the Company that is an entity that is a controlled foreign corporation under Section 957 of the Internal Revenue Code. "Guarantee" means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (1) to purchase or pay (or advance or supply funds for the III-7 purchase or payment of) such Indebtedness of such other Person (whether arising by virtue of partnership arrangements, or by agreements to keep- well, to purchase assets, goods, securities or services (unless such purchase arrangements are on arm's-length terms and are entered into in the ordinary course of business), to take-or-pay, or to maintain financial statement conditions or otherwise) or (2) entered into for purposes of assuring in any other manner the obligee of such Indebtedness of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided that the term "Guarantee" shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. "Incur" means, with respect to any Indebtedness, to incur, create, issue, assume, Guarantee or otherwise become liable for or with respect to, or become responsible for, the payment of, contingently or otherwise, such Indebtedness, including an "Incurrence" of Acquired Indebtedness; provided that neither the accrual of interest nor the accretion of original issue discount nor the issuance of pay-in-kind securities as an interest or dividend payment shall be considered an Incurrence of Indebtedness. "Indebtedness" means, with respect to any Person at any date of determination (without duplication): (1) all indebtedness of such Person for borrowed money to the extent such indebtedness would appear as a liability upon the consolidated balance sheet of such Person in accordance with GAAP; (2) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments to the extent such obligations would appear as a liability upon the consolidated balance sheet of such Person in accordance with GAAP; (3) all obligations of such Person in respect of letters of credit or other similar instruments (including reimbursement obligations with respect thereto, but excluding obligations with respect to letters of credit (including trade letters of credit) securing obligations (other than obligations described in (1) or (2) above or (5), (6) or (7) below) entered into in the ordinary course of business of such Person to the extent such letters of credit are not drawn upon or, if drawn upon, to the extent such drawing is reimbursed no later than the third Business Day following receipt by such Person of a demand for reimbursement); (4) all obligations of such Person to pay the deferred and unpaid purchase price of property or services, which purchase price is due more than six months after the date of placing such property in service or taking delivery and title thereto or the completion of such services, except Trade Payables; III-8 (5) all Capitalized Lease Obligations; (6) all Indebtedness of other Persons secured by a Lien on any asset of such Person, regardless of whether such Indebtedness is assumed by such Person; provided that the amount of such Indebtedness shall be the lesser of (A) the fair market value of such asset at such date of determination and (B) the amount of such Indebtedness; (7) all Indebtedness of other Persons Guaranteed by such Person to the extent such Indebtedness is Guaranteed by such Person; (8) all obligations to redeem or repurchase Preferred Stock of a Restricted Subsidiary; and (9) to the extent not otherwise included in this definition, obligations under Currency Agreements and Interest Rate Agreements (other than Currency Agreements and Interest Rate Agreements designed solely to protect the Company or its Restricted Subsidiaries against fluctuations in foreign currency exchange rates or interest rates and that do not increase the Indebtedness of the obligor outstanding at any time other than as a result of fluctuations in foreign currency exchange rates or interest rates or by reason of fees, indemnities and compensation payable thereunder). The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above and, with respect to contingent obligations, the maximum liability upon the occurrence of the contingency giving rise to the obligation, provided (A) that the amount outstanding at any time of any Indebtedness issued with original issue discount is the face amount of such Indebtedness less the remaining unamortized portion of the original issue discount of such Indebtedness at such time as determined in conformity with GAAP, (B) that money borrowed and set aside at the time of the Incurrence of any Indebtedness in order to prefund the payment of the interest on such Indebtedness shall not be deemed to be "Indebtedness" so long as such money is held to secure the payment of such interest, (C) that the amount of Indebtedness at any time of any Preferred Stock shall be the greater of its voluntary or involuntary liquidation preference and the maximum fixed redemption or repurchase price in respect thereof, (D) that Indebtedness shall not include III-9 (w) any liability for federal, state, local or other taxes, (x) obligations under performance, bid, surety, appeal or similar bonds provided in the ordinary course of business, (y) obligations arising in the ordinary course of business out of standby letters of credit covering workers' compensation, performance or similar obligations to the extent such letters of credit are not drawn upon or, if drawn upon, to the extent such drawing is reimbursed no later than the third Business Day following receipt by the issuer of such letters of credit a demand for reimbursement, or (z) obligations pursuant to agreements providing for indemnification, adjustment of purchase price or similar obligations, or Guarantees or letters of credit, performance, bid, surety, appeal or similar bonds securing any obligations of the Company or any of its Restricted Subsidiaries pursuant to such agreements, in any case Incurred in connection with the disposition of any business, assets or Restricted Subsidiary (other than Guarantees of Indebtedness Incurred by any Person acquiring all or any portion of such business, assets or Restricted Subsidiary for the purpose of financing such acquisition), so long as the principal amount does not to exceed the gross proceeds actually received by the Company or any Restricted Subsidiary in connection with such disposition. "Initial Subsidiary Guarantors" means (a) DMG; (b) Wholly Owned Subsidiaries of the Company that (i) are not Foreign Subsidiaries and (ii) the aggregate annual gross revenues of which constitute at least 90% of the aggregate annual gross revenues of the Company and its Restricted Subsidiaries that are not Foreign Subsidiaries or Subsidiaries of DMG, on a consolidated basis; and (c) to the extent not otherwise included among the Subsidiaries described in clauses (a) or (b), all of the Wholly Owned Subsidiaries of the Company that (i) are not Foreign Subsidiaries and (ii) have annual gross revenues in excess of $5 million. The determinations of revenue amounts shall be based upon the most recently filed United States income tax returns. "Interest Rate Agreement" means any interest rate protection agreement, interest rate future agreement, interest rate option agreement, interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedge agreement, option or future contract or other similar agreement or arrangement. "Investment" in any Person means any direct or indirect advance, loan or other extension of credit (including, without limitation, by way of Guarantee or similar III-10 arrangement; but excluding advances to customers or suppliers in the ordinary course of business that are, in conformity with GAAP, recorded as accounts receivable, prepaid expenses or deposits on the balance sheet of the Company or its Restricted Subsidiaries or endorsements for collection or deposit arising in the ordinary course of business) or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition of Capital Stock, bonds, notes, debentures or other similar instruments issued by, such Person and shall include (1) the designation of a Restricted Subsidiary as an Unrestricted Subsidiary and (2) the retention of the Capital Stock (or any other Investment) by the Company or any of its Restricted Subsidiaries, of (or in) any Person that has ceased to be a Restricted Subsidiary. For purposes of the definition of "Unrestricted Subsidiary" and Section 9A.3, the amount of or a reduction in an Investment shall be equal to the fair market value thereof at the time such Investment is made or reduced. "Lien" means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including, without limitation, any conditional sale or other title retention agreement or lease in the nature thereof or any agreement to give any security interest). "Net Cash Proceeds" means: (a) with respect to any Asset Sale, the proceeds of such Asset Sale in the form of cash or cash equivalents, including payments in respect of deferred payment obligations (to the extent corresponding to the principal, but not interest, component thereof) when received in the form of cash or cash equivalents and proceeds from the conversion of other property received when converted to cash or cash equivalents, net of: (1) brokerage commissions and other fees and expenses (including fees and expenses of counsel and investment bankers) related to such Asset Sale; (2) provisions for all taxes (regardless of whether such taxes will actually be paid or are payable) as a result of such Asset Sale without regard to the consolidated results of operations of the Company and its Restricted Subsidiaries, taken as a whole; (3) payments made to repay Indebtedness or any other obligation outstanding at the time of such Asset Sale that either (x) is secured by a Lien on the property or assets sold or (y) is required to be paid as a result of such sale; and III-11 (4) appropriate amounts to be provided by the Company or any Restricted Subsidiary as a reserve against any liabilities associated with such Asset Sale, including, without limitation, pension and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale, all as determined in conformity with GAAP; and (b) with respect to any issuance or sale of Capital Stock, the proceeds of such issuance or sale in the form of cash or cash equivalents, including payments in respect of deferred payment obligations (to the extent corresponding to the principal, but not interest, component thereof) when received in the form of cash or cash equivalents and proceeds from the conversion of other property received when converted to cash or cash equivalents, net of attorney's fees, accountants' fees, underwriters' or placement agents' fees, discounts or commissions and brokerage, consultant and other fees incurred in connection with such issuance or sale and net of taxes paid or payable as a result thereof. "Permitted Investment" means: (1) an Investment in Company or a Subsidiary Guarantor or a Person that will, upon the making of such Investment, become a Subsidiary Guarantor or be merged or consolidated with or into or transfer or convey all or substantially all its assets to, the Company or a Subsidiary Guarantor; provided that such person's primary business is related, ancillary or complementary to the businesses of the Company and its Restricted Subsidiaries on the date of such Investment, as determined in good faith by the Board of Directors or a Senior Officer of the Company, whose determination shall be conclusive; (2) cash and Temporary Cash Investments; (3) payroll, travel and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as expenses in accordance with GAAP; (4) stock, obligations or securities received in satisfaction of judgments; (5) an Investment in an Unrestricted Subsidiary to the extent consisting of an Investment in another Unrestricted Subsidiary; (6) Interest Rate Agreements and Currency Agreements designed solely to protect the Company or its Restricted Subsidiaries against fluctuations in interest rates or foreign currency exchange rates; III-12 (7) any of the Rollover Notes; (8) an Investment in a Restricted Subsidiary that is a Foreign Subsidiary; and (9) an Investment in a Restricted Subsidiary that is not a Subsidiary Guarantor, provided that the aggregate amount of such Investments under this clause (9) does not exceed $25 million plus the net reduction in Investments made pursuant to this clause (9) resulting from distributions on or repayments of such Investments or from the Net Cash Proceeds from the sale or other disposition of any such Investment (except in each case, in order to avoid duplication to the extent any such payments or proceeds have been or would be included in the calculation of Adjusted Consolidated Net Income for purposes of Section 9A.3(4)(C)(1)) or from such Person becoming a Subsidiary Guarantor (valued in each case as provided in the definition of "Investments"); provided that the net reduction in any Investment shall not exceed the amount of such Investment. "Preferred Stock" means, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated, whether voting or non-voting) of such Person's preferred or preference equity, whether outstanding on the Closing Date or issued thereafter, including, without limitation, all series and classes of such preferred or preference stock. "Purchase Money Indebtedness" of any Person means any Indebtedness, including Capitalized Leases, of such Person to any seller or other Person, that is Incurred to finance the acquisition, construction, installation or improvement of any Replacement Assets and that is incurred concurrently with, or within 180 days following, such acquisition, construction, installation or improvement. "Replacement Assets" means, on any date, property or assets (other than current assets) of a nature or type or that are used or useful in a business (or an Investment in a company having property or assets of a nature or type, or engaged in a business) similar or related to the nature or type of the property and assets of, or the business of, the Company and its Restricted Subsidiaries existing on such date, as determined in good faith by the Board of Directors or a Senior Officer of the Company, whose determination shall be conclusive. "Restricted Payment" has the meaning specified in Section 9A.3(4). "Restricted Subsidiary" means any Subsidiary of the Company other than an Unrestricted Subsidiary. III-13 "Senior Credit Agreement" means the credit agreement dated June 9, 1999 by and among the Company, certain of its Subsidiaries, certain financial institutions and Wells Fargo, as administrative agent, and including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith, as such credit agreement and/or related documents may be amended, restated, supplemented, renewed, refinanced, extended, replaced, restructured or otherwise modified from time to time regardless of whether with the same agent, trustee, representative lenders or holders, including any agreement (1) extending the maturity of any Indebtedness incurred thereunder or contemplated thereby, (2) adding or deleting borrowers or guarantors thereunder, so long as borrower and issuers include one or more of the Company and its Subsidiaries and their respective successors and assigns or (3) increasing the amount of Indebtedness incurred thereunder or available to be borrowed thereunder. "Senior Indebtedness" means the following obligations of the Company or any Subsidiary Guarantor, whether outstanding on the Rollover Date or thereafter Incurred: (1) all Indebtedness and all other monetary obligations (including, without limitation, expenses, fees, principal, interest, reimbursement obligations under letters of credit and indemnities payable in connection therewith) of the Company under (or in respect of) the Senior Credit Agreement or any Interest Rate Agreement or Currency Agreement relating to the Indebtedness under the Senior Credit Agreement and (2) all Indebtedness and all other monetary obligations of the Company or any Subsidiary Guarantor (other than the Rollover Notes and the Subsidiary Guaranties, the Convertible Subordinated Debentures and the Senior Subordinated Debentures), including principal and interest on such Indebtedness, unless such Indebtedness, by its terms or by the terms of any agreement or instrument pursuant to which such Indebtedness is issued, is pari passu with, or subordinated in right of payment to, the Rollover Notes; provided that the term "Senior Indebtedness" shall not include (a) any Indebtedness of the Company or any Subsidiary Guarantor that, when Incurred, was without recourse to the Company or to such Subsidiary Guarantor, (b) any Indebtedness of the Company or any Subsidiary Guarantor to a Subsidiary of the Company, or to a joint venture in which the Company has an interest, (c) any Indebtedness of the Company or any Subsidiary Guarantor, to the extent not permitted by Section 9A.1 or 9A.2, (d) any repurchase, redemption or other obligation in respect of Disqualified Stock, (e) any Indebtedness to any employee of the Company or any of its respective Subsidiaries, (f) any liability for taxes owed or owing by the Company or any Subsidiary Guarantor, or (g) any Trade Payables. "Senior Officer" of any Person means the Chief Executive Officer or Chief Financial Officer of such Person. "Senior Subordinated Debentures" means the 8 5/8% Senior Subordinated Debentures due 2004 of the Company issued pursuant to the Indenture dated as of March 16, 1989 between the Company and MTrust Corp., National Association, as trustee, as amended. III-14 "Stated Maturity" means (1) with respect to any debt security, the date specified in such debt security as the fixed date on which the final installment of principal of such debt security is due and payable and (2) with respect to any scheduled installment of principal of or interest on any debt security, the date specified in such debt security as the fixed date on which such installment is due and payable. "Subsidiary" means, with respect to any Person, any corporation, association or other business entity of which more than 50% of the voting power of the outstanding Voting Stock is owned, directly or indirectly, by such Person and one or more other Subsidiaries of such Person. "Subsidiary Guarantor" means any Initial Subsidiary Guarantor and any Restricted Subsidiary that provides a Guarantee of the Company's obligations under this Agreement and the Rollover Notes. "Temporary Cash Investment" means any of the following: (1) direct obligations of the United States of America or any agency thereof or obligations fully and unconditionally guaranteed by the United States of America or any agency thereof maturing no more than one year from the date of acquisition thereof; (2) time deposit accounts, certificates of deposit and money market deposits maturing within one year of the date of acquisition thereof issued by a bank or trust company that is organized under the laws of the United States of America, any state thereof or any foreign country recognized by the United States of America, and which bank or trust company has capital, surplus and undivided profits aggregating in excess of $100 million (or the foreign currency equivalent thereof) and has outstanding debt that is rated "A" (or such similar equivalent rating) or higher by at least one nationally recognized statistical rating organization (as defined in Rule 436 under the Securities Act) or any money-market fund sponsored by a registered broker dealer or mutual fund distributor; (3) repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clause (1) above entered into with a bank or trust company meeting the qualifications described in clause (2) above; (4) commercial paper, maturing not more than one year after the date of acquisition thereof, with a rating at the time as of which any investment therein is made of "P-1" (or higher) according to Moody's or "A-1" (or higher) according to S&P; III-15 (5) securities with maturities of one year or less from the date of acquisition issued or fully and unconditionally guaranteed by any state, commonwealth or territory of the United States of America, or by any political subdivision or taxing authority thereof, and rated at least "A" by S&P or Moody's; and (6) any mutual fund that has at least 95% of its assets continuously invested in investments of the types described in clauses (1) through (5) and has the highest rating obtainable from either Moody's or S&P. "Trade Payables" means, with respect to any Person, any accounts payable or any other indebtedness or monetary obligation to trade creditors created, assumed or Guaranteed by such Person or any of its Subsidiaries arising in the ordinary course of business in connection with the acquisition of goods or services. "Transaction Date" means, with respect to the Incurrence of any Indebtedness by the Company or any of its Restricted Subsidiaries, the date such Indebtedness is to be Incurred and, with respect to any Restricted Payment, the date such Restricted Payment is to be made. "Unrestricted Subsidiary" means (1) any Subsidiary of the Company that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors in the manner provided below; and (2) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate any Restricted Subsidiary (including any newly acquired or newly formed Subsidiary of the Company) to be an Unrestricted Subsidiary unless such Subsidiary owns any Capital Stock of, or owns or holds any Lien on any property of, the Company or any Restricted Subsidiary; provided that (a) any Guarantee by the Company or any Restricted Subsidiary of any Indebtedness of the Subsidiary being so designated shall be deemed an "Incurrence" of such Indebtedness and an "Investment" by the Company or such Restricted Subsidiary (or both, if applicable) at the time of such designation; (b) either (x) the Subsidiary to be so designated has total assets of $1,000 or less or (y) if such Subsidiary has assets greater than $1,000, such designation would be permitted under Section 9A.3 and (c) if applicable, the Incurrence of Indebtedness and the Investment referred to in clause (a) of this proviso would be permitted under Sections 9A.1 and 9A.3. The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that (1) no Default or Event of Default shall have occurred and be continuing at the time of or after giving effect to such designation and (2) all Liens and Indebtedness of such Unrestricted Subsidiary outstanding immediately after such designation would, if Incurred at such time, have been permitted to be Incurred (and shall be deemed to have been Incurred) for all purposes of this Agreement. Any such designation by the Board of Directors shall be evidenced to the Holders by promptly filing with the Holders a copy of the Board Resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the preceding provisions. III-16 "Voting Stock" means with respect to any Person, Capital Stock of any class or kind ordinarily having the power to vote for the election of directors, managers or other voting members of the governing body of such Person. "Wholly Owned" means, with respect to any Subsidiary of any Person, the ownership of all of the outstanding Capital Stock of such Subsidiary (other than any director's qualifying shares, shares owned by professional engineers in connection with licensing requirements or Investments by foreign nationals mandated by applicable law) by such Person or one or more Wholly Owned Subsidiaries of such Person. III-17 EXHIBIT A --------- FORM OF NOTE THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY BE REOFFERED OR SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. THIS SECURITY ALSO IS SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER AS SET FORTH IN THE NOTE PURCHASE AGREEMENT DATED AS OF JUNE 9, 1999, A COPY OF WHICH MAY BE OBTAINED FROM URS CORPORATION. URS CORPORATION Senior Subordinated Increasing Rate Notes due June 9, 2000 No.__________ Dated: June 9, 1999 $____________ FOR VALUE RECEIVED, the undersigned URS CORPORATION, a Delaware corporation (the "Company"), HEREBY PROMISES TO PAY to [NAME OF PURCHASER], or its registered assigns, the principal amount of [SPECIFY PRINCIPAL AMOUNT EVIDENCED BY THIS NOTE IN WORDS] DOLLARS, or such lesser unpaid principal amount as shall be outstanding hereunder, on June 9, 2000, together with interest (computed on the basis of a 360-day year of twelve 30-day months) at the interest rates and payable at such times as are specified below. Interest on the unpaid balance of the principal amount of this Note shall accrue at a rate per annum equal to: (a) the Applicable Interest Rate from (and including) the date hereof to (but excluding) December 9, 1999; (b) the Applicable Interest Rate plus 1.00% per annum from (and including) December 9, 1999 to (but excluding) March 9, 2000; (c) the Applicable Interest Rate plus 1.50% from (and including) March 9, 2000 to (but excluding) June 9, 2000; and (d) shall thereafter increase by an additional 0.50% at the end of each subsequent three-month period until the unpaid principal balance of this Note shall be paid in full (whether by scheduled maturity or at a date fixed for prepayment, redemption or repurchase or by declaration, demand or otherwise), payable quarterly on September 9, November 9, March 9 and June 9 of each year (collectively, the "Interest Payment Dates"), commencing September 9, 1999, and on the date on which the unpaid principal balance of this Note shall be paid in full; provided, however, that any overdue payment (including, without limitation, any overdue prepayment, redemption or repurchase) of principal and, to the extent permitted by applicable law, any overdue payment of interest and premium, if any, shall accrue interest at a rate per annum equal at all times to 2% per annum in excess of the rate of interest otherwise in effect hereunder at such time, payable quarterly on each of the dates on which interest is otherwise payable under the provisions set forth above and, at the option of the registered Holder of this Note, upon demand, until the unpaid principal balance of this Note shall be paid in full; provided further that (i) in no event shall the interest rate on this Note exceed 17.0% per annum and (ii) to the extent the interest on this Note accrues at an interest rate per annum in excess of 15.0% per annum, the Company shall have the option to pay such excess by the issuance of Secondary Notes as provided in the Note Purchase Agreement referred to below. For purposes of this Note, "Applicable Interest Rate" means the higher of the following, as determined at the beginning of the three month period immediately preceding the applicable Interest Payment Date: (A) the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) obtained by dividing (x) the interest rate per annum for deposits in United States Dollars in an amount approximately equal to the principal of this Note and for a three-month period that appears on page 3750 of the Telerate Screen Information or any successor thereto (or if an amount approximately equal to the principal amount hereof is not so specified, then to the amount on such screen closest to such principal amount) as of 11:00 a.m. (London time) two Business Days prior to the beginning of such three-month period for delivery on the first day of such three-month period by (y) a percentage equal to 100% minus the stated maximum rate (expressed as a decimal) of all reserve requirements (including any marginal, emergency, supplemental, special or other reserves) applicable on such day to any member bank of the Federal Reserve System in respect of "Eurocurrency Liabilities" as defined in Regulation D of the Board of Governors of the Federal Reserve System (or any successor category of liabilities under such Regulation D) plus 6.50% per annum and (B) the highest of the yields reported, as of 10:00 a.m. (New York City time) two Business Days prior to the beginning of such three-month period that appears on page 678 of the Telerate Screen Information or any successor thereto for actively traded United States Treasury Securities having maturities of approximately 1, 3, 5 and 10 years plus 6.00% per annum. Payments of principal of, and interest and premium, if any, on, this Note are payable in lawful money of the United States of America at the place designated therefor on Schedule I of the Note Purchase Agreement, or at such other place as the Holder of this Note shall have designated by written notice to the Company as provided in the Note Purchase Agreement referred to below. Whenever any payment under this Note shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest. This Note is one of the Senior Subordinated Increasing Rate Notes due June 9, 2000 (collectively, the "Notes") originally issued pursuant to the Note Purchase Agreement dated as of June 9, 1999 (as amended, supplemented or otherwise modified from time to time, the "Note Purchase Agreement"; capitalized terms not otherwise defined herein having the same A-2 meanings as specified in Schedule II of the Note Purchase Agreement) between the Company and the respective purchasers of the Notes (collectively, the "Purchasers") named therein. The Holder of this Note is entitled to the benefits of the Note Purchase Agreement and may enforce the agreements of the Company therein and of the Obligors in the other Note Documents in accordance with the respective terms thereof, and may enforce the rights and remedies provided for thereby or otherwise available in respect thereof in accordance with the respective terms thereof. Each Holder of this Note will be deemed, by its acceptance hereof, (i) to have agreed to the confidentiality provisions set forth in Section 18 of the Note Purchase Agreement, (ii) to have made the representation set forth in Section 5 of the Note Purchase Agreement and (iii) otherwise to be bound to the provisions of the Note Purchase Agreement. This Note is a registered Note and, as provided in and subject to the terms of the Note Purchase Agreement, is transferable only upon surrender of this Note for registration of transfer or exchange (and, in the case of a surrender for registration of transfer, duly endorsed or accompanied by a written instrument of transfer, duly executed by the registered Holder of this Note or his attorney duly authorized in writing), at which time a new Note for a like principal amount will be issued to, and registered in the name of, the permitted transferee. Reference in this Note to a "Holder" shall mean the person or entity in whose name this Note is at the time registered in the register kept by the Company as provided in Section 11.1 of the Note Purchase Agreement and, prior to due presentment for registration of transfer, the Company may treat such person or entity as the owner of this Note for the purpose of receiving payment and for all other purposes, and the Company will not be affected by any notice to the contrary. The Company is required to make redemptions of principal on the dates and in the amounts specified in Sections 6.2 and 6.3 of the Note Purchase Agreement. This Note is also subject to optional prepayment, in whole or from time to time in part, at the times and on the terms specified in Section 6.1 of the Note Purchase Agreement. If an Event of Default shall occur and be continuing, the unpaid balance of principal of this Note and any accrued and unpaid interest and other amounts payable hereon may be declared or otherwise become due and payable in the manner, at the price and with the effect provided in Section 10 of the Note Purchase Agreement. This Note is guaranteed on a subordinated basis by each Subsidiary Guarantor, as set forth in the Note Purchase Agreement. [The remainder of this page intentionally left blank.] A-3 This Note shall be governed by, and construed in accordance with, the laws of the State of New York. Very truly yours, URS CORPORATION By ______________________________ Name: Title: EXHIBIT B --------- FORM OF ROLLOVER NOTE THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY BE REOFFERED OR SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. THIS SECURITY ALSO IS SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER AS SET FORTH IN THE NOTE PURCHASE AGREEMENT DATED AS OF JUNE 9, 1999, A COPY OF WHICH MAY BE OBTAINED FROM URS CORPORATION. URS CORPORATION Senior Subordinated Increasing Rate Notes due June 9, 2010 No.__________ Dated: June 9, 2000 $____________ FOR VALUE RECEIVED, the undersigned URS CORPORATION, a Delaware corporation (the "Company"), HEREBY PROMISES TO PAY to [NAME OF PURCHASER], or its registered assigns, the principal amount of [SPECIFY PRINCIPAL AMOUNT EVIDENCED BY THIS ROLLOVER NOTE IN WORDS] DOLLARS, or such lesser unpaid principal amount as shall be outstanding hereunder, on June 9, 2010, together with interest (computed on the basis of a 360-day year of twelve 30-day months) at the interest rates and payable at such times as are specified below. Interest on the unpaid balance of the principal amount of this Rollover Note shall accrue at a rate per annum equal to: (a) the Applicable Interest Rate plus 2.00% from (and including) the date hereof to (but excluding) September 9, 2000; and (b) shall thereafter increase by an additional 0.50% at the end of each subsequent three-month period until the unpaid principal balance of this Rollover Note shall be paid in full (whether by scheduled maturity or at a date fixed for prepayment, redemption or repurchase or by declaration, demand or otherwise), payable quarterly on September 9, November 9, March 9 and June 9 of each year (collectively, the "Interest Payment Dates"), commencing September 9, 2000, and on the date on which the unpaid principal balance of this Rollover Note shall be paid in full; provided, however, that any overdue payment (including, without limitation, any overdue prepayment, redemption or repurchase) of principal and, to the extent permitted by applicable law, any overdue payment of interest and premium, if any, shall accrue interest at a rate per annum equal at all times to 2% per annum in excess of the rate of interest otherwise in effect hereunder at such time, payable quarterly on each of the dates on which interest is otherwise payable under the provisions set forth above and, at the option of the registered Holder of this Rollover Note, upon demand, until the unpaid principal balance of this Note shall be paid in full; provided further that (i) in no event shall the interest rate on this Note exceed 17.0% per annum and (ii) to the extent the interest on this Rollover Note accrues at an interest rate per annum in excess of 15.0% per annum, the Company shall have the option to pay such excess by the issuance of Secondary Notes as provided in the Note Purchase Agreement referred to below. For purposes of this Note, "Applicable Interest Rate" means the higher of the following, as determined at the beginning of the three month period immediately preceding the applicable Interest Payment Date: (A) the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) obtained by dividing (x) the interest rate per annum for deposits in United States Dollars in an amount approximately equal to the principal of this Note and for a three-month period that appears on page 3750 of the Telerate Screen Information or any successor thereto (or if an amount approximately equal to the principal amount hereof is not so specified, then to the amount on such screen closest to such principal amount) as of 11:00 a.m. (London time) two Business Days prior to the beginning of such three-month period for delivery on the first day of such three-month period by (y) a percentage equal to 100% minus the stated maximum rate (expressed as a decimal) of all reserve requirements (including any marginal, emergency, supplemental, special or other reserves) applicable on such day to any member bank of the Federal Reserve System in respect of "Eurocurrency Liabilities" as defined in Regulation D of the Board of Governors of the Federal Reserve System (or any successor category of liabilities under such Regulation D) plus 6.50% per annum and (B) the highest of the yields reported, as of 10:00 a.m. (New York City time) two Business Days prior to the beginning of such three-month period that appears on page 678 of the Telerate Screen Information or any successor thereto for actively traded United States Treasury Securities having maturities of approximately 1, 3, 5 and 10 years plus 6.00% per annum. Payments of principal of, and interest and premium, if any, on, this Rollover Note are payable in lawful money of the United States of America at the place designated therefor on Schedule I of the Note Purchase Agreement, or at such other place as the Holder of this Rollover Note shall have designated by written notice to the Company as provided in the Note Purchase Agreement referred to below. Whenever any payment under this Rollover Note shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest. This Rollover Note is one of the Rollover Notes (collectively, the "Rollover Notes") issued pursuant to the Note Purchase Agreement dated as of June 9, 1999 (as amended, supplemented or otherwise modified from time to time, the "Note Purchase Agreement"; capitalized terms not otherwise defined herein having the same meanings as specified in Schedule II of the Note Purchase Agreement) between the Company and the respective purchasers of the Notes (collectively, the "Purchasers") named therein. The Holder of this B-2 Rollover Note is entitled to the benefits of the Note Purchase Agreement and may enforce the agreements of the Company therein and of the Obligors in the other Note Documents in accordance with the respective terms thereof, and may enforce the rights and remedies provided for thereby or otherwise available in respect thereof in accordance with the respective terms thereof. Each Holder of this Rollover Note will be deemed, by its acceptance hereof, (i) to have agreed to the confidentiality provisions set forth in Section 18 of the Note Purchase Agreement, (ii) to have made the representation set forth in Section 5 of the Note Purchase Agreement and (iii) otherwise to be bound to the provisions of the Note Purchase Agreement. This Rollover Note is a registered Rollover Note and, as provided in and subject to the terms of the Note Purchase Agreement, is transferable only upon surrender of this Rollover Note for registration of transfer or exchange (and, in the case of a surrender for registration of transfer, duly endorsed or accompanied by a written instrument of transfer, duly executed by the registered Holder of this Rollover Note or his attorney duly authorized in writing), at which time a new Note for a like principal amount will be issued to, and registered in the name of, the permitted transferee. Reference in this Rollover Note to a "Holder" shall mean the person or entity in whose name this Rollover Note is at the time registered in the register kept by the Company as provided in Section 11.1 of the Note Purchase Agreement and, prior to due presentment for registration of transfer, the Company may treat such person or entity as the owner of this Rollover Note for the purpose of receiving payment and for all other purposes, and the Company will not be affected by any notice to the contrary. The Company is required to make redemptions of principal on the dates and in the amounts specified in Sections 6.2 and 6.3 of the Note Purchase Agreement. This Rollover Note is also subject to optional prepayment, in whole or from time to time in part, at the times and on the terms specified in Section 6.1 of the Note Purchase Agreement. If an Event of Default shall occur and be continuing, the unpaid balance of principal of this Rollover Note and any accrued and unpaid interest and other amounts payable hereon may be declared or otherwise become due and payable in the manner, at the price and with the effect provided in Section 10 of the Note Purchase Agreement. This Rollover Note is guaranteed on a subordinated basis by each Subsidiary Guarantor, as set forth in the Note Purchase Agreement. [The remainder of this page intentionally left blank.] B-3 This Note shall be governed by, and construed in accordance with, the laws of the State of New York. Very truly yours, URS CORPORATION By ________________________________ Name: Title: EXHIBIT F --------- FORM OF COMPLIANCE CERTIFICATE THE UNDERSIGNED HEREBY CERTIFIES THAT: (1) I am the duly elected [President] [Chief Financial Officer] of URS Corporation, a Delaware corporation (the "Company"); (2) I have reviewed the terms of that certain Note Purchase Agreement dated as of June 9, 1999, as amended, supplemented or otherwise modified to the date hereof (said Note Purchase Agreement, as so amended, supplemented or otherwise modified, being the "Note Purchase Agreement", the terms defined in Schedule II therein and not otherwise defined in this Certificate (including Attachment No. 1 annexed hereto and made a part hereof) being used in this Certificate as therein defined), by and among the Company and the Purchasers party thereto, and the terms of the other Note Documents, and I have made, or have caused to be made under my supervision, a review in reasonable detail of the transactions and condition of the Company and its Subsidiaries during the accounting period covered by the attached financial statements; and (3) The examination described in paragraph (2) above did not disclose, and I have no actual knowledge of, the existence of any condition or event that constitutes a Default or an Event of Default during or at the end of the accounting period covered by the attached financial statements or as of the date of this Certificate, except as set forth below. Set forth below are all exceptions to paragraph (3) above listing, in detail, the nature of the condition or event, the period during which it has existed and the action which the Company has taken, is taking, or proposes to take with respect to each such condition or event: The foregoing certifications, together with the computations set forth in Attachment No. 1 annexed hereto and made a part hereof and the financial statements delivered with this Certificate in support hereof, are made and delivered this __________ day of _____________, ____ pursuant to Section 8.1(c) of the Note Purchase Agreement. URS CORPORATION By: __________________________ Name: ________________________ Title: _______________________ ATTACHMENT NO. 1 TO COMPLIANCE CERTIFICATE This Attachment No. 1 is attached to and made a part of a Compliance Certificate dated as of ____________, ____ and pertains to the period from ____________, ____ to ____________, ____. Subsection references herein relate to subsections of the Note Purchase Agreement. A. Indebtedness (9.1) 1. Indebtedness of the Company and its Domestic Subsidiaries to Persons other than Company or any of its Subsidiaries (not including the amount of any such Indebtedness and committed lines of credit listed in Section _________ 4.13 of the Bridge Note Disclosure letter): (Maximum permitted by Section 9.1(j) - $50,000,000) 2. Indebtedness of Foreign Subsidiaries to Persons other than the Company or any of its Subsidiaries (including the amount of any such Indebtedness and committed lines of _________ credit listed in Section 4.13 of the Bridge Note Disclosure Letter): (Maximum permitted by Section 9.1(k) - $30,000,000) B. Liens (9.2) 1.Other Liens (Maximum permitted by Section 9.2(a)(viii) - $500,000) _________ C. Investments (9.3) 1. Investments of the Company and its Subsidiaries (other than Inactive Subsidiaries) in Joint Ventures: _________ (Maximum permitted by Section 9.3(h) - $5,000,000) 2. Investments of the Company and Subsidiary Guarantors in Subsidiaries (other than wholly-owned Subsidiary Guarantors and Inactive Subsidiaries) including the amount _________ of any such Investments listed in Section 9.3 of the Bridge Note Disclosure Letter: (Maximum permitted by Section 9.3(m) - $25,000,000) D. Contingent Obligations (9.4) 1. Contingent Obligations of the Company and its Subsidiaries: _________ (Maximum permitted by Section 9.4(i) - $10,000,000) E. Asset Sales; Acquisitions (9.6) 1. Total Purchase Price for Subsequent Acquisitions: _________ (Maximum permitted by Section 9.6(f) - $60,000,000) E. Capital Expenditures (9.7) Consolidated Capital Expenditures: _________ (Maximum Consolidated Capital Expenditures permitted under Section 9.7: ___________________________) EX-2.4 4 SECURITIES PURCHASE AGREEMENT, DATED 05-05-1999 EXHIBIT 2.4 SECURITIES PURCHASE AGREEMENT Dated as of May 5, 1999 By and Between RCBA Strategic Partners, L.P., and URS Corporation Corrected and conformed copy Table of Contents ----------------- ARTICLE I DEFINITIONS; CERTAIN REFERENCES 2 ARTICLE II CLOSING 6 2.1 Time and Place of the Closing 6 ----------------------------- 2.2 Transactions at the Closing 6 --------------------------- 2.3 Use of Proceeds. 6 ---------------- ARTICLE III CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER 6 3.1 Material Adverse Effect 6 ----------------------- 3.2 Minimum D&M EBITDA 7 ------------------ 3.3 Certificates of Designation 7 --------------------------- 3.4 Closing Deliveries 7 ------------------ 3.5 HSR 8 --- 3.6 Section 203 8 ----------- 3.7 Merger Agreement 8 ---------------- 3.8 Credit Facility 8 --------------- 3.9 Subordinated Notes Offering 8 --------------------------- 3.10 Simultaneous Closing 8 -------------------- 3.11 Accuracy of Seller's Representations and Warranties. 8 ---------------------------------------------------- 3.12 Compliance by Seller 8 -------------------- 3.13 No Legal Action 9 --------------- ARTICLE IV CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER 9 4.1 Closing Deliveries 9 ------------------ 4.2 HSR 9 --- 4.3 Simultaneous Closing. 9 --------------------- 4.4 Accuracy of Purchaser's Representations and Warranties 9 ------------------------------------------------------ 4.5 Compliance by Purchaser 10 ----------------------- 4.6 No Legal Action 10 --------------- ARTICLE V REPRESENTATIONS AND WARRANTIES OF SELLER 10 5.1 Organization, Good Standing, Power, Authority, Etc 10 -------------------------------------------------- 5.2 Capitalization of Seller 10 ------------------------ 5.3 SEC Documents; Financial Statements 11 ----------------------------------- 5.4 Authority and Qualification of Seller 12 ------------------------------------- 5.5 No Contravention, Conflict, Breach, Etc. 13 ---------------------------------------- 5.6 Consents 13 -------- 5.7 Vote Required. 13 -------------- 5.8 Certain Approvals. 13 ------------------ 5.9 Brokers. 14 -------- 5.10 Certain Agreements. 14 ------------------- 5.11 No Material Adverse Change 14 -------------------------- 5.12 Exemption from Registration. 14 ---------------------------- 5.13 Opinion of Independent Investment Banking Firm. 14 ----------------------------------------------- 5.14 Other Matters 14 ------------- ARTICLE VI REPRESENTATIONS AND WARRANTIESOF PURCHASER 15 6.1 Organization, Good Standing, Power, Authority, Etc 15 -------------------------------------------------- 6.2 Authority and Qualification of Purchaser 15 ---------------------------------------- 6.3 No Contravention, Conflict, Breach, Etc. 15 ---------------------------------------- 6.4 Consents 15 -------- 6.5 Brokers. 16 -------- 6.6 Investment Intent. 16 ------------------ ARTICLE VII CORPORATE GOVERNANCE 16 7.1 Board of Directors 16 ------------------ 7.2 Observer Rights for Purchaser Designee. 16 --------------------------------------- ARTICLE VIII COVENANTS OF THE PARTIES 17 8.1 Restrictions 17 ------------ 8.2 Pre-Closing Activities 17 ---------------------- 8.3 Filing with SEC. 17 ---------------- 8.4 Stockholder Meeting 17 ------------------- 8.5 Proxy Statement 18 --------------- 8.6 Stock Exchange Listing 18 ---------------------- 8.7 HSR 18 --- 8.8 Equity Proposals 18 ---------------- 8.9 Publicity 19 --------- 8.10 Securities 19 ---------- 8.11 Access, Information and Confidentiality 21 ---------------------------------------- 8.12 Maintenance of Business 22 ----------------------- 8.13 Exchange 22 -------- 8.14 Tax Matters. 23 ------------ 8.15 Authorized Shares. 24 ------------------ ARTICLE IX TERMINATION 24 9.1 General 24 ------- 9.2 Breach By Seller 24 ---------------- 9.3 Breach By Purchaser 24 ------------------- 9.4 Specific Remedies 25 ----------------- ARTICLE X SURVIVAL; INDEMNIFICATION 25 10.1 Survival of Representations and Warranties and Covenants. 25 --------------------------------------------------------- 10.2 Indemnification of Seller 25 ------------------------- 10.3 Indemnification of Purchaser 25 ---------------------------- ARTICLE XI MISCELLANEOUS 25 11.1 Successors and Assigns 25 ---------------------- 11.2 Performance; Waiver 26 ------------------- 11.3 Notices 26 ------- 11.4 Expenses 27 -------- 11.5 Governing Law 27 ------------- 11.6 Severability; Interpretation 27 ---------------------------- 11.7 Headings 27 -------- 11.8 Entire Agreement 27 ---------------- 11.9 Counterparts 28 ------------ 11.10 Absence of Third Party Beneficiary Rights 28 ----------------------------------------- 11.11 Mutual Drafting 28 --------------- 11.12 Further Representations 28 ----------------------- 11.13 Specific Performance; Remedies 28 ------------------------------ SECURITIES PURCHASE AGREEMENT This SECURITIES PURCHASE AGREEMENT (the "Agreement") is made and entered into as of May 5, 1999, by and between RCBA Strategic Partners, L.P., a Delaware limited partnership ("Purchaser"), and URS Corporation, a Delaware corporation ("Seller"). WHEREAS, Seller wishes to sell, and Purchaser wishes to purchase, an aggregate of 46,082.95 newly issued shares of Series A Preferred Stock of Seller, par value $1.00 ("Series A Preferred Stock") and 450,000 newly issued shares of Series C Preferred Stock of Seller, par value $1.00 ("Series C Preferred Stock") (collectively, as to the Series A Preferred Stock and Series C Preferred Stock issued on the date hereof, the "Bridge Securities") for the consideration and upon the terms and subject to the conditions set forth in this Agreement; and WHEREAS, the Series A Preferred Stock and Series C Preferred Stock will not be convertible into common stock of Seller and will not have voting rights because such conversion and voting rights would require (i) prior stockholder approval by the stockholders of Seller pursuant to New York Stock Exchange ("NYSE") Rules and (ii) an amendment to Seller's Articles of Incorporation to increase the number of authorized common shares; and WHEREAS, Seller is using the funds raised by this Agreement to purchase all of the outstanding equity of the Dames & Moore Group, a Delaware corporation ("D&M"), and such purchase is due to close before the approval of the stockholders of Seller referred to above could be sought or obtained; and WHEREAS, Seller has agreed to use its best efforts to obtain such stockholder approval and Purchaser has agreed to vote, and to cause all affiliated entities to vote, all voting securities they hold in the Seller in favor of such approval; and WHEREAS, Seller and Purchaser have agreed that upon receiving stockholder approval for the transactions contemplated hereby the Bridge Securities so purchased (and any additional shares of Series A Preferred Stock paid as dividends thereon) will automatically, and without any further action of either party, convert into shares of Series B Exchangeable Convertible Preferred Stock of Seller, par value $1.00 (the "Series B Preferred Stock"). NOW, THEREFORE, in consideration of the premises and of the respective representations, warranties, covenants, agreements and conditions contained herein, each of Purchaser and Seller (together "Parties") agree as follows: ARTICLE I DEFINITIONS; CERTAIN REFERENCES The terms defined in this Article I, whenever used in this Agreement, shall have the following meanings for all purposes of this Agreement: 1.1 "Act" means the Securities Act of 1933, as amended. 1.2 "Affiliate" has the meaning set forth in Rule 12b-2 under the Exchange Act. 1.3 "Board" means the Board of Directors of Seller. 1.4A "Bridge Notes" has the meaning set forth in Section 3.9 of this Agreement. 1.4 "Bridge Securities" has the meaning given it in the first recital of this Agreement. 1.5 "Business Day" shall have the meaning specified in Rule 14d-1(e)(6) of the Exchange Act. 1.6 "Capital Stock" has the meaning given it in Section 5.2 of this Agreement. 1.7 "Certificates of Designation" means the Certificate of Designation of Seller classifying 300,000 shares as Series A Preferred Stock, the Certificate of Designation of Seller classifying 150,000 shares as Series B Exchangeable Convertible Preferred Stock, and the Certificate of Designation of Seller classifying 450,000 shares as Series C Preferred Stock, each to be filed by Seller with the Office of the Secretary of State for the State of Delaware on or prior to the date and time of the Closing, a true and correct copy of the text of each of which is attached as Exhibit 1.7 hereto. 1.8 "Certificate of Incorporation" means the Certificate of Incorporation of Seller as filed with the Office of the Secretary of State for the State of Delaware, as amended from time to time. 1.9 "Closing" has the meaning set forth in Section 2.1 of this Agreement. 1.10 "Closing Date" has the meaning set forth in Section 2.1 of this Agreement. 1.11 "Common Stock" means the common stock, par value $.01 per share, of Seller. 1.12 "Conversion Shares" means the shares of Common Stock issuable or issued upon conversion of the Series B Preferred Stock pursuant to the terms of this Agreement and the Certificate of Designation for the Series B Preferred Stock. 1.12A "Credit Facility" has the meaning given it in Section 3.8 of this Agreement. 1.13 "DGCL" means the Delaware General Corporation Law, as amended. 1.13A "D&M" has the meaning given it in the third recital of this Agreement. 1.14 "Equity Proposal" has the meaning set forth in Section 8.8 of this Agreement. 1.14A "Exchange" has the meaning given it in Section 8.13 of this Agreement. 1.15 "Exchange Act" means the Securities Exchange Act of 1934, as amended. 1.15A "Exchange Approval" has the meaning given it in Section 8.4 of this Agreement. 1.16 "Exchange Debentures" means the subordinated debentures into which the Series B Preferred Stock is exchangeable (at the option of Seller) and which will have substantially the same terms as the Series B Preferred Stock, the form of which will be agreed by the parties hereto prior to Closing if either party so requests. 1.17 "Filed SEC Documents" has the meaning given it in Section 5.3 of this Agreement. 1.18 "GAAP" has the meaning given it in Section 5.3 of this Agreement. 1.19 "Government Entity" means any foreign, federal, state, or local court or tribunal or administrative, governmental or regulatory body, agency, commission, division, department, public body or other authority. 1.20 "HSR" has the meaning given it in Section 3.5 of this Agreement. 1.21 "Indemnifiable Losses" shall mean any and all direct or indirect demands, claims, payments, obligations, actions, or causes of action, assessments, losses, liabilities, costs, or expenses paid or incurred, any kind or character (whether or not known or asserted before the date of this Agreement, fixed or unfixed, conditional or unconditional, choate or inchoate, liquidated or unliquidated, secured or unsecured, accrued, absolute, contingent, or otherwise). Indemnifiable Losses shall include penalties, interest, or any amount payable to a third party as a result of such Indemnifiable Losses. Indemnifiable Losses shall include legal or other expenses reasonably incurred in connection with investigating or defending any claims or actions, whether or not resulting in any liability, and all amounts paid in settlement of claims or actions in accordance with Article X. 1.22 "Issuable Securities" means the Series A Preferred Stock, the Series B Preferred Stock, the Conversion Shares, the Series C Preferred Stock, the Series C Redemption Shares and the Exchange Debentures. 1.23 "Knowledge of Seller" means to the actual or constructive knowledge of any executive officer or director of Seller. 1.24 "Liens" has the meaning given it in Section 5.2 of this Agreement. 1.25 "Material Adverse Effect" means any condition, event or development having, or likely to have a material adverse effect on the business, operations, properties, assets, liabilities, financial condition, or prospects of Seller and the Subsidiaries, taken as a whole, or of Purchaser, taken as a whole (as applicable). 1.25A "Merger Agreement" has the meaning given it in Section 2.3 of this Agreement. 1.26 "NYSE" has the meaning given it in the second recital of this Agreement. 1.26A "Offer" has the meaning given it in the Merger Agreement. 1.27 "Person" means and includes an individual, a partnership, a joint venture, a corporation, a trust, limited liability company, an unincorporated organization and a Government Entity. 1.28 [Intentionally omitted] 1.29 "Proxy Statement" means the proxy statement to be sent to the shareholders of Seller in connection with the Stockholder Meeting of Seller with respect to, among other matters, the Stockholder Meeting Matters. 1.30 "Purchase Price" means, for the Bridge Securities to be purchased by Purchaser, $100,000,000 in the aggregate. 1.31 "Purchaser" has the meaning set forth in the first paragraph of this Agreement. 1.32 "Registration Rights Agreement" means the Registration Rights Agreement to be dated as of the date of the Closing among Seller and Purchaser, in substantially the form attached as Exhibit 1.32 hereto, as amended, supplemented and modified from time to time in accordance with the terms thereof. 1.33 "Schedule 14D-9" has the meaning set forth in Section 5.6 of this Agreement. 1.33A "SEC" means the Securities and Exchange Commission. 1.33B "Seller" has the meaning given it in the first paragraph of this Agreement. 1.34 "Series C Redemption Shares" means the shares of Common Stock issuable or that may be issued upon redemption of the Series C Preferred Stock pursuant to the terms of this Agreement and the Certificate of Designation for the Series C Preferred Stock. 1.35 [Intentionally omitted] 1.36 "Significant Holder" means Purchaser and any transferee of Purchaser for so long any such person owns Issuable Securities in the aggregate equal to at least ten (10) percent of (a) prior to Stockholder Approval, the Issuable Securities purchased by Purchaser and issued on the Closing Date, or (b) at any other time, the Issuable Securities issued to Purchaser in exchange for the Series A Preferred Stock and the Series C Preferred Stock on the effective date of that Exchange. In determining the number of Issuable Securities held by any person or outstanding at any time, (i) each share of Series A Preferred Stock shall be deemed to be convertible into Common Stock (on the same terms and conditions as the Series B Preferred Stock) and to have been converted (to the fullest extent then determinable) and such calculation shall include the hypothetical number of shares of Common Stock that then would be deliverable upon the conversion of such stock (as if such stock were converted), and (ii) each share of Series C Preferred Stock shall be deemed to have been redeemed in exchange for Common Stock, and each share of Series B Preferred Stock shall be deemed to have been converted (in either case, to the fullest extent then determinable) and such calculation shall include the number of Series C Redemption Shares or Conversion Shares then deliverable upon the redemption of the Series C Preferred Stock or the conversion of the Series B Preferred Stock (to the fullest extent then determinable), as the case may be. 1.36A "Stockholder Approval" has the meaning given it in Section 8.4 of this Agreement. 1.37 "Stockholder Meeting" has the meaning set forth in Section 8.4 of this Agreement. 1.37A "Stockholder Meeting Matters" has the meaning given it in Section 8.4 of this Agreement. 1.38 "Stock Plans" has the meaning given it in Section 5.2 of this Agreement. 1.39 "Stock Purchase" means the purchase of Series A Preferred Stock and Series C Preferred Stock by Purchaser from Seller under this Agreement. 1.40 "Subsidiary" means, with respect to Seller, any corporation, limited or general partnership, joint venture, association, joint stock company, trust, unincorporated organization, or other entity analogous to any of the foregoing of which a majority of the equity ownership (whether voting stock or comparable interest) is, at the time, owned, directly or indirectly by Seller. 1.41 "Transaction Documents" means this Agreement, the Certificates of Designation, and the Registration Rights Agreement. 1.42 "Voting Debt" has the meaning given it in Section 5.2 of this Agreement. ARTICLE II CLOSING 2.1 Time and Place of the Closing. Seller shall as promptly as ----------------------------- practicable notify Purchaser, and Purchaser shall as promptly as practicable notify Seller when the conditions, contained in Articles III and IV hereof, to such parties' respective obligations to effect the Stock Purchase have been satisfied. The closing of the Stock Purchase (the "Closing") shall take place at the offices of Cooley Godward LLP in San Francisco, California, or such other location as the parties may mutually agree, on a date to be agreed upon by the parties that is no later than November 30, 1999 (the "Closing Date"), and shall be effective as of 12:01 a.m. on the Closing Date, unless another date, effective time, or place is agreed to in writing by Purchaser and Seller. 2.2 Transactions at the Closing. At the Closing, subject to the terms --------------------------- and conditions of this Agreement, Seller shall issue and sell to Purchaser and Purchaser shall purchase the Bridge Securities. At the Closing, Seller shall deliver to Purchaser a certificate or certificates representing the number of the Bridge Securities to be purchased, each registered in the name of Purchaser or its nominee against payment of the Purchase Price with respect thereto by wire transfer of immediately available funds to an account or accounts previously designated by Seller. 2.3 Use of Proceeds. The proceeds from the purchase and sale of the --------------- Bridge Securities hereunder will be used simultaneously with the Closing of the Offer (as defined in the Merger Agreement by and among D&M, Seller and one or more Affiliates of either or both, dated May 5, 1999 (the "Merger Agreement")), and shall not be used for any other purpose. ARTICLE III CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER The obligations of Purchaser to be discharged under this Agreement on or prior to the Closing are subject to satisfaction of the following conditions at or prior to the Closing (unless expressly waived in writing by Purchaser at or prior to the Closing): 3.1 Material Adverse Effect. ----------------------- (a) There shall not have occurred and there shall not otherwise exist any Material Adverse Effect on Seller. (b) There shall not have occurred (i) any suspension or limit of trading in securities generally on the NYSE (including automatic halt in trading pursuant to market-decline triggers other than those in which solely program trading is temporarily halted), (ii) the imposition generally of minimum or maximum prices on such exchange or on The Nasdaq Stock Market or additional material governmental restrictions, in either case not in force on the date of this Agreement, by such exchange or by order of the SEC or the NASD or any court or other governmental authority, (iii) the declaration of any general banking moratorium by either Federal or New York State authorities, or (iv) any material adverse change in the financial or securities markets in the United States or in political, financial or economic conditions in the United States or any outbreak or escalation of hostilities or declaration by the United States of a national emergency or war or other calamity or crisis, the effect of any of which is such as to make it, in reasonable judgment of Purchaser, impracticable or inadvisable to acquire the Bridge Securities on the terms and in the manner contemplated by this Agreement. 3.2 Minimum D&M EBITDA. D&M EBITDA for the fiscal year ended March 26, ------------------ 1999, before second quarter restructuring charges, as shown in the audit of D&M for the fiscal year ended March 26, 1999, which such audit shall be completed prior to Closing, shall be no less than $65 million. 3.3 Certificates of Designation. The Certificates of Designation shall --------------------------- have been filed for record with the Office of the Secretary of State for the State of Delaware and shall have become effective. 3.4 Closing Deliveries. Seller shall have delivered to Purchaser on or ------------------ before the Closing the following: (a) Opinion of Cooley Godward LLP, dated as of the Closing Date, in form reasonably satisfactory to Purchaser; (b) Registration Rights Agreement executed by Seller; (c) Certificate of the Secretary or Assistant Secretary of Seller dated as of the Closing Date certifying: (i) that attached thereto is a true and complete copy of the By-Laws of Seller as in effect on the date of such certification; (ii) that attached thereto is a true and complete copy of all resolutions adopted by the Board authorizing the execution, delivery and performance of the Agreement, the issuance, sale and delivery of the Issuable Securities, and that all such resolutions are in full force in effect and are all the resolutions adopted in connection with the transactions contemplated by this Agreement; (iii) that attached thereto is a true and complete copy of the Certificate of Incorporation as in effect on the date of such certification; and (iv) to the incumbency and specimen signature of certain officers of Seller; (d) Certificate or certificates representing the number of the Bridge Securities to be purchased, as described in the first recital and Section 2.2; and (e) Executed and conformed copies of such other certificates, letters and documents as Purchaser may reasonably request and as are customary for transactions such as those contemplated by this Agreement. 3.5 HSR. The waiting period under the Hart-Scott-Rodino Antitrust --- Improvements Act of 1976, as amended (the "HSR Act") shall have expired or been terminated, if applicable. 3.6 Section 203. The issuance of (a) the Bridge Securities to Seller ----------- hereunder, (b) additional shares of Series A Preferred Stock and Series B Preferred Stock as dividends, (c) the Series B Preferred Stock for which the Bridge Securities are exchangeable, (d) any securities of Seller into which such Series B Preferred Stock is convertible or exchangeable, and (e) the Series C Redemption Shares shall have been exempted from the provisions of Section 203 of the DGCL. 3.7 Merger Agreement. The Merger Agreement shall not have been modified ---------------- between the date hereof and the Closing Date in any material respect (except with the prior written consent of Purchaser). 3.8 Credit Facility. The Credit Facility between Seller and Wells Fargo --------------- Bank, National Association, as agent, as contemplated by the commitment letter dated as of May 3, 1999 (the "Credit Facility"), shall not deviate from the terms of such commitment letter in any material respect (except with the prior written consent of Purchaser). 3.9 Subordinated Notes Offering. Seller's issuance and sale on the date --------------------------- on which the Offer is consummated, of senior subordinated increasing rate notes, for permanent financing in replacement thereof, in an aggregate principal amount of $200 million (the "Bridge Notes"), as contemplated by the commitment letter between Seller and Morgan Stanley & Co. Incorporated, dated as of May 3, 1999, shall not deviate from the terms of such commitment letter in any material respect (except with the prior written consent of Purchaser). 3.10 Simultaneous Closing. (a) The Offer shall have been consummated and -------------------- all shares tendered accepted for purchase by Seller or one or more of its Affiliates, (b) the Credit Facility shall have closed and (c) the Bridge Notes shall have closed, each of the foregoing substantially simultaneously with the Closing. 3.11 Accuracy of Seller's Representations and Warranties. The --------------------------------------------------- representations and warranties of Seller contained in Article V hereof which are not subject to a qualification regarding materiality shall be true and correct in all material respects as of the date when made and as of the Closing Date, as though made on such date, the representations and warranties of Seller contained in Article V hereof, which are subject to a qualification regarding materiality shall be true and correct in all respects as of the date when made and as of the Closing Date, as though made on such date, and Purchaser shall have received a certificate attesting thereto signed by the Chief Executive Officer of Seller, on behalf of Seller. 3.12 Compliance by Seller. Seller shall have performed, satisfied and complied with, in all material respects, all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with on or prior to the Closing Date, and Purchaser shall have received a certificate attesting thereto signed by the Chief Executive Officer of Seller. 3.13 No Legal Action. No action, suit, investigation or other proceeding --------------- relating to the transactions contemplated hereby shall have been instituted before or threatened by any Government Entity which presents a substantial risk of the restraint or prohibition of the transactions contemplated hereby or the obtaining of material damages or other material relief in connection therewith. ARTICLE IV CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER The obligations of Seller to be discharged under this Agreement on or prior to the Closing are subject to satisfaction of the following conditions at or prior to the Closing (unless expressly waived in writing by Seller at or prior to the Closing): 4.1 Closing Deliveries. Purchaser shall have delivered to Seller on or ------------------ before the Closing the following: (a) Opinion of Wilmer, Cutler & Pickering, dated as of the Closing Date, in form reasonably satisfactory to Seller; and (b) Immediately available funds in the amount of the Purchase Price. 4.2 HSR. The waiting period under the HSR Act shall have expired or --- been terminated, if applicable. 4.3 Simultaneous Closing. (a) The Offer shall have been consummated and -------------------- all shares tendered accepted for purchase by Seller or one or more of its Affiliates, (b) the Credit Facility shall have closed and (c) the Bridge Notes shall have closed, each of the foregoing substantially simultaneously with the Closing. 4.4 Accuracy of Purchaser's Representations and Warranties. The ------------------------------------------------------ representations and warranties of Purchaser contained in Article VI hereof which are not subject to a qualification regarding materiality shall be true and correct in all material respects as of the date when made and as of the Closing Date, as though made on such date, the representations and warranties of Purchaser contained in Article VI hereof, which are subject to a qualification regarding materiality shall be true and correct in all respects as of the date when made and as of the Closing Date, as though made on such date, and Seller shall have received a certificate attesting thereto signed by an officer of Purchaser, on behalf of Purchaser. 4.5 Compliance by Purchaser. Purchaser shall have performed, satisfied ----------------------- and complied with, in all material respects, all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with on or prior to the Closing Date, and Seller shall have received a certificate attesting thereto signed by an officer of Purchaser. 4.6 No Legal Action. No action, suit, investigation or other proceeding --------------- relating to the transactions contemplated hereby shall have been instituted before or threatened by any Government Entity which presents a substantial risk of the restraint or prohibition of the transactions contemplated hereby or the obtaining of material damages or other material relief in connection therewith. ARTICLE V REPRESENTATIONS AND WARRANTIES OF SELLER Except as set forth in the Filed SEC Documents, Seller hereby represents and warrants to Purchaser as follows: 5.1 Organization, Good Standing, Power, Authority, Etc. Each of Seller -------------------------------------------------- and the Subsidiaries (a) is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, (b) has all requisite corporate power and authority and possesses all governmental franchises, licenses, permits, authorizations and approvals necessary to enable it to own, lease or otherwise hold and operate its properties and to carry on its business as now being conducted and (c) is duly qualified to do business and in good standing in each jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualification necessary, except, in the case of clause (b) or (c) above, where the failure to have such power or authority, to possess such franchises, licenses, permits, authorizations or approvals or to be so qualified or in good standing, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect on Seller. 5.2 Capitalization of Seller. ------------------------ (a) The authorized capital stock of Seller ("Capital Stock"), the number of shares of Seller outstanding, the number of shares of Common Stock reserved for issuance upon the exercise of outstanding Seller stock options pursuant to stock option plans, the employee stock purchase plan and the director stock plan, each as described in the Filed SEC Documents (collectively, the "Stock Plans"), and the number of additional shares of Common Stock reserved for issuance pursuant to the Stock Plans, are all substantially as set forth in Seller's proxy statement for its annual meeting held March 23, 1999. Other than as set forth above, at the close of business on the date of Seller's proxy statement for its annual meeting held March 23, 1999 ("Proxy Statement Date"), there were outstanding no shares of Capital Stock or options, warrants or other rights to acquire Capital Stock from Seller. Since the Proxy Statement Date, there have been no issuances by Seller of shares of Capital Stock or of options, warrants or other rights to acquire Capital Stock from Seller, other than issuances and grants of shares of Common Stock and rights to acquire shares of Common Stock that were reserved for issuance as of the Proxy Statement Date and that were issued pursuant to the terms of the Stock Plans. (b) No bonds, debentures, notes or other indebtedness having the right to vote (or convertible into or exchangeable for securities having the right to vote) on any matters on which stockholders of Seller may vote are issued or outstanding ("Voting Debt"). (c) All outstanding shares of Common Stock are, and any shares of Common Stock which may be issued upon the exercise of stock options when issued will be, duly authorized, validly issued, fully paid and nonassessable and not subject to preemptive rights. All shares of Common Stock which may be issued upon the exercise of stock options will at the time issued by Seller be free and clear of all liens, claims, charges, pledges, mortgages, security interests or other encumbrances ("Liens"). Other than as set forth above, and except for this Agreement (and the securities being issued hereunder) and the Stock Plans, there are not any options, warrants, rights, convertible or exchangeable securities, "phantom" stock rights, stock appreciation rights, stock-based performance units, commitments, contracts, arrangements or undertakings of any kind to which Seller or any of the Subsidiaries is a party or by which any of them is bound (i) obligating Seller or any of the Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or other equity interests in, or any security convertible or exercisable for or exchangeable into any capital stock of or other equity interest in, Seller or of any of the Subsidiaries or any Voting Debt, (ii) obligating Seller or any of the Subsidiaries to issue, grant, extend or enter into any such option, warrant, call, right, security, commitment, contract, arrangement or undertaking or (iii) that give any person the right to receive any economic benefit or right similar to or derived from the economic benefits and rights of holders of Common Stock. (d) There are no outstanding contractual obligations of Seller or any of the Subsidiaries to repurchase, redeem or otherwise acquire any shares of capital stock of Seller or any of the Subsidiaries and, to the Knowledge of Seller, there are no irrevocable proxies with respect to shares of Common Stock or shares of capital stock of any Subsidiary of Seller. 5.3 SEC Documents; Financial Statements. ----------------------------------- (a) Seller has filed and provided or made available to Purchaser a true and complete copy of each report, schedule, registration statement and definitive proxy statement required to be filed by Seller with the SEC since January 1, 1995 (the "Filed SEC Documents"). As of their respective dates, each Filed SEC Document complied in all material respects with the requirements of the Act or the Exchange Act, as the case may be, applicable to such Filed SEC Document. None of the Filed SEC Documents when filed contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Except to the extent that information contained in any Filed SEC Document has been revised or superseded by a later Filed SEC Document filed and publicly available prior to the date of this Agreement, none of the Filed SEC Documents contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. (b) All contracts or agreements, including agreements relating to indebtedness of Seller or any of the Subsidiaries, required to be filed with the SEC under the Exchange Act have been filed with the SEC. (c) The financial statements of Seller included in the Filed SEC Documents comply as to form in all material respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with generally accepted accounting principles applied on a consistent basis ("GAAP") during the periods involved (except, in the case of the unaudited statements, as permitted by Form 10-Q of the SEC) and fairly present the consolidated financial position of Seller and its consolidated subsidiaries as at the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal and recurring year-end adjustments which are not material). Except as set forth in the Filed SEC Documents, neither Seller nor any Subsidiary of Seller has any liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise) required by GAAP to be set forth on a consolidated balance sheet of Seller and the Subsidiaries or in the notes thereto. None of the Subsidiaries is, or has at any time since January 1, 1995 been, subject to the reporting requirements of Sections 13(a) or 15(d) of the Exchange Act. 5.4 Authority and Qualification of Seller. Seller has all requisite ------------------------------------- corporate power and authority to enter into this Agreement and the Merger Agreement, and, subject to obtaining the Stockholder Approval with respect to the matters set forth in Section 8.4, to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the Merger Agreement, and the consummation of the transactions contemplated hereby and thereby, have been duly authorized by all necessary corporate action on the part of Seller subject, in the case of the Exchange, to obtaining the stockholders' approval and adoption of certain matters described in Section 8.4 hereof. The Board, at a meeting duly called and held, duly and unanimously adopted resolutions (a) approving this Agreement, the Merger Agreement and the transactions contemplated hereby and thereby, (b) determining that the terms of this Agreement, the Merger Agreement and the transactions contemplated hereby and thereby are fair to and in the best interests of Seller and its stockholders, (c) recommending that Seller's stockholders grant the Stockholder Approval and (d) declaring that this Agreement and the Merger Agreement are each advisable. Each of this Agreement and the Merger Agreement has been duly executed and delivered by Seller and, assuming such agreement constitutes a legal, valid and binding obligation of each of the other parties thereto, constitutes a valid and binding obligation of Seller, enforceable against Seller in accordance with its terms, subject to applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally and general principles of equity. 5.5 No Contravention, Conflict, Breach, Etc. The execution and delivery --------------------------------------- of this Agreement and the Merger Agreement do not, and the consummation of the transactions contemplated hereby and thereby will not, conflict with, or result in any breach or violation of, or default (with or without notice or lapse of time or both) under, or result in the termination of, or accelerate the performance required by, or give rise to a right of termination, cancellation or acceleration of any obligation under, or to increased, additional, accelerated or guaranteed rights or entitlements of any person under, or result in the creation of any Lien on the properties or assets of Seller or any of the Subsidiaries pursuant to, (a) any provision of the Certificate of Incorporation or the Seller's By-laws or the comparable charter or organizational documents of any Subsidiary, or (b) any judgment, order, decree, statute, law, ordinance, rule or regulation applicable to Seller or any Subsidiary or their respective properties or assets. 5.6 Consents. No consent, approval, order or authorization of, or -------- registration, declaration or filing with, any Government Entity is required by or with respect to Seller or any Subsidiary in connection with the execution and delivery of this Agreement or the Merger Agreement by Seller, or the consummation by Seller of the transactions contemplated hereby or thereby, except for such consents, approvals, orders, authorizations, registrations, declarations or filings the failure of which to be obtained or made would not, individually or in the aggregate, have a Material Adverse Effect on Seller, and except for: (i) the filing with the SEC of (A) a Schedule 14D-9 of Seller to be filed under the Exchange Act (the "Schedule 14D-9"), (B) a proxy statement relating to the consideration of D&M's stockholders approval at a meeting of the stockholders of D&M duly called and convened to consider the adoption of the Merger Agreement, and (C) such other reports under the Exchange Act, as may be required in connection with this Agreement or the Merger Agreement and the transactions contemplated hereby, (ii) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware and appropriate documents with the relevant authorities of other states in which D&M is qualified to do business, (iii) filings required pursuant to the HSR Act, and the rules and regulations promulgated thereunder, (iv) filings necessary to satisfy the applicable requirements of state securities or "blue sky" laws and (v) those filings required under the rules and regulations of the NYSE. 5.7 Vote Required. The Stockholder Approval is the only vote of the ------------- holders of any class or series of Capital Stock necessary to adopt this Agreement and approve the transactions contemplated hereby. No stockholder approval of any kind is required for the issuance of the Series A Preferred Stock and the Series C Preferred Stock. 5.8 Certain Approvals. The Board has taken any and all necessary and ----------------- appropriate action to render inapplicable to Stock Purchase, the Exchange and the other transactions contemplated hereby the provisions of Section 203 of the DGCL. No other state takeover statute or similar statute or regulation applies to the Offer, the Merger Agreement or the other transactions contemplated hereby. 5.9 Brokers. No broker, investment banker, financial advisor or other ------- person, other than Morgan Stanley & Co. Incorporated, the fees and expenses of which will be paid by Seller, is entitled to any broker's, finder's, financial advisor's or other similar fee or commission in connection with the transactions contemplated hereby based upon arrangements made by or on behalf of Seller. 5.10 Certain Agreements. There are no employment contracts to which ------------------ Seller or any of the Subsidiaries is a party which provides for any benefit upon or resulting from a "change in control" of Seller or any of the Subsidiaries or any similar event. 5.11 No Material Adverse Change. Since October 31, 1998, there has not -------------------------- been any event, change, effect, condition or development that, individually or in the aggregate, has had or could reasonably be expected to have a Material Adverse Effect on Seller (other than any such Material Adverse Effect on Seller the existence of which is specifically disclosed in any report filed and publicly available on Form 10-Q or Form 8-K under the Exchange Act with the SEC by Seller after October 31, 1998 and prior to the date hereof). 5.12 Exemption from Registration. Assuming the representations and --------------------------- warranties of Purchaser set forth in Article VI hereof are true and correct in all material respects, the offer and sale of the Series A Preferred Stock and the Series C Preferred Stock made pursuant to this Agreement will be exempt from the registration requirements of the Act. Neither Seller nor any Person acting on its behalf has, in connection with the offering of the Series A Preferred Stock or the Series C Preferred Stock, engaged in (a) any form of general solicitation or general advertising (as those terms are used within the meaning of Rule 502(c) under the Act), (b) any action involving a public offering within the meaning of Section 4(2) of the Act, or (c) any action which would require the registration of the offering and sale of the Series A Preferred Stock or the Series C Preferred Stock pursuant to this Agreement under the Act or which would violate applicable state securities or "blue sky" laws. Seller has not made and will not make, directly or indirectly, any offer or sale of the Series A Preferred Stock, the Series C Preferred Stock, or of securities of the same or a similar class as the Series A Preferred Stock or the Series C Preferred Stock if as a result the offer and sale of the Series A Preferred Stock and Series C Preferred Stock contemplated hereby could fail to be entitled to exemption from the registration requirements of the Act. As used herein, the terms "offer" and "sale" have the meanings specified in Section 2(3) of the Act. 5.13 Opinion of Independent Investment Banking Firm. Seller has obtained ---------------------------------------------- advice from Morgan Stanley & Co. Incorporated that the financial terms of the transactions contemplated by this Agreement are reasonable. 5.14 Other Matters. The Parties agree that each of the representations ------------- and warranties made by Seller to the lenders pursuant to the Credit Facility will be incorporated herein by reference as if such representations and warranties had been made directly to Purchaser. By Closing on this Agreement, Seller agrees that Purchaser may rely on such representations as if set forth fully herein. ARTICLE VI REPRESENTATIONS AND WARRANTIES OF PURCHASER Purchaser hereby represents and warrants to Seller that: 6.1 Organization, Good Standing, Power, Authority, Etc. Purchaser is a -------------------------------------------------- limited partnership duly organized, validly existing and in good standing under the laws of its jurisdiction of organization. 6.2 Authority and Qualification of Purchaser. Purchaser has all ---------------------------------------- requisite partnership power and authority to enter into this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary action on the part of Purchaser. No vote of the holders of partnership interests is necessary to approve or adopt this Agreement or the transactions contemplated hereby. This Agreement has been duly executed and delivered by Purchaser and, assuming such agreement constitutes a legal, valid and binding obligation of each of the other parties thereto, constitutes a valid and binding obligation of Purchaser, enforceable against Purchaser in accordance with its terms, subject to applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally and general principles of equity. 6.3 No Contravention, Conflict, Breach, Etc. The execution and delivery --------------------------------------- of this Agreement do not, and the consummation of the transactions contemplated hereby will not, conflict with, or result in any breach or violation of, or default (with or without notice or lapse of time or both) under, or result in the termination of, or accelerate the performance required by, or give rise to a right of termination, cancellation or acceleration of any obligation under, or to increased, additional, accelerated or guaranteed rights or entitlements of any person under, or result in the creation of any Lien on the properties or assets of Purchaser or any of its subsidiaries pursuant to, (a) any provision of the Purchaser's organizational documents, or (b) any judgment, order, decree, statute, law, ordinance, rule or regulation applicable to Purchaser or any subsidiary of Purchaser or their respective properties or assets. 6.4 Consents. No consent, approval, order or authorization of, or -------- registration, declaration or filing with, any Federal, state, local, or foreign government or any court, administrative agency, tribunal or commission or other Government Entity is required by or with respect to Purchaser in connection with the execution and delivery of this Agreement by Purchaser or the consummation by Purchaser of the transactions contemplated hereby, except for such consents, approvals, orders, authorizations, registrations, declarations or filings the failure of which to be obtained or made would not, individually or in the aggregate, have a Material Adverse Effect on Purchaser or filings required pursuant to the HSR Act. 6.5 Brokers. No broker, investment banker, financial advisor or other ------- person is entitled to any broker's, finder's, financial advisor's or other similar fee or commission in connection with the transactions contemplated hereby based upon arrangements made by or on behalf of Purchaser. 6.6 Investment Intent. Purchaser is an "Accredited Investor" within the ----------------- meaning of Rule 501(a) of Regulation D under the Act, and it is or will be acquiring the Issuable Securities for its own account and not with a view to, or for sale in connection with, any distribution thereof in violation of the Act. It understands that the Issuable Securities have not been registered under the Act by reason of a specific exemption from the registration provisions thereof which depends upon, among other things, the bona fide nature of their investment intent as expressed herein. ARTICLE VII CORPORATE GOVERNANCE 7.1 Board of Directors. ------------------ (a) At all times on and after the Closing Date, for so long as Purchaser and its Affiliates own or control at least 10% of the outstanding shares of Common Stock, and until Richard C. Blum no longer wishes to serve as a director, Seller shall take all such actions as may be necessary or appropriate to cause Mr. Blum to be elected or re-elected as a member of the Board and to be maintained in such position at all times. (b) In the event that a vacancy is created on the Board at any time by the death, disability, retirement, or resignation of Mr. Blum, Purchaser and Seller will take such actions as will result in the election or appointment of a new director designated by Purchaser, provided that such designee is acceptable to Seller. 7.2 Observer Rights for Purchaser Designee. Seller shall, for so long as -------------------------------------- Purchaser and its Affiliates own or control at least 10% of the outstanding shares of Common Stock, permit an individual designated by Purchaser and acceptable to Seller to attend and observe meetings of the Board, and such designee shall have the right to receive all written information provided by Seller to the Board (but only if specifically requested by such designee). Such designee shall have no right to vote on any matter presented to the Board, but otherwise shall have all rights of a Director, including: (i) the right to examine books and records of Seller; (ii) the right to review and participate in all discussions of the Board including, without limitation, capital or equity programs; (iii) the right to receive, upon request, any information relating to Seller and the Subsidiaries, and to any Affiliates thereof; and (iv) the right to meet on a regular basis with the management personnel of Seller and the Subsidiaries, or any Affiliates thereof; provided that any such designee shall agree to be bound by all policies relating to confidentiality and material non- public information which are applicable to the Directors and senior executive officers of Seller. ARTICLE VIII COVENANTS OF THE PARTIES 8.1 Restrictions. Purchaser covenants and agrees with Seller that ------------ Purchaser will not dispose of any of Purchaser's shares of the Issuable Securities except pursuant to (a) an effective registration statement under the Act or (b) an applicable exemption from registration under the Act. In connection with any sale by Purchaser pursuant to clause (b) of the preceding sentence, Purchaser shall furnish to Seller, if requested by Seller, an opinion of counsel reasonably satisfactory to Seller to the effect that such exemption from registration is available in connection with such sale. 8.2 Pre-Closing Activities. From and after the date of this Agreement ---------------------- until the Closing, each of Seller and Purchaser shall act with good faith towards, and shall use all commercially reasonable efforts to consummate, the transactions contemplated by this Agreement, and neither Seller nor Purchaser will take any action that would prohibit or impair its ability to consummate the transactions contemplated by the Merger Agreement and this Agreement. 8.3 Filing with SEC. So long as any of the Issuable Securities are --------------- outstanding, Seller shall file with the SEC the annual reports and quarterly reports and the information, documents and other reports that are required to be filed with the SEC pursuant to Sections 13 and 15 of the Exchange Act, so long as Seller has or is required to have a class of securities registered under the Exchange Act and is then subject to the reporting requirements of the Exchange Act, at the time Seller is required to file the same with the SEC and, promptly after Seller is required to file such reports, information or documents with the SEC, to mail copies of such reports, information and documents to the holders of the Series A Preferred Stock, Series B Preferred Stock, the Conversion Shares, Series C Preferred Stock and the Series C Redemption Shares at their addresses set forth in the register maintained by the transfer agent therefor. 8.4 Stockholder Meeting. Seller shall cause a special meeting of its ------------------- common stockholders (the "Stockholder Meeting") to be held as soon as practicable but in no event later than six months after the Closing, for the purpose of approving (i) the issuance of the Series B Preferred Stock (pursuant to the Exchange contemplated by Section 8.13 hereof (the "Exchange Approval")) as required by NYSE Rule 312 and (ii) an amendment to the Certificate of Incorporation of Seller providing for an increase in the number of authorized common shares to such number as may be deemed appropriate by Seller (the "Charter Amendment Approval" and, together with the Exchange Approval, the "Stockholder Approval"), and transacting such other business as may properly come before the meeting or any adjournment thereof, (the "Stockholder Meeting Matters"). Seller shall use its best efforts to obtain the Stockholder Approval no later than six months after the Closing. Purchaser shall vote, and shall cause its Affiliates to vote, all shares of Seller voting securities which they may hold at the time of the Stockholder Meeting in favor of the Stockholder Approval. 8.5 Proxy Statement. Seller covenants that the Proxy Statement will not --------------- include any untrue statement of a material fact, or omit to state any material fact, necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, -------- ------- Seller's covenant shall not encompass any information in the Proxy Statement that was furnished in writing to Seller by or on behalf of Purchaser for use specifically in connection with the preparation of the Proxy Statement. 8.6 Stock Exchange Listing. Subsequent to consideration by the ---------------------- shareholders of Seller of the Stockholder Meeting Matters at the Shareholders Meeting and until such shares shall cease to be outstanding, Seller shall take all steps necessary to ensure that the Series A Preferred Stock (if still outstanding), Conversion Shares and Series C Preferred Stock (if still outstanding) and Series C Redemption Shares (if any) are approved for trading, subject to notice of issuance by the NYSE and any other securities exchange on which the Common Stock is listed. 8.7 HSR. Upon the terms and subject to the conditions set forth in this --- Agreement, each of the parties agrees to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other parties in doing, all things necessary, proper or advisable to consummate and make effective all necessary filings required pursuant to the HSR Act no later than five Business Days from the date of this Agreement, and shall use their best efforts to obtain the early termination of the waiting period thereunder, provided that neither Seller nor Purchaser shall be required to agree to dispose of or hold separate any portion of its business or assets. 8.8 Equity Proposals. ---------------- (a) Prior to the Closing, Seller agrees that neither Seller nor any Subsidiary nor any of the respective officers and directors of Seller or any of the Subsidiaries shall, and Seller shall direct and use its best efforts to cause its employees, agents and representatives (including, without limitation, any investment banker, attorney or accountant retained by Seller or any Subsidiary) not to, initiate, solicit or encourage, directly or indirectly, any inquiries or the making of any proposal or offer (including, without limitation, any proposal or offer to stockholders of Seller) with respect to the offer, sale or issuance of preferred stock or other comparable equity securities as contemplated by this Agreement (any such proposal or offer being hereinafter referred to as an "Equity Proposal") or engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any Person relating to an Equity Proposal, or otherwise facilitate directly or indirectly any effort or attempt to make or implement an Equity Proposal; and (b) Seller will immediately cease and cause to be terminated any existing activities, discussions or negotiations with any parties conducted heretofore with respect to any of the foregoing. Seller will take the necessary steps to inform the individuals or entities referred to in the first sentence hereof of the obligations undertaken in this subsection 8.8(b). Seller will notify Purchaser immediately if any such inquiries or proposals are received by, any such information is requested from, or any such negotiations or discussions are sought to be initiated or continued with Purchaser. 8.9 Publicity. Seller and Purchaser will consult with each other before --------- issuing any press release or otherwise making any public statements with respect to the transactions contemplated hereby and shall not issue any such press release or make any such public statement prior to such consultation, except as may be required by law or by obligations pursuant to any listing agreement with any securities exchange. 8.10 Securities. Seller hereby covenants to Purchaser, that from and after ---------- the date hereof and so long as Purchaser owns any Issuable Securities: (a) Unissued Shares of Common Stock. (i) Reserve and keep available out of its authorized but unissued shares of Series B Preferred Stock and Common Stock (including any shares held by Seller in its corporate treasury), for the purpose of issuing any and all payment in kind dividends and effecting the Exchange and the exercise in full of conversion and other rights related to the Series B Preferred Stock and the Series C Preferred Stock, such number of its duly authorized shares of Series B Preferred Stock and Common Stock as shall be sufficient to effect such exercise, and if at any time the number of authorized but unissued shares of Series B Preferred Stock or Common Stock shall not be sufficient to effect such exercise, subject to any required approval by the holders of the Common Stock and as may otherwise be required pursuant to the DGCL and applicable federal and state securities laws, Seller shall take all such corporate action as may be necessary (and desirable in the reasonable discretion of Purchaser) to increase its authorized but unissued shares of Series B Preferred Stock and Common Stock to such number of shares as shall be sufficient for such purposes, and (ii) reserve and keep available out of its authorized but unissued shares of Series A Preferred Stock, for the purpose of issuing any and all payment in kind dividends on the Series A Preferred Stock, such number of its duly authorized shares of Series A Preferred Stock as shall be sufficient to effect any such dividend contemplated by the Series A Preferred Stock, and if at any time the number of authorized but unissued Series A Preferred Stock shall not be sufficient to effect such dividends, subject to any required approval by the holders of the Common Stock and as may otherwise be required pursuant to the DGCL and applicable federal and state securities laws, Seller shall take all corporate action as may be necessary (and desirable in the reasonable discretion of Purchaser) to increase its authorized but unissued Series A Preferred Stock to such number of shares as shall be sufficient for such purposes. (b) Exchange of Certificates. Seller shall, upon surrender by the holder of any certificates representing the Series A Preferred Stock, the Series B Preferred Stock or the Series C Preferred Stock (or securities issued upon exchange, conversion or redemption of any of the foregoing) for exchange or reissuance at the office of Seller, cause to be issued in exchange therefor new certificates in such denomination or denominations as may be requested for the same aggregate number of such securities (or securities issued upon exchange, conversion or redemption thereof) represented by the certificates so surrendered and registered as such holder may request, subject to the provisions hereof. (c) Replacement of Certificates. Upon receipt by Seller of evidence reasonably satisfactory to it of loss, theft, destruction or mutilation of any certificate evidencing any of the Series A Preferred Stock, the Series B Preferred Stock, or the Series C Preferred Stock (or securities issued upon exchange, conversion or redemption of any of the foregoing), and (in case of loss, theft or destruction) of indemnity reasonably satisfactory to Seller, and upon the surrender and cancellation of such certificate, if mutilated, Seller shall make and deliver in lieu of such certificate a new certificate for the number of such securities (or securities issued upon exchange, conversion or redemption thereof), as the case may be, evidenced by such lost, stolen, destroyed or mutilated certificate which remains outstanding. Purchaser's agreement of indemnity shall constitute indemnity satisfactory to Seller for the purposes of this Section 8.10 without the need of any further surety or bond. (d) Government and Other Approvals. Seller shall promptly prepare, submit and file with all public and governmental authorities, all applications, notices, registrations, certificates, statements and such other information, documents and instruments as may be required pursuant to any federal, state, local or foreign law or rule or regulation of the NYSE, NASD or any other securities exchange, in connection with the consummation of the transactions contemplated by this Agreement, including the effect of any dividends, exchange, conversion or redemption rights, anti-dilution provisions or Board control contemplated by the terms of the Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock, or other securities of Seller which may be acquired by Purchaser pursuant to this Agreement and the Certificates of Designation. Seller shall use its best efforts to obtain any necessary consents or approvals from any Government Entity in connection with the consummation of the transactions contemplated by this Agreement, including the effect of any dividends, exchange, conversion or redemption rights or anti- dilution provisions contemplated by the terms of the Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock or other securities of Seller which may be acquired by Purchaser pursuant to this Agreement and the Certificates of Designation. Purchaser shall provide all cooperation and support, and take all such actions as may be reasonably required to facilitate such filings and obtain such consents. 8.11 Access, Information and Confidentiality. --------------------------------------- (a) Pre-Closing Access. Upon reasonable notice prior to the Closing, Seller shall (and shall cause each of the Subsidiaries to) afford Purchaser and its representatives reasonable access to its properties, books, contracts and records and personnel and advisors and Seller shall (and shall cause each of the Subsidiaries to) furnish promptly to Purchaser all information concerning its business, properties and personnel as Purchaser or its representatives may reasonably request. (b) Post-Closing Access. From the date hereof until the Stockholder Meeting, Seller shall permit Purchaser (and its designated representatives) to visit and inspect any of the properties of Seller and the Subsidiaries, including the books and records of Seller and the Subsidiaries (and to make extracts and copies therefrom), and to consult with respect to and discuss the affairs, businesses, finances, operations and accounts of Seller and the Subsidiaries with the officers, directors and employees of such entities, all at such reasonable times and as often as Purchaser may reasonably request. (c) Information. Seller covenants that so long as Purchaser owns at least 10% of any Issuable Securities it will deliver to Purchaser the following: (i) As soon as practicable and in any event within 45 days after the end of each quarterly period (other than the last quarterly period) in each fiscal year, (A) a consolidated statement of income and consolidated statements of changes in financial position and cash flows of Seller and the Subsidiaries for such quarterly period and for the period from the beginning of the current fiscal year to the end of such quarterly period, and (B) a consolidated balance sheet of Seller and the Subsidiaries as at the end of such quarterly period, setting forth in each case, in comparative form, figures for the corresponding periods in the preceding fiscal year and corresponding figures for the budget for such quarterly period, all in reasonable detail and certified by an authorized financial officer of Seller, subject to changes resulting from year-end adjustments; (ii) As soon as practicable and in any event within 120 days after the end of each fiscal year, (A) a consolidated statement of income and consolidated statements of changes in financial position and cash flows of Seller and the Subsidiaries for such year, and (B) a consolidated balance sheet of Seller and the Subsidiaries as of the end of such year, setting forth in each case, in comparative form, corresponding consolidated figures from the preceding annual audit and corresponding figures for the budget for such fiscal year, all in reasonable detail together with an opinion directed to Seller of independent public accountants of recognized standing selected by Seller; (iii) Promptly upon transmission thereof, copies of all such financial statements, proxy statements, notices and reports as it shall send to its public stockholders and copies of all registration statements (without exhibits), other than on Form S-8 or any similar successor form, and all reports which it files with the SEC (or any governmental body or agency succeeding to the functions of the SEC); (iv) With reasonable promptness, such other financial data as any Purchaser may reasonably request. (d) Confidentiality. Purchaser recognizes and acknowledges that it has in the past, currently has, and in the future may possibly have, access to certain confidential information of Seller. Purchaser agrees that it will not disclose confidential information with respect to Seller to any Person for any purpose or reason whatsoever, except to authorized representatives of Seller and to counsel and other advisers, provided, however, that such advisers (other than -------- ------- counsel) agree to the confidentiality provisions of this subsection 8.11(d), unless (i) such information becomes known to the public generally through no fault of Purchaser, or (ii) disclosure is required by law or the order of any governmental authority under color of law; provided, however, that prior to -------- ------- disclosing any information pursuant to clauses (i) or (ii) above, Purchaser shall, if possible, give prior written notice thereof to Seller and provide Seller with the opportunity to contest such disclosure. 8.12 Maintenance of Business. Seller covenants that between the date of ----------------------- this Agreement and Closing, it shall and shall cause each of the Subsidiaries to: (a) conduct its business (including, but not limited to, making loans, paying directors, officers and employees, including any salary, bonus, or other compensation policy, disposing or acquiring assets, and incurring liabilities) only in the ordinary course, consistent with past practice; (b) use commercially reasonable efforts to preserve its business organizations intact, to retain the services of its present officers and employees and to preserve the good will of the suppliers and customers and others having business relations with it; (c) comply in all material respects with all laws that may be applicable to its business; (d) not make any distributions or dividends to its stockholders; and (e) comply with its stated official accounting policies with respect to charge-offs and loss provisions. Subject to the foregoing, any transaction or action that is not in the ordinary course of business, consistent with Seller's past practice, shall be subject to the prior written consent of Purchaser. 8.13 Exchange. In the event Seller shall have obtained the Stockholder -------- Approval, on the first Business Day following the last to occur of (a) delivery to Purchaser of a Certificate of the Chief Executive Officer or other executive officer of Seller certifying that the Stockholder Approval has been obtained, which Certificate shall be delivered within one Business Day of obtaining the Stockholder Approval and (b) termination of any applicable waiting period under the HSR Act, then the Bridge Securities and any additional shares of Series A Preferred Stock paid as dividends thereon shall, without any further action on the part of Seller or the holders thereof, be exchanged for shares of Series B Preferred Stock (the "Exchange"). If the Stockholder Approval has not been obtained prior to six months after the Closing, then the Exchange shall not take place without the prior written consent of the holders of at least 67% of the shares of Series A Preferred Stock and Series C Preferred Stock. In connection with the Exchange, the holders of the Bridge Securities or any additional shares of Series A Preferred Stock paid as dividends thereon shall receive the number of shares of Series B Preferred Stock equal to 46,082.95 plus the number of any additional shares of Series A Preferred Stock paid as dividends thereon then owned by them on the date of the Exchange (after giving effect to any accrued dividends and interest). From and after the date of the Exchange all of the Bridge Securities and any additional shares of Series A Preferred Stock paid as dividends thereon shall be deemed to have been exchanged for the Series B Preferred Stock into which they were exchangeable. Holders of Issuable Securities shall be entitled to obtain certificates representing the Series B Preferred Stock to which they are entitled pursuant to the Exchange by delivering to Seller certificates representing the Series A Preferred Stock and the Series C Preferred Stock. Seller shall not take any action between the date hereof and the date set for redemption of the Series A Preferred Stock that would cause the Conversion Price (as defined in the Series B Certificate of Designation) to be any amount other than $21.70 per share if shares of Series B Preferred Stock were outstanding on the date hereof without making appropriate adjustments thereof in the conversion price (which such adjustment or cumulative adjustments to the Series B Preferred Stock shall take effect immediately after the Exchange). 8.14 Tax Matters. Purchaser intends that no pay-in-kind dividends on the ----------- Series A Preferred Stock or the Series B Preferred Stock will, when paid or accrued, be includible in Purchaser's gross income for federal, state or local tax purposes. Accordingly, for so long as there are any shares of Series A Preferred Stock or Series B Preferred Stock outstanding then: (a) unless Seller concludes in good faith that there is no reasonable basis to make or file any tax return that is consistent with such intention, Seller shall not make or file any tax return that is inconsistent with such intention; (b) if by reason of any action taken by Seller over the objection of Purchaser the pay-in-kind dividends which accrue or are paid with respect to the Series A Preferred Stock or Series B Preferred Stock become taxable as income for tax purposes when paid or accrued, Seller shall pay to the holders of such securities such additional amount (the "Gross Up Amount") as may be necessary to fund any federal, state or local income tax payable with respect to such dividend. Such Gross Up Amount shall also include an amount necessary to fund the payment of any such income tax payable with respect to the Gross Up Amount. Such Gross Up Amount shall be paid upon notice to Seller at least ten (10) days before the date on which the relevant income tax payment is due or made. Prior to receiving any taxable distribution from Seller, Purchaser shall provide Seller with such documentation as may be reasonably requested by Seller in order to make such distribution without withholding for tax purposes. All amounts paid or accrued on any Issuable Security shall be net of applicable withholding taxes. 8.15 Authorized Shares. If Seller is unable to obtain the Stockholder ----------------- Approval, it will use its best efforts to obtain an amendment to the Certificate of Incorporation providing for an increase in the number of authorized shares of Common Stock to such number as is sufficient to permit the repurchase by Seller of the Series C Preferred Stock pursuant to the terms of the Certificate of Designation for the Series C Preferred Stock. ARTICLE IX TERMINATION 9.1 General. Except for the obligations in Article IX, Article XI and ------- Section 8.11(a) and (d), this Agreement and the transactions contemplated hereby shall terminate without any action by the parties hereto if the Closing shall not have occurred on or before November 30, 1999. This Agreement may be terminated at any time prior to the Closing (i) by a written instrument executed and delivered by Seller and Purchaser; (ii) by Purchaser upon any material breach or default by Seller under this Agreement; or (iii) by Seller upon any material breach or default by Purchaser under this Agreement. 9.2 Breach By Seller. A material breach or default by Seller shall occur: ---------------- (a) in the event that any representation or warranty of Seller set forth in Article V shall be false in any material respect; or (b) in the event that Seller (or any applicable Subsidiary) shall not perform in any material respect any covenant required of it in Article III or Article VIII not otherwise waived by Purchaser; or (c) breach of or default by Seller or any Subsidiary under any of the Transaction Documents. 9.3 Breach By Purchaser. A material breach or default by Purchaser shall ------------------- occur (a) in the event that any representation or warranty of Purchaser set forth in Article VI shall be false in any material respect; or (b) in the event that Purchaser shall not perform in any material respect any covenant required of it in Article IV or VIII not otherwise waived by Seller; or (c) breach of or default by Purchaser under any of the Transaction Documents. 9.4 Specific Remedies. In addition to the termination of this Agreement ----------------- and the transactions contemplated herein prior to Closing, in the event of a material breach or default by a party (the "Breaching Party"), the Breaching Party shall indemnify the non-breaching party for any and all loss, cost, and expense caused by the breach of representation, warranty, or covenant. ARTICLE X SURVIVAL; INDEMNIFICATION 10.1 Survival of Representations and Warranties and Covenants. All -------------------------------------------------------- representations and warranties contained in this Agreement shall survive the execution and delivery of this Agreement and the delivery of Bridge Securities for a period of two (2) years from the date of such delivery and any examination or investigation made by any party to this Agreement or any of their successors and assigns. All covenants shall survive for the periods specified therein or, if no period is specified, for a period of two (2) years. 10.2 Indemnification of Seller. From and after the Closing Purchaser ------------------------- shall indemnify Seller and its Affiliates, officers, directors, employees, partners (general or limited), shareholders, and shareholders of their partners (general or limited), for, and shall defend and hold harmless each of them from, against, and with respect to all Indemnifiable Losses as a result of, arising from, in connection with, or incident to (a) any breach or inaccuracy of any representation or warranty Purchaser makes in this Agreement; or (b) any failure of Purchaser to fulfill, satisfy, and discharge any of its obligations or covenants under this Agreement. 10.3 Indemnification of Purchaser. From and after the Closing Seller shall ---------------------------- indemnify Purchaser and its Affiliates, officers, directors, employees, partners (general or limited) and shareholders of its partners (general or limited) for, and shall defend and hold harmless each of them from, against, and with respect to all Indemnifiable Losses as a result of, arising from, in connection with, or incident to (a) any breach or inaccuracy of any written representation or warranty made by Seller in this Agreement; or (b) any failure of Seller to fulfill, satisfy, and discharge any of its obligations or covenants under this Agreement. ARTICLE XI MISCELLANEOUS 11.1 Successors and Assigns. All covenants and agreements contained in ---------------------- this Agreement by or on behalf of the parties hereto shall bind, and inure to the benefit of, the respective successors and assigns of the parties hereto; provided, however, that the rights granted to the parties hereto may not be - -------- ------- assigned (except to wholly-owned subsidiaries of such parties) without the prior written consent of the other party. Purchaser may assign to one or more of its affiliated partnerships its obligations hereunder in whole or in part, but shall not be relieved of such obligations. 11.2 Performance; Waiver. The provisions of this Agreement (including ------------------- this Section 11.2) may be modified or amended, and waivers and consents to the performance and observance of the terms hereof may be given by written instrument executed and delivered by Seller and (1) prior to the Closing, by Purchaser and (2) after the Closing, by the holder or holders of a majority of the Series A Preferred Stock and Series C Preferred Stock or, after the Exchange, of the Series B Preferred Stock. The failure at any time to require performance of any provision hereof shall in no way affect the full right to require such performance at any time thereafter (unless performance thereof has been waived in accordance with the terms hereof for all purposes and at all times by the parties to whom the benefit of such performance is to be rendered). The waiver by any party to this Agreement of a breach of any provision hereof shall not be taken or held to be a waiver of any succeeding breach of such provision or any other provision or as a waiver of the provision itself. 11.3 Notices. All notices or other communications given or made hereunder ------- shall be validly given or made if in writing and delivered by facsimile transmission or in person at, or mailed by overnight courier to, the following addresses (and shall be deemed effective at the time of receipt thereof). If to Seller: URS Corporation 100 California Street, Suite 500 San Francisco, California 94111 Attn: Kent P. Ainsworth Facsimile: (415) 398-2621 with a copy to: Cooley Godward LLP One Maritime Plaza, 20th Floor San Francisco, California 94111-3580 Attn: Samuel M. Livermore Facsimile: (415) 951-3699 If to Purchaser: RCBA Strategic Partners, L.P. 909 Montgomery Street, Suite 400 San Francisco, California 94133 Attn: Murray A. Indick Facsimile: (415) 434-3130 with a copy to: Wilmer, Cutler & Pickering 2445 M Street, N.W. Washington, D.C. 20037 Attn: Michael R. Klein and Eric R. Markus Facsimile: (202) 663-6363 or to such other address as the party to whom notice is to be given may have previously furnished notice in writing to the other in the manner set forth above. 11.4 Expenses. -------- (a) Seller shall reimburse Purchaser for all of Purchaser's reasonable out-of pocket costs and third party expenses (including professional fees), that Purchaser incurred in association with this Agreement including, but not limited to, conducting "due diligence" review of Seller, as and when such expenses are incurred; provided, however, that if Purchaser has breached this -------- ------- Agreement as provided in Section 9.3, and Seller terminates this Agreement, each party shall bear its own expenses. (b) In addition to any other reimbursement to which Purchaser is entitled pursuant to this Section, Seller shall pay to Purchaser in cash at Closing the sum of One Million Five Hundred Thousand Dollars ($1,500,000.00) as a transaction fee. 11.5 Governing Law. This Agreement shall be governed by and construed in ------------- accordance with the laws of the State of Delaware as applied to contracts made and performed within the State of Delaware, without regard to principles of conflicts of law. 11.6 Severability; Interpretation. If any term, provision, covenant or ---------------------------- restriction of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, each of Seller and Purchaser directs that such court interpret and apply the remainder of this Agreement in the manner which it determines most closely effectuates their intent in entering into this Agreement, and in doing so particularly take into account the relative importance of the term, provision, covenant or restriction being held invalid, void or unenforceable. 11.7 Headings. The index and section headings herein are for convenience -------- only and shall not affect the construction hereof. 11.8 Entire Agreement. This Agreement together with the other Transaction ---------------- Documents embody the entire agreement between the Parties relating to the subject matter hereof and any and all prior oral or written agreements, representations or warranties, contracts, understandings, correspondence, conversations, and memoranda, whether written or oral, among Seller and Purchaser, or between or among any agents, representatives, parents, subsidiaries, Affiliates, predecessors in interest or successors in interest, with respect to the subject matter hereof. 11.9 Counterparts. This Agreement may be executed in counterparts, each ------------ of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument. 11.10 Absence of Third Party Beneficiary Rights. No provision of this ----------------------------------------- Agreement is intended, nor will be interpreted, to provide or to create any third party beneficiary rights or any other rights of any kind in any client, customer, Affiliate, shareholder, employee, or partner of any party hereto or any other Person. 11.11 Mutual Drafting. This Agreement is the mutual product of the --------------- parties hereto, and each provision hereof has been subject to the mutual consultation, negotiation and agreement of each of the parties, and shall not be construed for or against any party hereto. 11.12 Further Representations. Each party to this Agreement acknowledges ----------------------- and represents that it has been represented by its own legal counsel in connection with the transactions contemplated by this Agreement, with the opportunity to seek advice as to its legal rights from such counsel. Each party further represents that it is being independently advised as to the tax consequences of the transactions contemplated by this Agreement and is not relying on any representation or statements made by the other party as to such tax consequences. 11.13 Specific Performance; Remedies. ------------------------------ (a) Seller acknowledges that Purchaser will be irreparably harmed and that there will be no adequate remedy at law for any violation by Seller of the covenants or agreements contained in Sections 8.4 (Stockholder Meeting), 8.6 (Stock Exchange Listing), 8.8 (Equity Proposals), 8.9 (Publicity), 8.10 (Securities), 8.11(a), (b) and (c) (Pre-Closing Access; Post-Closing Access; Information), 8.13 (Exchange), and 8.14 (Tax Matters) of this Agreement. It is accordingly agreed that, in addition to any other remedies which may be available upon the breach of any such covenants or agreements, Purchaser shall have the right to obtain injunctive relief to restrain a breach or threatened breach of, or otherwise to obtain specific performance of, these covenants and agreements of Seller. (b) Purchaser acknowledges that Seller will be irreparably harmed and that there will be no adequate remedy at law for any violation by Purchaser of the covenants or agreements contained in Section 8.9 (Publicity) and subsection 8.11(d) (Confidentiality) of this Agreement. It is accordingly agreed that, in addition to any other remedies which may be available upon the breach of any such covenants or agreements, Seller shall have the right to obtain injunctive relief to restrain a breach or threatened breach of, or otherwise to obtain specific performance of, these covenants and agreements of Purchaser. [Remainder of page left intentionally blank.] IN WITNESS WHEREOF, the parties hereto have executed this Agreement. --------------------------------------------------------------------- RCBA STRATEGIC PARTNERS, URS CORPORATION - ------------------------- L.P. - ---- By: /s/ Kent P. Ainsworth ------------------------- By: RCBA GP, L.L.C., its Name: Kent P. Ainsworth - -------------------------- general partner Title: Executive Vice - --------------- President and Chief Financial By: /s/ Murray A. Indick Officer ---------------------------- Name: Murray A. Indick Title: Member EXHIBIT 1.7 TO THE SECURITIES PURCHASE AGREEMENT CERTIFICATE OF DESIGNATION of SERIES A PREFERRED STOCK of URS CORPORATION Pursuant to Section 151 of the General Corporation Law of the State of Delaware URS Corporation, a Delaware corporation (the "Corporation"), certifies that pursuant to the authority contained in its Certificate of Incorporation, as amended, and in accordance with the provisions of Section 151 of the General Corporation Law of the State of Delaware, its Board of Directors (the "Board of Directors") has adopted the following resolution creating a series of its Preferred Stock, par value $1.00 per share, designated as Series A Preferred Stock: RESOLVED, that a series of authorized Preferred Stock, par value $1.00 per share, of the Corporation be hereby created, and that the designation and amount thereof and the voting powers, preferences and relative, participating, optional and other special rights of the shares of such series, and the qualifications, limitations or restrictions thereof are as follows: Section 1. Designation and Amount. ---------------------- The shares of such series shall be designated as the "Series A Preferred Stock" (the "Series A Preferred Stock") and the number of shares constituting such series shall be 300,000 shares of Series A Preferred Stock. Section 12 below contains the definitions of certain defined terms used herein. Section 2. Dividends and Distributions. --------------------------- (a) The holders of shares of Series A Preferred Stock, in preference to the holders of shares of the Common Stock and of any other Capital Stock of the Corporation ranking junior to the Series A Preferred Stock as to payment of dividends, shall be entitled to receive on the last day of each calendar quarter, cumulative dividends on the Series A Preferred Stock accruing on a daily basis (computed on the basis of a 360-day year of twelve 30-day months) at the rate per annum equal to the Dividend Rate (as defined herein) per share of Series A Preferred Stock calculated as a percentage of $2,170.00, compounded quarterly, from and including the date of issuance until the redemption of the Series A Preferred Stock. Such dividends shall be paid in kind as herein provided, and will be paid whether or not they have been declared and whether or not there are profits, surplus or other funds of the Corporation legally available for the payment of dividends. Dividends on the Series A Preferred Stock shall be paid in additional shares of Series A Preferred Stock valued at $2,170.00 per share. For purposes hereof, the "Dividend Rate" shall mean eight percent (8%) per annum from the date of initial issuance of the Series A Preferred Stock until six (6) months after the date of issuance, and (ii) and fifteen percent (15%) thereafter (except as otherwise provided in the last sentence of Section 4(b)(ii)); provided, however, that if Stockholder Approval (as such term is defined in the - -------- ------- Securities Purchase Agreement) has not been obtained within six (6) months after the date of issuance, then the Dividend Rate shall be retroactively recalculated as if it were fifteen percent (15%) from the time of issuance and additional dividend shares shall be paid in respect of such retroactive increase. (b) In case the Corporation or any Subsidiary of the Corporation shall at any time or from time to time declare, order, pay or make a dividend or other distribution (including, without limitation, any distribution of stock or other securities or property or rights or warrants to subscribe for securities of the Corporation or any of its Subsidiaries by way of dividend or spin off) on the Common Stock, other than any dividend or distribution of shares of Common Stock covered by paragraph (b)(i) of Section 7 hereof (a "Covered Distribution"), the holders of shares of Series A Preferred Stock shall be entitled to receive from the Corporation, with respect to each share of Series A Preferred Stock held, in addition to the dividends payable under paragraph (a) of this Section 2, the same dividend or distribution received by a holder of the number of shares of Common Stock equal to the Common Liquidation Equivalent per share of Series A Preferred Stock on the record date for such dividend or distribution. Any such dividend or distribution shall be declared, ordered, paid or made on the Series A Preferred Stock at the same time such dividend or distribution is declared, ordered, paid or made on the Common Stock and shall be in addition to any dividends payable under paragraph (a) of this Section 2. Section 3. Voting Rights. ------------- So long as any shares of Series A Preferred Stock shall be outstanding and unless the consent or approval of a greater number of shares shall then be required by law, without first obtaining the consent or approval of the Requisite Holders, voting as a single class, given in person or by proxy at a meeting at which the holders of such shares shall be entitled to vote separately as a class, or by written consent, the Corporation shall not (and shall not permit or authorize any subsidiary to): (i) authorize, create or issue any class or series, or any shares of any class or series, of stock having any preference or priority as to voting, dividends or upon liquidation, dissolution or winding up over the Series A Preferred Stock ("Senior Stock"); (ii) authorize, create or issue any class or series, or any shares of any class or series, of stock ranking on a parity as to voting, dividends or upon liquidation, dissolution or winding up with the Series A Preferred Stock ("Parity Stock"); (iii) reclassify any shares of stock of the Corporation into shares of Senior Stock or Parity Stock; (iv) authorize any security exchangeable for, convertible into, or evidencing the right to purchase any shares of Senior Stock or Parity Stock, other than the exchange of Series B Exchangeable Convertible Preferred Stock of the Corporation (the "Series B Preferred Stock") for shares of Series A Preferred Stock and Series C Preferred Stock of the Corporation (the "Series C Preferred Stock"); (v) alter or change the rights, preferences or privileges of the Series A Preferred Stock; (vi) increase or decrease the authorized number of shares of Series A Preferred Stock or issue shares of Series A Preferred Stock other than to holders of Series A Preferred Stock pursuant to its terms; or (vii) amend or waive any provision of the Corporation's Certification of Incorporation or bylaws in a manner adverse in any respect to the holders of Series A Preferred Stock. Section 4. Mandatory Repurchase by the Corporation. --------------------------------------- (a) On the twelfth anniversary of the Closing Date of the Securities Purchase Agreement, the Corporation shall purchase for cash from each holder of shares of Series A Preferred Stock the number of shares of the Series A Preferred Stock held by such holder on such twelfth anniversary. Repurchases made pursuant to this Section 4(a) shall be effected on such anniversary date (or such other day as the holder and the Corporation may agree) and shall be for the Liquidation Preference. The place of payment shall be at an office or agency fixed therefor by the Corporation or, if not fixed, at the principal executive office of the Corporation. (b) (i) On the date fixed for repurchase, each holder of shares of Series A Preferred Stock shall surrender the certificate representing such shares to the Corporation at the place designated in such notice and shall thereupon be entitled to receive payment in cash therefor provided in this Section 4. Dividends with respect to the shares of Series A Preferred Stock so purchased shall cease to accrue after the date so purchased, such shares shall no longer be deemed outstanding after such date and the holders thereof shall cease to be stockholders of the Corporation and all rights whatsoever with respect to the shares so purchased shall terminate. (ii) If the funds legally available for such purchase are not sufficient to purchase all the shares of Series A Preferred Stock tendered to the Corporation for purchase, the Corporation shall purchase the greatest number of whole shares for which such funds are so available on a pro rata basis among all tendering holders based on the ratio of the number of shares tendered by each of them to the aggregate amount of all shares so tendered, and the certificates representing the unpurchased shares shall be deemed not to be surrendered for repurchase, such unpurchased shares shall remain outstanding and the rights of the holders of shares of Series A Preferred Stock thereafter shall continue to be those of a holder of shares of the Series A Preferred Stock; provided, however, the Corporation shall thereafter be required - -------- ------- to repurchase all such remaining shares at the first date it has sufficient funds legally available for such purpose at the price it would have paid at the date such shares were actually tendered and the Corporation shall give notice as aforesaid to each holder whose shares were not repurchased for such reason and such holder shall thereafter have the right to elect to have such shares repurchased, such election to be made within 30 days of receipt of such notice. For purposes of this Section, the Corporation shall be deemed not to have sufficient funds legally available for any such purchase if the Board of Directors reasonably determines that immediately after such repurchase the Corporation would be insolvent. Upon the failure to purchase all of the Series A Preferred Stock as required by this Section 4, the Dividend Rate on any such stock that has not been purchased shall automatically, pursuant to Section 2(a), increase to eighteen percent (18%). (c) Whenever the Corporation shall not have redeemed the shares of Series A Preferred Stock within five (5) Business Days of the date such redemption is required by Section 4(a), thereafter and until all redemption payments shall have been made, if and so long as any shares of Series A Preferred Stock remain outstanding, the Corporation shall not, nor shall it permit any of its Subsidiaries to: (i) declare or pay dividends, or make any other distributions, on any shares of Common Stock or other capital stock of the Corporation ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Stock ("Junior Stock"), other than dividends or distribution payable in Junior Stock; (ii) declare or pay dividends, or make any other distributions, on any shares of Parity Stock, other than dividends or distributions payable in Junior Stock, except dividends paid ratably on the Series A Preferred Stock and all Parity Stock on which dividends are payable or in arrears, in proportion to the total amounts to which the holders of all such shares are then entitled; (iii) redeem or purchase or otherwise acquire for consideration (other than Junior Stock) any shares of Junior Stock or Parity Stock (other than, with respect to Parity Stock, ratably with the Series A Preferred Stock); or (iv) purchase or otherwise acquire for consideration any shares of Series A Preferred Stock, other than purchases ratably among all holders of the Series A Preferred Stock. (d) The Corporation shall not permit any Subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of capital stock of the Corporation unless the Corporation could, pursuant to paragraph (c) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner. Section 5. Reacquired Shares. ----------------- Any shares of Series A Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof, and, if necessary to provide for the lawful purchase of such shares, the capital represented by such shares shall be reduced in accordance with the General Corporation Law of the State of Delaware. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock, par value $1.00 per share, of the Corporation and may be reissued as part of another series of Preferred Stock, par value $1.00 per share, of the Corporation subject to the conditions or restrictions on authorizing, or creating or issuing any class or series, or any shares of any class or series, set forth in Section 3. Section 6. Liquidation, Dissolution or Winding Up. -------------------------------------- If the Corporation shall adopt a plan of liquidation or of dissolution, or commence a voluntary case under the Federal bankruptcy laws or any other applicable state or Federal bankruptcy, insolvency or similar law, or consent to the entry of an order for relief in any involuntary case under any such law or to the appointment of a receiver, liquidator, assignee, custodian, trustee or sequestrator (or similar official) of the Corporation or of any substantial part of its property, or make an assignment for the benefit of its creditors, or admit in writing its inability to pay its debts generally as they become due, or if a decree or order for relief in respect of the Corporation shall be entered by a court having jurisdiction in the premises in an involuntary case under the Federal bankruptcy laws or any other applicable Federal or state bankruptcy, insolvency or similar law, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Corporation or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and any such decree or order shall be unstayed and in effect for a period of ninety (90) consecutive days and on account of such event the Corporation shall liquidate, dissolve or wind up, or upon any other liquidation, dissolution or winding up of the Corporation, no distribution shall be made (i) to the holders of shares of Junior Stock, unless prior thereto, the holders of shares of Series A Preferred Stock shall have received in cash the Liquidation Preference, or (ii) to the holders of shares of Parity Stock, except distributions made ratably on the Series A Preferred Stock and all such Parity Stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up of the Corporation. A consolidation, merger, corporate reorganization, recapitalization or other similar transaction as a result of which the beneficial holders of the Corporation's Common Stock immediately prior to such transaction do not hold, directly or indirectly, in excess of 50% of the combined voting securities entitled to vote generally in the election of the directors of the surviving or resulting corporation immediately after such transaction, and a sale or other disposition of all or substantially all of the assets of the Corporation in one transaction or series of related transactions, each shall be deemed to be a "liquidation" within the meaning of this Section 6; provided that no such transaction shall be deemed to be a "liquidation" if first approved by the Board of Directors of the Corporation and the Requisite Holders. Section 7. Common Liquidation Equivalent. ----------------------------- (a) Subject to the provisions for adjustment hereinafter set forth, the "Common Liquidation Equivalent" of each share of Series A Preferred Stock shall be equal to an amount that would be payable to the holder of such share upon the occurrence of an event described in Section 6 had such holder, immediately prior to such event, exchanged such shares for shares of Common Stock at the Applicable Exchange Rate. The Applicable Exchange Rate in effect at any time shall be the quotient obtained by dividing $2,170.00 by the Applicable Exchange Value, calculated as provided in Section 7(b). (b) The Applicable Exchange Value shall be $21.70, except that such amount shall be adjusted from time to time in accordance with this Section 7. The Applicable Exchange Value shall be subject to adjustment from time to time as follows: (i) In case the Corporation shall at any time or from time to time after the original issuance of the Series A Preferred Stock declare a dividend, or make a distribution, on the outstanding shares of Common Stock in either case, in shares of Common Stock, or effect a subdivision, combination, consolidation or reclassification of the outstanding shares of Common Stock into a greater or lesser number of shares of Common Stock, then, and in each such case, the Applicable Exchange Value in effect immediately prior to such event or the record date therefor, whichever is earlier, shall be adjusted by multiplying the Applicable Exchange Value by a fraction, the numerator of which is the number of shares of Common Stock that were outstanding immediately prior to such event and the denominator of which is the number of shares of Common Stock outstanding immediately after such event. An adjustment made pursuant to this clause (i) shall become effective (x) in the case of any such dividend or distribution, immediately after the close of business on the record date for the determination of holders of shares of Common Stock entitled to receive such dividend or distribution, or (y) in the case of any such subdivision, reclassification, consolidation or combination, at the close of business on the day upon which such corporate action becomes effective. (ii) In addition to the foregoing adjustments in subsection (i) above, the Corporation will be permitted to make such reductions in the Applicable Exchange Value as it considers to be advisable in order that any event treated for Federal income tax purposes as a dividend of stock or stock rights will not be taxable to the holders of the shares of Common Stock. (iii) No adjustment in the Applicable Exchange Value shall be required unless such adjustment would require an increase or decrease of at least 0.1% of the Applicable Exchange Value; provided, that any adjustments which by reason of this subsection (v) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 7 shall be made to the nearest cent or to the nearest one-hundredth of a share, as the case may be. (iv) In each case of an adjustment or readjustment of the Applicable Exchange Rate, the Corporation at its expense will furnish each holder of Series A Preferred Stock with a certificate, executed by the president and chief financial officer (or in the absence of a person designated as the chief financial officer, by the treasurer) showing such adjustment or readjustment, and stating in detail the facts upon which such adjustment or readjustment is based. Section 8. Rank. ---- The Series A Preferred Stock shall rank, with respect to dividend rights and rights upon liquidation, winding up and dissolution, prior to all classes and series of the Corporation's preferred stock authorized or outstanding on the date of initial issuance of the Series A Preferred Stock (other than the Series C Preferred Stock, which shall rank on a par with the Series A Preferred Stock) and prior to all classes of Common Stock. Section 9. Other Covenants. --------------- (a) Transfer Taxes. The Corporation shall pay any and all issue or -------------- other taxes that may be payable in respect of any issue or delivery of shares of Series B Preferred Stock on exchange of the Series A Preferred Stock and other securities. The Corporation shall not, however, be required to pay any income tax or tax which may be payable in respect of any transfer involved in the issue or delivery of Series A Preferred Stock (or other securities or assets) in a name other than that in which the shares of Series A Preferred Stock so exchanged were registered, and no such issue or delivery shall be made unless and until the person requesting such issue has paid to the Corporation the amount of such tax or has established, to the satisfaction of the Corporation, that such tax has been paid. (b) Prior Notice of Certain Events. In case: ------------------------------ (i) the Corporation shall authorize the granting to all holders of Common Stock of rights or warrants to subscribe for or purchase any shares of stock of any class or of any other rights or warrants; or (ii) of any reclassification of Common Stock (other than a subdivision or combination of the outstanding Common Stock, or a change in par value, or from par value to no par value, or from no par value to par value), or of any consolidation or merger to which the Corporation is a party and for which approval of any stockholders of the Corporation shall be required, or of the sale or transfer of all or substantially all of the assets of the Corporation or of any compulsory share exchange whereby the Common Stock is converted into other securities, cash or other property; or (iii) of the voluntary or involuntary dissolution, liquidation or winding up of the Corporation; then the Corporation shall cause to be filed with the transfer agent for the Series A Preferred Stock, and shall cause to be mailed to the holders of record of the Series A Preferred Stock, at their last addresses as they shall appear upon the stock transfer books of the Corporation, at least fifteen days prior to the applicable record date hereinafter specified, a notice stating, as the case may be, (x) the record date (if any) for the purpose of such dividend, distribution, redemption, repurchase or granting of rights or warrants or, if no record date is to be set, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer, share exchange, dissolution, liquidation or winding up is expected to become effective, and the date, if any, as of which it is expected that holders of shares of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reclassification, consolidation, merger, sale, transfer, share exchange, dissolution, liquidation or winding up (but no failure to mail such notice or any defect therein or in the mailing thereof shall affect the validity of the corporate action required to be specified in such notice). Section 10. Remedies. -------- (a) The Corporation stipulates that the remedies at law of each holder of Series A Preferred Stock in the event of any failure in the performance of or compliance with any of the terms hereof are not and will not be adequate and that, to the fullest extent permitted by law, such terms may be specifically enforced by a decree for the specific performance of any agreement contained herein or by an injunction against a violation of any of the terms hereof or otherwise without requiring any holder to post a bond or other security except to the extent required by applicable law. (b) Any holder of Series A Preferred Stock shall be entitled to recover from the Corporation the reasonable attorneys' fees and expenses incurred by such holder in connection with the enforcement by such holder of any obligation of the Corporation hereunder. (c) No failure or delay on the part of any holder of Series A Preferred Stock in exercising any right, power or remedy hereunder or under applicable law or otherwise shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy hereunder or thereunder. The remedies herein provided are cumulative and not exclusive of any remedies provided by law or otherwise. Section 11. Severability of Provisions. -------------------------- Whenever possible, each provision hereof shall be interpreted in a manner as to be effective and valid under applicable law, but if any provision hereof 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 or otherwise adversely affecting the remaining provisions hereof. If a court of competent jurisdiction should determine that a provision hereof would be valid or enforceable if a period of time were extended or shortened or a particular percentage were increased or decreased, then such court may make such change as shall be necessary to render the provision in question effective and valid under applicable law. Section 12. Definitions. ----------- For the purposes of the Certificate of Designation of Series A Preferred Stock which embodies this resolution: (a) "Accrued Dividends" to a particular date (the "Applicable Date") shall mean (i) all dividends accrued but not paid on the Series A Preferred Stock pursuant to paragraph (a) of Section 2, whether or not declared, accrued to the Applicable Date, plus (ii) all dividends or distributions payable pursuant to paragraph (b) of Section 2 for which the Covered Distribution was declared, ordered, paid or made on or prior to the Applicable Date. (b) "Business Day" shall mean any day other than a Saturday, Sunday, or a day on which commercial banks in the City of New York are authorized or obligated by law or executive order to close. (c) "capital stock" shall mean (i) in the case of a corporation, corporate stock, (ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, (iii) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited) and (iv) any other interest or participation that confers on a person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing person. (d) "Closing Price" per share of Common Stock on any date shall mean the last sale price, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, in either case as reported on the Nasdaq National Market or in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or American Stock Exchange, as the case may be, or, if the Common Stock is listed or admitted to trading on the New York Stock Exchange or American Stock Exchange, or, if the Common Stock is not listed or admitted to trading on any national securities exchange, the last quoted sale price or, if not so quoted, the average of the high bid and low asked prices in the over-the- counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotations System ("NASDAQ") or such other system then in use, or, if on any such date the Common Stock is not quoted by any such organization, the average of the Closing bid and asked prices as furnished by a professional market maker making a market in the Common Stock selected by the Board of Directors and reasonably acceptable to the Requisite Holders. (e) "Common Liquidation Equivalent" shall have the meaning set forth in Section 7. (f) "Current Market Price" per share of Common Stock on any date shall mean the average of the Closing Prices of a share of Common Stock for the twenty (20) consecutive Trading Days ending on the date in question. If on any such Trading Day the Common Stock is not quoted by any organization referred to in the definition of Closing Price, the fair value of the Common Stock on such day, as reasonably determined in good faith by the Board of Directors of the Corporation, shall be used. (g) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. (h) "Liquidation Preference" shall mean an amount per share of Series A Preferred Stock equal to the greater of (i) the Common Liquidation Equivalent and (ii) the Preferred Liquidation Amount. (i) "Person" shall mean an individual, partnership, corporation, limited liability company or partnership, unincorporated organization, trust or joint venture, or a governmental agency or political subdivision thereof, or other entity of any kind. (j) "Preferred Liquidation Amount" per share of Series A Preferred Stock shall be an amount equal to $2,170.00 plus all Accrued Dividends thereon to the date of determination. (k) "Requisite Holders" shall mean the holders of sixty-seven percent (67%) of the then-outstanding shares of Series A Preferred Stock. (l) "Securities Purchase Agreement" shall mean that certain agreement dated as of May 5, 1999 by and among the Corporation and certain purchasers of the Series A Preferred Stock party thereto. (m) "Subsidiary" of any Person shall mean any corporation or other entity of which a majority of the voting power of the voting equity securities or equity interest is owned, directly or indirectly, by such Person. (n) "Trading Day" shall mean a day on which the principal national securities exchange on which the Common Stock is quoted, listed or admitted to trading is open for the transaction of business or, if the Common Stock is not quoted, listed or admitted to trading on any national securities exchange (including the Nasdaq Stock Market), any day other than a Saturday, Sunday, or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close. [Remainder of Page Intentionally Left Blank] IN WITNESS WHEREOF, the Corporation has caused this Certificate of Designation of Series A Preferred Stock to be duly executed by its President and attested to by its Secretary and has caused its corporate seal to be affixed hereto, this 9th day of June, 1999. URS CORPORATION By: /s/ Kent P. Ainsworth --------------------- Kent P. Ainsworth EXHIBIT 1.7 TO THE SECURITIES PURCHASE AGREEMENT CERTIFICATE OF DESIGNATION of SERIES B EXCHANGEABLE CONVERTIBLE PREFERRED STOCK of URS CORPORATION Pursuant to Section 151 of the General Corporation Law of the State of Delaware URS Corporation, a Delaware corporation (the "Corporation"), certifies that pursuant to the authority contained in its Certificate of Incorporation, as amended, and in accordance with the provisions of Section 151 of the General Corporation Law of the State of Delaware, its Board of Directors (the "Board of Directors") has adopted the following resolution creating a series of its Preferred Stock, par value $1.00 per share, designated as Series B Exchangeable Convertible Preferred Stock: RESOLVED, that a series of authorized Preferred Stock, par value $1.00 per share, of the Corporation be hereby created, and that the designation and amount thereof and the voting powers, preferences and relative, participating, optional and other special rights of the shares of such series, and the qualifications, limitations or restrictions thereof are as follows: Section 1. Designation and Amount. ----------------------- The shares of such series shall be designated as the "Series B Exchangeable Convertible Preferred Stock" (the "Series B Preferred Stock") and the number of shares constituting such series shall be 150,000 shares of Series B Preferred Stock. Section 14 below contains the definitions of certain defined terms used herein. Section 2. Dividends and Distributions. ---------------------------- (a) The holders of shares of Series B Preferred Stock, in preference to the holders of shares of the Common Stock and of any other capital stock of the Corporation ranking junior to the Series B Preferred Stock as to payment of dividends, shall be entitled to receive on the last day of each calendar quarter, cumulative dividends on the Series B Preferred Stock accruing on a daily basis (computed on the basis of a 360-day year of twelve 30-day months) at the rate per annum equal to the Dividend Rate (as defined herein) per share of Series B Preferred Stock calculated as a percentage of $2,170.00, compounded quarterly, from and including the date of issuance of the Series B Preferred Stock until the conversion or exchange of the Series B Preferred Stock. Such dividends shall be paid in kind as herein provided, and will be paid whether or not they have been declared and whether or not there are profits, surplus or other funds of the Corporation legally available for the payment of dividends. Dividends on the Series B Preferred Stock shall be paid in additional shares of Series B Preferred Stock valued at $2,170.00 per share. For purposes hereof, the "Dividend Rate" shall mean eight percent (8%) per annum from the date of initial issuance of the Series B Preferred Stock (except as otherwise provided in the last sentence of Section 4(b)(ii)). (b) In case the Corporation or any Subsidiary of the Corporation shall at any time or from time to time declare, order, pay or make a dividend or other distribution (including, without limitation, any distribution of stock or other securities or property or rights or warrants to subscribe for securities of the Corporation or any of its Subsidiaries by way of dividend or spin off) on the Common Stock, other than any dividend or distribution of shares of Common Stock covered by paragraph (b)(i) of Section 8 hereof (a "Covered Distribution"), the holders of shares of Series B Preferred Stock shall be entitled to receive from the Corporation, with respect to each share of Series B Preferred Stock held, in addition to the dividends payable under paragraph (a) of this Section 2, the same dividend or distribution received by a holder of the number of shares of Common Stock into which such share of Series B Preferred Stock is convertible on the record date for such dividend or distribution. Any such dividend or distribution shall be declared, ordered, paid or made on the Series B Preferred Stock at the same time such dividend or distribution is declared, ordered, paid or made on the Common Stock and shall be in addition to any dividends payable under paragraph (a) of this Section 2. Section 3. Voting Rights. -------------- In addition to any voting rights provided elsewhere herein, and any voting rights provided by law, the holders of shares of Series B Preferred Stock shall have the following voting rights: (a) So long as the Series B Preferred Stock is outstanding, each share of Series B Preferred Stock shall entitle the holder thereof to vote on all matters voted on by holders of the capital stock of the Corporation into which such share of Series B Preferred Stock is convertible, voting together as a single class with the other shares entitled to vote, at all meetings of the stockholders of the Corporation. With respect to any such vote, each share of Series B Preferred Stock shall entitle the holder thereof to cast the number of votes equal to the number of votes which could be cast in such vote by a holder of the shares of capital stock of the Corporation into which such share of Series B Preferred Stock is convertible on the record date for such vote or, if no such record date is established, on the date any written consent of stockholders is solicited. (b) So long as any shares of Series B Preferred Stock shall be outstanding and unless the consent or approval of a greater number of shares shall then be required by law, without first obtaining the consent or approval of the Requisite Holders, voting as a single class, given in person or by proxy at a meeting at which the holders of such shares shall be entitled to vote separately as a class, or by written consent, the Corporation shall not (and shall not permit or authorize any subsidiary to): (i) authorize, create or issue any class or series, or any shares of any class or series, of stock having any preference or priority as to voting, dividends or upon liquidation, dissolution or winding up over the Series B Preferred Stock ("Senior Stock"); (ii) authorize, create or issue any class or series, or any shares of any class or series, of stock ranking on a parity as to voting, dividends or upon liquidation, dissolution or winding up with the Series B Preferred Stock ("Parity Stock"); (iii) reclassify any shares of stock of the Corporation into shares of Senior Stock or Parity Stock; (iv) authorize any security exchangeable for, convertible into, or evidencing the right to purchase any shares of Senior Stock or Parity Stock; (v) alter or change the rights, preferences or privileges of the Series B Preferred Stock; (vi) increase or decrease the authorized number of shares of Series B Preferred Stock or issue shares of Series B Preferred Stock other than to holders of Series B Preferred Stock pursuant to its terms; (vii) amend or waive any provision of the Corporation's Certification of Incorporation or bylaws in a manner adverse in any respect to the holders of Series B Preferred Stock; (viii) authorize or pay any cash dividend on Common Stock or any other class or series of stock over which the Series B Preferred Stock has any preference or priority as to voting, dividends or upon liquidation, dissolution or winding-up ("Junior Stock"); or (ix) redeem, repurchase, retire or otherwise acquire Common Stock or any other Junior Stock (other than by conversion into or exchange for shares of Junior Stock and other than any redemptions, repurchases or acquisitions made pursuant to and as required by the terms of any employee incentive or benefit plan of the Corporation as in effect from time to time). Section 4. Mandatory Repurchase by the Corporation. ---------------------------------------- (a) On the twelfth anniversary of the Closing Date of the Securities Purchase Agreement, the Corporation shall purchase for cash from each holder of shares of Series B Preferred Stock the number of shares of the Series B Preferred Stock held by such holder on such twelfth anniversary. Repurchases made pursuant to this Section 4(a) shall be effected on such anniversary date (or such other day as the holder and the Corporation may agree) and shall be for the Conversion Value. The place of payment shall be at an office or agency fixed therefor by the Corporation or, if not fixed, at the principal executive office of the Corporation. (b) (i) On the date fixed for repurchase, each holder of shares of Series B Preferred Stock shall surrender the certificate representing such shares to the Corporation at the place designated in such notice and shall thereupon be entitled to receive payment in cash therefor provided in this Section 4. Dividends with respect to the shares of Series B Preferred Stock so purchased shall cease to accrue after the date so purchased, such shares shall no longer be deemed outstanding after such date and the holders thereof shall cease to be stockholders of the Corporation and all rights whatsoever with respect to the shares so purchased shall terminate. (ii) If the funds legally available for such purchase are not sufficient to purchase all the shares of Series B Preferred Stock tendered to the Corporation for purchase, the Corporation shall purchase the greatest number of whole shares for which such funds are so available on a pro rata basis among all tendering holders based on the ratio of the number of shares tendered by each of them to the aggregate amount of all shares so tendered, and the certificates representing the unpurchased shares shall be deemed not to be surrendered for repurchase, such unpurchased shares shall remain outstanding and the rights of the holders of shares of Series B Preferred Stock thereafter shall continue to be those of a holder of shares of the Series B Preferred Stock; provided, however, the Corporation shall thereafter be required to repurchase - -------- ------- all such remaining shares at the first date it has sufficient funds legally available for such purpose at the price it would have paid at the date such shares were actually tendered and the Corporation shall give notice as aforesaid to each holder whose shares were not repurchased for such reason and such holder shall thereafter have the right to elect to have such shares repurchased, such election to be made within 30 days of receipt of such notice. For purposes of this Section, the Corporation shall be deemed not to have sufficient funds legally available for any such purchase if the Board of Directors reasonably determines that immediately after such repurchase the Corporation would be insolvent. Upon the failure to purchase all of the Series B Preferred Stock as required by this Section 4, the Dividend Rate on any such stock that has not been purchased shall automatically, pursuant to Section 2(a), increase to twelve percent (12%). If any part of the Series B Preferred Stock has not been purchased pursuant to this Section 4 three (3) months after the twelfth anniversary of the Closing Date of the Securities Purchase Agreement, the Dividend Rate shall thereafter increase to fifteen percent (15%). Section 5. Conversion at Option of the Corporation. ----------------------------------------- (a) Securities Purchase Agreement (the "Third Anniversary"), so long as shares of Common Stock shall have traded on the Primary Exchange for at least thirty (30) of the forty-five (45) trading days immediately preceding the Determination Date (defined below), at a Closing Price in excess of the Hurdle Percentage of the Conversion Price then in effect for the Series B Preferred Stock for each such trading day, all, but not less than all, of the shares of Series B Preferred Stock may, at the option of the Corporation, be converted into shares of Common Stock. The Corporation shall send notice of mandatory conversion to each of the holders of the Series B Preferred Stock at such holder's address as it appears on the transfer books of the Corporation. (b) Subject to the provisions for adjustment set forth in Section 8, each share of Series B Preferred Stock shall be -- if the Corporation so elects as provided in Section 5(a) -- converted into a number of fully paid and nonassessable shares of Common Stock equal to the product obtained by multiplying the Applicable Conversion Rate by the number of shares of Series B Preferred Stock being converted. The Applicable Conversion Rate shall be the quotient obtained by dividing the Conversion Value on the date of conversion by the applicable Conversion Price. Section 6. Reacquired Shares. ----------------- Any shares of Series B Preferred Stock converted, purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof, and, if necessary to provide for the lawful purchase of such shares, the capital represented by such shares shall be reduced in accordance with the General Corporation Law of the State of Delaware. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock, par value $1.00 per share, of the Corporation and may be reissued as part of another series of Preferred Stock, par value $1.00 per share, of the Corporation subject to the conditions or restrictions on authorizing, or creating or issuing any class or series, or any shares of any class or series, set forth in paragraph (b) of Section 3. Section 7. Liquidation, Dissolution or Winding Up. --------------------------------------- If the Corporation shall adopt a plan of liquidation or of dissolution, or commence a voluntary case under the Federal bankruptcy laws or any other applicable state or Federal bankruptcy, insolvency or similar law, or consent to the entry of an order for relief in any involuntary case under any such law or to the appointment of a receiver, liquidator, assignee, custodian, trustee or sequestrator (or similar official) of the Corporation or of any substantial part of its property, or make an assignment for the benefit of its creditors, or admit in writing its inability to pay its debts generally as they become due, or if a decree or order for relief in respect of the Corporation shall be entered by a court having jurisdiction in the premises in an involuntary case under the Federal bankruptcy laws or any other applicable Federal or state bankruptcy, insolvency or similar law, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Corporation or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and any such decree or order shall be unstayed and in effect for a period of ninety (90) consecutive days and on account of such event the Corporation shall liquidate, dissolve or wind up, or upon any other liquidation, dissolution or winding up of the Corporation, no distribution shall be made (i) to the holders of shares of Junior Stock, unless prior thereto, the holders of shares of Series B Preferred Stock shall have received in cash the Liquidation Preference, or (ii) to the holders of shares of Parity Stock, except distributions made ratably on the Series B Preferred Stock and all such Parity Stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up of the Corporation. Section 8. Conversion. ---------- Each share of Series B Preferred Stock may, at the option of the holder thereof, be converted into shares of Common Stock at any time, whether or not the Corporation has given notice of exchange under Section 9, on the terms and conditions set forth in this Section 8. In addition: (a) Subject to the provisions for adjustment hereinafter set forth, each share of Series B Preferred Stock shall be convertible in the manner hereinafter set forth into a number of fully paid and nonassessable shares of Common Stock equal to the product obtained by multiplying the Applicable Conversion Rate by the number of shares of Series B Preferred Stock being converted. The Applicable Conversion Rate shall be the quotient obtained by dividing the Conversion Value on the date of conversion by the applicable Conversion Price. (b) The Conversion Price shall be subject to adjustment from time to time as follows: (i) In case the Corporation shall at any time or from time to time after the original issuance of the Series B Preferred Stock declare a dividend, or make a distribution, on the outstanding shares of Common Stock in either case, in shares of Common Stock, or effect a subdivision, combination, consolidation or reclassification of the outstanding shares of Common Stock into a greater or lesser number of shares of Common Stock, then, and in each such case, the Conversion Price in effect immediately prior to such event or the record date therefor, whichever is earlier, shall be adjusted by multiplying the Conversion Price by a fraction, the numerator of which is the number of shares of Common Stock that were outstanding immediately prior to such event and the denominator of which is the number of shares of Common Stock outstanding immediately after such event. An adjustment made pursuant to this clause (i) shall become effective (x) in the case of any such dividend or distribution, immediately after the close of business on the record date for the determination of holders of shares of Common Stock entitled to receive such dividend or distribution, or (y) in the case of any such subdivision, reclassification, consolidation or combination, at the close of business on the day upon which such corporate action becomes effective. (ii) In addition to the foregoing adjustments in subsections (i), the Corporation will be permitted to make such reductions in the Conversion Price as it considers to be advisable in order that any event treated for Federal income tax purposes as a dividend of stock or stock rights will not be taxable to the holders of the shares of Common Stock. (iii) In any case in which this Section 8 shall require that an adjustment (including by reason of the last sentence of subsection (i) above) be made immediately following a record date, the Corporation may elect to defer the effectiveness of such adjustment (but in no event until a date later than the effective time of the event giving rise to such adjustment), in which case the Corporation shall, with respect to any share of Series B Preferred Stock converted after such record date and on and before such adjustment shall have become effective (x) defer paying any cash payment pursuant to Section 8(f) hereof or issuing to the holder of such shares of Series B Preferred Stock the number of shares of Common Stock and other capital stock of the Corporation (or other assets or securities) issuable upon such conversion in excess of the number of shares of Common Stock and other capital stock of the Corporation issuable thereupon only on the basis of the Conversion Price prior to adjustment, and (y) not later than five Business Days after such adjustment shall have become effective, pay to such holder the appropriate cash payment pursuant to Section 8(f) hereof and issue to such holder the additional shares of Common Stock and other capital stock of the Corporation issuable on such conversion. (iv) No adjustment in the Conversion Price shall be required unless such adjustment would require an increase or decrease of at least 0.1% of the Conversion Price; provided, that any adjustments which by reason of this subsection (iv) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 8 shall be made to the nearest cent or to the nearest one-hundredth of a share, as the case may be. (c) (i) In case of any capital reorganization or reclassification of outstanding shares of Common Stock (other than a reclassification covered by paragraph (b) (i) of this Section 8), or in case of any consolidation or merger of the Corporation with or into another corporation, or in case of any sale or conveyance to another corporation of the property of the Corporation as an entirety or substantially as an entirety (each of the foregoing being referred to as a "Transaction"), (x) if such Transaction occurs prior to the Third Anniversary and constitutes or leads to a Change in Control, each holder of Series B Preferred Stock shall then be entitled to the acceleration and immediate vesting of all dividends such holder would have accrued on and prior to the Third Anniversary, and (y) each share of Series B Preferred Stock then outstanding shall thereafter be convertible into, in lieu of the Common Stock issuable upon such conversion prior to the consummation of such Transaction, the kind and amount of shares of stock and other securities and property (including cash) receivable upon the consummation of such transaction by a holder of that number of shares of Common Stock into which one share of Series B Preferred Stock was convertible immediately prior to such Transaction (including, on a pro rata basis, the cash, securities or property received by holders of Common Stock in any tender or exchange offer that is a step in such Transaction). In any such case, if necessary, appropriate adjustment (as determined by the Board of Directors) shall be made in the application of the provisions set forth in this Section 8 with respect to rights and interests thereafter of the holders of shares of Series B Preferred Stock to the end that the provisions set forth herein for the protection of the conversion rights of the Series B Preferred Stock shall thereafter be applicable, as nearly as reasonably may be, to any such other shares of stock and other securities and property deliverable upon conversion of the shares of Series B Preferred Stock remaining outstanding (with such adjustments in the conversion price and number of shares issuable upon conversion and such other adjustments in the provisions hereof as the Board of Directors shall determine to be appropriate). In case securities or property other than Common Stock shall be issuable or deliverable upon conversion as aforesaid, then all references in this Section 8 shall be deemed to apply, so far as appropriate and as nearly as may be, to such other securities or property. (ii) Notwithstanding anything contained herein to the contrary, the Corporation will not effect any Transaction unless, prior to the consummation thereof, the Surviving Person (as defined in Section 14) thereof shall assume, by written instrument mailed to each record holder of shares of Series B Preferred Stock, at such holder's address as it appears on the transfer books of the Corporation, the obligation to deliver to such holder such cash and such securities to which, in accordance with the foregoing provisions, such holder is entitled. Nothing contained in this paragraph (c) shall limit the rights of holders of the Series B Preferred Stock to convert the Series B Preferred Stock in connection with the Transaction. (d) The holder of any shares of Series B Preferred Stock may exercise its right to convert such shares into shares of Common Stock by surrendering for such purpose to the Corporation, at its principal office or at such other office or agency maintained by the Corporation for that purpose, a certificate or certificates representing the shares of Series B Preferred Stock to be converted duly endorsed to the Corporation in blank accompanied by a written notice stating that such holder elects to convert all or a specified whole number of such shares in accordance with the provisions of this Section 8. The Corporation will pay any and all issue and other taxes (other than taxes based on income) that may be payable in respect of any issue or delivery of shares of Common Stock on conversion of Series B Preferred Stock pursuant hereto. As promptly as practicable, and in any event within three Business Days after the surrender of such certificate or certificates and the receipt of such notice relating thereto and, if applicable, payment of all transfer taxes (or the demonstration to the satisfaction of the Corporation that such taxes have been paid), the Corporation shall deliver or cause to be delivered (i) certificates registered in the name of such holder representing the number of validly issued, fully paid and nonassessable full shares of Common Stock to which the holder of shares of Series B Preferred Stock so converted shall be entitled and (ii) if less than the full number of shares of Series B Preferred Stock evidenced by the surrendered certificate or certificates are being converted, a new certificate or certificates, of like tenor, for the number of shares evidenced by such surrendered certificate or certificates less the number of shares converted. Such conversion shall be deemed to have been made at the close of business on the date of receipt of such notice and of such surrender of the certificate or certificates representing the shares of Series B Preferred Stock to be converted so that the rights of the holder thereof as to the shares being converted shall cease except for the right to receive shares of Common Stock and any declared but unpaid dividends in accordance herewith, and the person entitled to receive the shares of Common Stock shall be treated for all purposes as having become the record holder of such shares of Common Stock at such time. (e) Notwithstanding any other provisions of this Certificate of Designation, shares of Series B Preferred Stock may be converted at any time and, if subject to exchange, up to the close of business on the last Business Day immediately preceding the date fixed for such exchange of such shares. (f) In connection with the conversion of any shares of Series B Preferred Stock, no fractions of shares of Common Stock shall be issued, but in lieu thereof the Corporation shall pay a cash adjustment in respect of such fractional interest in an amount equal to such fractional interest multiplied by the Current Market Price per share of Common Stock on the day on which such shares of Series B Preferred Stock are deemed to have been converted. (g) In case at any time or from time to time the Corporation shall pay any dividend or make any other distribution to the holders of its Common Stock, or shall offer for subscription pro rata to the holders of its Common Stock any additional shares of stock of any class or any other right, or there shall be any capital reorganization or reclassification of the Common Stock of the Corporation or consolidation or merger of the Corporation with or into another corporation, or any sale or conveyance to another corporation of the property of the Corporation as an entirety or substantially as an entirety, or there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Corporation, then, in any one or more of said cases the Corporation shall give at least twenty (20) days' prior written notice (the time of mailing of such notice shall be deemed to be the time of giving thereof) to the registered holders of the Series B Preferred Stock at the addresses of each as shown on the books of the Corporation of the date on which (i) the books of the corporation shall close or a record shall be taken for such stock dividend, distribution or subscription rights or (ii) such reorganization, reclassification, consolidation, merger, sale or conveyance, dissolution, liquidation or winding up shall take place, as the case may be, provided that in the case of any Transaction to which paragraph (c) applies the Corporation shall give at least thirty (30) days' prior written notice as aforesaid. Such notice shall also specify the date as of which the holders of the Common Stock and of the Series B Preferred Stock of record shall participate in said dividend, distribution or subscription rights or shall be entitled to exchange their Common Stock or Series B Preferred Stock for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale or conveyance, or participate in such dissolution, liquidation or winding up, as the case may be. (h) Whenever the number of shares of Common Stock into which each share of Series B Preferred Stock is convertible (or the number of votes to which each share of Series B Preferred Stock is entitled) is adjusted as provided in Section 8 hereof, the Corporation shall promptly mail to the holders of record of the outstanding shares of Series B Preferred Stock at their respective addresses as the same shall appear in the Corporation's stock records a notice stating that the number of shares of Common Stock into which the shares of Series B Preferred Stock are convertible has been adjusted and setting forth the new number of shares of Common Stock (or describing the new stock, securities, cash or other property) into which each share of Series B Preferred Stock is convertible, as a result of such adjustment, a brief statement of the facts requiring such adjustment and the computation thereof, and when such adjustment became effective. Section 9. Exchange at the Option of the Corporation. ------------------------------------------ (a) The Corporation may, at its option, exchange the Series B Preferred Stock, in whole but not in part, at any time, for Exchange Debentures; provided, however, that (i) on the date of such exchange there are no - -------- ------- accumulated and unpaid dividends on the Series B Preferred Stock (including the dividend payable on such date) that are not paid contemporaneously with such exchange or other contractual impediments to such exchange; (ii) such exchange is permitted under applicable law; and (iii) the Corporation shall have delivered to the Trustee under the Exchange Indenture, an opinion of counsel with respect to the due authorization and issuance of the Exchange Debentures. (b) Upon any exchange of Series B Preferred Stock for Exchange Debentures pursuant to this Section 9, each Holder of Series B Preferred Stock will be entitled to receive, subject to the second succeeding sentence, $1.00 principal amount of Exchange Debentures for each $1.00 of Conversion Value of Series B Preferred Stock so exchanged. The Exchange Debentures will be issued in registered form without coupons. Exchange Debentures issued in exchange for Preferred Stock will be issued in principal amounts of $1,000 and integral multiples thereof to the extent possible, and will also be issued in principal amounts less than $1,000 so that each Holder of Series Preferred Stock will receive certificates representing the entire amount of Exchange Debentures to which such Holder's shares of Preferred Stock entitle such Holder; provided, -------- however, that the Corporation may pay cash in lieu of issuing a Exchange - ------- Debenture in a principal amount less than $1,000. (c) The Corporation will send a written notice of exchange (the "Exchange Notice") by first-class mail to each Holder of record of shares of Series B Preferred Stock not fewer than thirty (30), nor more than sixty (60), days before the date fixed for any exchange (the "Exchange Date") at its registered address and notice, if mailed in the manner herein provided, shall conclusively be presumed to have been given, whether or not the Holder receives such notice; provided, however, that no failure to give such notice nor any -------- ------- deficiency therein shall affect the validity of the procedure for the exchange of any shares of Series B Preferred Stock to be exchanged except as to the Holder or Holders to whom the Corporation has failed to give said notice or except as to the Holder or Holders whose notice was defective. The Exchange Notice shall state: (1) the Exchange Date; (2) that the Holder is to surrender to the Corporation, in the manner and at the place or places designated, his certificate or certificates representing the shares of Preferred Stock to be exchanged; (3) that dividends on the shares of Series B Preferred Stock to be exchanged shall cease to accrue on such Exchange Date whether or not certificates representing shares of Series B Preferred Stock are surrendered for exchange on such Exchange Date unless the Corporation shall default in the delivery of the Exchange Debentures to Holders of the Preferred Stock who have duly surrendered their certificates for exchange in accordance with Section 9(c) on or before the Exchange Date; and (4) that interest on the Exchange Debentures shall accrue from the Exchange Date whether or not certificates for shares of Series B Preferred Stock are surrendered for exchange on such Exchange Date. (d) On and after the Exchange Date, dividends will cease to accrue on the outstanding shares of Series B Preferred Stock, and all rights of the Holders of Series B Preferred Stock (except the right to receive the Exchange Debentures or an amount in cash, to the extent applicable, equal to the accumulated and unpaid dividends to the Exchange Date and, if the Corporation so elects, cash in lieu of any Exchange Debenture that is in a principal amount that is not an integral multiple of $1,000) will terminate. From and after the Exchange Date, the person entitled to receive the Exchange Debentures issuable upon such exchange will be treated for all purposes as the registered holder of such Exchange Debentures. (e) On or before the Exchange Date, each Holder of Series B Preferred Stock shall surrender the certificate or certificates representing such shares of Preferred Stock, in the manner and at the place designated in the Exchange Notice. Upon surrender in accordance with the Exchange Notice of the certificates representing any shares of Series B Preferred Stock so exchanged, duly endorsed (or otherwise in proper form for transfer, as determined by the Company), such shares shall be exchanged by the Company for Exchange Debentures in accordance with Section 9(b). The Corporation shall pay interest on the Exchange Debentures at the rate and on the dates specified therein from the Exchange Date. (f) Notwithstanding the foregoing provisions of this Section 9, the Corporation shall not be entitled to exchange the Series B Preferred Stock for Exchange Debentures if such exchange, or any term or provision of the Exchange Indenture or the Exchange Debentures, or the performance of the Company's obligations under this Certificate of Designation, the Preferred Stock, the Exchange Indenture or the Exchange Debentures, shall violate or conflict with any applicable law or agreement or instrument then binding on the Company or if, at the time of such exchange, the Company is insolvent or would be rendered insolvent by such exchange. (g) Notwithstanding the foregoing, if notice of exchange has been given pursuant to this Section 9 and any holder of shares of Preferred Stock shall, prior to the close of business on the Exchange Date, give written notice to the Corporation pursuant to Section 8 of the conversion of any or all of the shares held by the holder (accompanied by a certificate or certificates for such shares, duly endorsed or assigned to the Corporation), then the exchange shall not become effective as to the shares to be converted and the conversion shall become effective as provided in Section 8. (h) Prior to the Exchange Date, the Corporation will comply with any applicable securities and blue sky laws with respect to the exchange of the Series B Preferred Stock for the Debentures. Section 10. Rank. ----- The Series B Preferred Stock shall rank, with respect to dividend rights and rights upon liquidation, winding up and dissolution, prior to all classes and series of the Corporation's preferred stock authorized or outstanding on the date of initial issuance of the Series B Preferred Stock and prior to all classes of Common Stock. Section 11. Other Covenants. ---------------- (a) Reservation of Shares; Transfer Taxes; Etc. ------------------------------------------ (i) The Corporation shall at all times reserve and keep available, out of its authorized and unissued stock, solely for the purpose of effecting the conversion of the Series B Preferred Stock, such number of shares of its Common Stock or Common Stock free of preemptive rights as shall from time to time be sufficient to effect the conversion of all shares of Series B Preferred Stock from time to time outstanding. The Corporation shall from time to time, in accordance with the laws of the State of Delaware, increase the number of authorized shares of Common Stock if at any time the number of shares of authorized and unissued Common Stock shall not be sufficient to permit the conversion of all the then outstanding shares of Series B Preferred Stock. (ii) If any shares of Common Stock required to be reserved for purposes of conversion of the Series B Preferred Stock hereunder require registration with or approval of any governmental authority under any Federal or State law before such shares may be issued upon conversion, the Corporation will in good faith and as expeditiously as possible endeavor to cause such shares to be duly registered or approved, as the case may be. If the Common Stock is listed on the New York Stock Exchange or any other national securities exchange or national quotation service, the Corporation will list and keep listed on such exchange, upon official notice of issuance, all shares of Common Stock issuable upon conversion of the shares of Series B Preferred Stock. (iii) The Corporation shall pay any and all issue or other taxes that may be payable in respect of any issue or delivery of shares of Common Stock on conversion or exchange of the Series B Preferred Stock. The Corporation shall not, however, be required to pay any income tax or tax which may be payable in respect of any transfer involved in the issue or delivery of Common Stock (or other securities or assets) in a name other than that in which the shares of Series B Preferred Stock so converted were registered, and no such issue or delivery shall be made unless and until the person requesting such issue has paid to the Corporation the amount of such tax or has established, to the satisfaction of the Corporation, that such tax has been paid. (b) Prior Notice of Certain Events. In case: ------------------------------ (i) the Corporation shall authorize the granting to all holders of Common Stock of rights or warrants to subscribe for or purchase any shares of stock of any class or of any other rights or warrants; or (ii) of any reclassification of Common Stock (other than a subdivision or combination of the outstanding Common Stock, or a change in par value, or from par value to no par value, or from no par value to par value), or of any consolidation or merger to which the Corporation is a party and for which approval of any stockholders of the Corporation shall be required, or of the sale or transfer of all or substantially all of the assets of the Corporation or of any compulsory share exchange whereby the Common Stock is converted into other securities, cash or other property; or (iii) of the voluntary or involuntary dissolution, liquidation or winding up of the Corporation; (iv) then the Corporation shall cause to be filed with the transfer agent for the Series B Preferred Stock, and shall cause to be mailed to the holders of record of the Series B Preferred Stock, at their last addresses as they shall appear upon the stock transfer books of the Corporation, at least fifteen days prior to the applicable record date hereinafter specified, a notice stating, as the case may be, (x) the record date (if any) for the purpose of such dividend, distribution, redemption, repurchase or granting of rights or warrants or, if no record date is to be set, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer, share exchange, dissolution, liquidation or winding up is expected to become effective, and the date, if any, as of which it is expected that holders of shares of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reclassification, consolidation, merger, sale, transfer, share exchange, dissolution, liquidation or winding up (but no failure to mail such notice or any defect therein or in the mailing thereof shall affect the validity of the corporate action required to be specified in such notice). Section 12. Remedies. --------- (a) The Corporation stipulates that the remedies at law of each holder of Series B Preferred Stock in the event of any Triggering Event or threatened Triggering Event or otherwise or other failure in the performance of or compliance with any of the terms hereof are not and will not be adequate and that, to the fullest extent permitted by law, such terms may be specifically enforced by a decree for the specific performance of any agreement contained herein or by an injunction against a violation of any of the terms hereof or otherwise without requiring any holder to post a bond or other security except to the extent required by applicable law. (b) Any holder of Series B Preferred Stock shall be entitled to recover from the Corporation the reasonable attorneys' fees and expenses incurred by such holder in connection with any Triggering Event or enforcement by such holder of any obligation of the Corporation hereunder. (c) No failure or delay on the part of any holder of Series B Preferred Stock in exercising any right, power or remedy hereunder or under applicable law or otherwise shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy hereunder or thereunder. The remedies herein provided are cumulative and not exclusive of any remedies provided by law or otherwise. Section 13. Severability of Provisions. --------------------------- Whenever possible, each provision hereof shall be interpreted in a manner as to be effective and valid under applicable law, but if any provision hereof 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 or otherwise adversely affecting the remaining provisions hereof. If a court of competent jurisdiction should determine that a provision hereof would be valid or enforceable if a period of time were extended or shortened or a particular percentage were increased or decreased, then such court may make such change as shall be necessary to render the provision in question effective and valid under applicable law. Section 14. Definitions. ------------ For the purposes of the Certificate of Designation of Series B Exchangeable Convertible Preferred Stock which embodies this resolution: (a) "Acceleration Amount" per share of Series B Preferred Stock shall mean, as of the date of conversion or exchange of the Series B Preferred Stock under Section 5, 8 or 9 hereof, or the date of any payments on the Series B Preferred Stock under Section 7 hereof, or as of any other date on which it is necessary to determine the number of shares of Common Stock into which a share of Series B Preferred Stock is then convertible: (i) following a Change in Control and prior to the Third Anniversary, an amount calculated to provide the holder of a share of Series B Preferred Stock, as of such date, with a gross amount of accretion calculated at the rate of eight percent (8%) on $2,170.00 per share of Series B Preferred Stock, compounded quarterly, from the date of conversion or exchange of the Series B Preferred Stock under Section 5, 8 or 9 hereof, or the date of any payments on the Series B Preferred Stock under Section 7 hereof, or the date of any other determination, as the case may be, to and including the Third Anniversary, or (ii) other than as specified in clause (i), zero. (b) "Accrued Dividends" to a particular date (the "Applicable Date") shall mean (i) all dividends accrued but not paid on the Series B Preferred Stock pursuant to paragraph (a) of Section 2, whether or not declared, accrued to the Applicable Date, plus (ii) all dividends or distributions payable pursuant to paragraph (b) of Section 2 for which the Covered Distribution was declared, ordered, paid or made on or prior to the Applicable Date. (c) "Affiliate" shall have the meaning set forth in Rule 12b-2 promulgated by the Securities and Exchange Commission under the Exchange Act. (d) "Business Day" shall mean any day other than a Saturday, Sunday, or a day on which commercial banks in the City of New York are authorized or obligated by law or executive order to close. (e) "Capital Stock" shall mean (i) in the case of a corporation, corporate stock, (ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, (iii) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited) and (iv) any other interest or participation that confers on a person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing person. (f) "Change in Control" shall mean any of the following: (i) the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act), other than the Corporation, or any of its Subsidiaries, or any employee benefit plan or related trust of the Corporation or any of its Subsidiaries or any Excluded Person or Excluded Group (an "Acquiring Person"), of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more than fifty percent (50%) of the combined voting power of the then outstanding voting securities of the Corporation entitled to vote generally in the election of directors; or (ii) the approval by the stockholders of the Corporation, other than any Excluded Person or Excluded Group, of a reorganization, merger or consolidation, in each case, with respect to which all or substantially all of the individuals and entities who were the respective beneficial owners of the voting securities of the Corporation immediately prior to such reorganization, merger or consolidation do not, following such reorganization, merger or consolidation, beneficially own, directly or indirectly, more than fifty percent (50%) of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the Corporation resulting from such reorganization, merger or consolidation; or (iii) the sale or other disposition of all or any substantial part of the assets of the Corporation, other than to any Excluded Person or Excluded Group, in one transaction or series of related transactions; provided that the occurrence of any event identified in subparagraphs (i) through (iii) above that would otherwise be treated as a Change in Control shall not constitute a Change in Control hereunder if (x) the Board of Directors of the Corporation, by vote duly taken, and (y) the Requisite Holders of Series B Preferred Stock, by written consent, shall so determine. (g) "Closing Price" per share of Common Stock on any date shall mean the last sale price, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, in either case as reported on the Nasdaq National Market or in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or American Stock Exchange, as the case may be, or, if the Common Stock is listed or admitted to trading on the New York Stock Exchange or American Stock Exchange, or, if the Common Stock is not listed or admitted to trading on any national securities exchange, the last quoted sale price or, if not so quoted, the average of the high bid and low asked prices in the over-the- counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotations System ("NASDAQ") or such other system then in use, or, if on any such date the Common Stock is not quoted by any such organization, the average of the Closing bid and asked prices as furnished by a professional market maker making a market in the Common Stock selected by the Board of Directors and reasonably acceptable to the Requisite Holders. (h) "Conversion Price" shall mean initially $21.70 per share, as adjusted from time to time in accordance with Section 8. (i) "Conversion Value" per share of Series B Preferred Stock shall mean an amount equal to the sum of (x) $2,170.00, (y) all Accrued Dividends thereon to the date of conversion and (z) the Acceleration Amount. (j) "Current Market Price" per share of Common Stock on any date shall mean the average of the Closing Prices of a share of Common Stock for the twenty (20) consecutive Trading Days ending on the date in question. If on any such Trading Day the Common Stock is not quoted by any organization referred to in the definition of Closing Price, the fair value of the Common Stock on such day, as reasonably determined in good faith by the Board of Directors of the Corporation, shall be used. (k) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. (l) "Exchange Debenture" shall mean the Subordinated Exchange Debentures of the Corporation, issuable in exchange for the Series B Preferred Stock. (m) "Excluded Group" shall mean a "group" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) that includes one or more Excluded Persons; provided that the voting securities of the Corporation "beneficially owned" (as such term is used in Rule 13d-3 promulgated under the Exchange Act) by such Excluded Persons represents a majority of the voting securities "beneficially owned" (as such term is used in Rule 13d-3 promulgated under the Exchange Act) by such group. (n) "Excluded Person" shall mean each of RCBA Strategic Partners, L.P., Richard C. Blum & Associates, L.P. and any affiliate (as defined in the Exchange Act) of any of the foregoing. (o) "Hurdle Percentage" shall mean 135%. (p) "Liquidation Preference" shall mean an amount per share of Series B Preferred Stock equal to the greater of (i) the Conversion Value or (ii) in the event of any liquidation or winding up of the Corporation, the amount the holders of the Series B Preferred Stock would have received had they converted into Common Stock immediately prior to such liquidation or winding up and, if such liquidation or winding up occurs prior to the Third Anniversary of the Closing Date of the Securities Purchase Agreement, the amount such holders would have received had they received the additional dividends that would have been paid from the date of liquidation or winding up through such Third Anniversary, and such additional shares were also converted into Common Stock immediately prior to such liquidation or winding up. (q) "Person" shall mean an individual, partnership, corporation, limited liability company or partnership, unincorporated organization, trust or joint venture, or a governmental agency or political subdivision thereof, or other entity of any kind. (r) "Requisite Holders" shall mean the holders of sixty-seven percent (67%) of the then-outstanding shares of Series B Preferred Stock. (s) "Securities Purchase Agreement" shall mean that certain agreement dated as of May 5, 1999 by and among the Corporation and certain purchasers of the Series B Preferred Stock party thereto. (t) "Subsidiary" of any Person shall mean any corporation or other entity of which a majority of the voting power of the voting equity securities or equity interest is owned, directly or indirectly, by such Person. (u) "Surviving Person" shall mean the continuing or surviving Person of a merger, consolidation or other corporate combination, the Person receiving a transfer of all or a substantial part of the properties and assets of the Corporation, or the Person consolidating with or merging into the Corporation in a merger, consolidation or other corporate combination in which the Corporation is the continuing or surviving Person, but in connection with which the Series B Preferred Stock or Common Stock of the Corporation is exchanged, converted or reinstated into the securities of any other Person or cash or any other property; provided, however, -------- ------- if such Surviving Person is a direct or indirect Subsidiary of a Person, the parent entity also shall be deemed to be a Surviving Person. (v) "Trading Day" shall mean a day on which the principal national securities exchange on which the Common Stock is quoted, listed or admitted to trading is open for the transaction of business or, if the Common Stock is not quoted, listed or admitted to trading on any national securities exchange (including the Nasdaq Stock Market), any day other than a Saturday, Sunday, or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close. (w) "Triggering Event" shall mean any one or more of the following: (i) The Corporation shall fail to redeem any part or all of the Series B Preferred Stock in accordance with Section 4. (ii) The Corporation shall fail to pay any dividend on any Series B Preferred Stock on any dividend payment date in accordance with Section 2 for any reason, including but not limited to, that such payment is prohibited by applicable law or the Board of Directors elect not to pay such dividend, or shall otherwise violate any term of Section 2 and such failure shall not be cured within a period of 30 days after such dividend payment date or violation (which cure shall be effected in a manner ensuring the holders the same yield as if such violation had not occurred). (iii) The Corporation shall enter into any transaction or take any action required to be approved by any holders of Series B Preferred Stock without obtaining the requisite approval of the holders of the Series B Preferred Stock. (iv) The Corporation shall (A) fail for any reason to issue Common Stock as required under Section 8 upon the request of any holder of Series B Preferred Stock; or (B) so long as any shares of the Series B Preferred Stock are outstanding, fail to make any anti-dilution adjustment thereunder, and, in each case, such failure to issue Common Stock or to make such adjustment shall continue for 30 days after notice. (v) The Corporation shall adopt a plan of liquidation or of dissolution, or commence a voluntary case under the Federal bankruptcy laws or any other applicable state or Federal bankruptcy, insolvency or similar law, or consent to the entry of an order for relief in any involuntary case under any such law or to the appointment of a receiver, liquidator, assignee, custodian, trustee or sequestrator (or similar official) of the Corporation or of any substantial part of its property, or make an assignment for the benefit of its creditors, or admit in writing its inability to pay its debts generally as they become due, or if a decree or order for relief in respect of the Corporation shall be entered by a court having jurisdiction in the premises in an involuntary case under the Federal bankruptcy laws or any other applicable Federal or state bankruptcy, insolvency or similar law, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Corporation or of any substantial part of its property, or ordering the winding up or liquidation of its affairs. (x) "Voting Stock" shall mean the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors. IN WITNESS WHEREOF, the Corporation has caused this Certificate of Designation of Series B Exchangeable Convertible Preferred Stock to be duly executed by its President and attested to by its Secretary and has caused its corporate seal to be affixed hereto, this 9th day of June, 1999. URS CORPORATION By: /s/ Kent P. Ainsworth --------------------- Kent P. Ainsworth EXHIBIT 1.7 TO THE SECURITIES PURCHASE AGREEMENT CERTIFICATE OF DESIGNATION of SERIES C PREFERRED STOCK of URS CORPORATION Pursuant to Section 151 of the General Corporation Law of the State of Delaware URS Corporation, a Delaware corporation (the "Corporation"), certifies that pursuant to the authority contained in its Certificate of Incorporation, as amended, and in accordance with the provisions of Section 151 of the General Corporation Law of the State of Delaware, its Board of Directors (the "Board of Directors") has adopted the following resolution creating a series of its Preferred Stock, par value $1.00 per share, designated as Series C Preferred Stock: RESOLVED, that a series of authorized Preferred Stock, par value $1.00 per share, of the Corporation be hereby created, and that the designation and amount thereof and the voting powers, preferences and relative, participating, optional and other special rights of the shares of such series, and the qualifications, limitations or restrictions thereof are as follows: Section 1. Designation and Amount. ----------------------- The shares of such series shall be designated as the "Series C Preferred Stock" (the "Series C Preferred Stock") and the number of shares constituting such series shall be 450,000 shares of Series C Preferred Stock. Section 11 below contains the definitions of certain defined terms used herein. Section 2. Dividends and Distributions. ---------------------------- (a) The holders of shares of Series C Preferred Stock shall not be entitled to any dividends or distributions except as provided in Section 2(b). (b) In case the Corporation or any Subsidiary of the Corporation shall at any time or from time to time declare, order, pay or make a dividend or other distribution (including, without limitation, any distribution of stock or other securities or property or rights or warrants to subscribe for securities of the Corporation or any of its Subsidiaries by way of dividend or spin off) on the Common Stock, the holders of shares of Series C Preferred Stock shall be entitled to receive from the Corporation, with respect to each share of Series C Preferred Stock held, the same dividend or distribution received by a holder of the number of shares of Common Stock equal to one share multiplied by the Liquidation Multiplier. Section 3. Voting Rights. -------------- So long as any shares of Series C Preferred Stock shall be outstanding and unless the consent or approval of a greater number of shares shall then be required by law, without first obtaining the consent or approval of the Requisite Holders, voting as a single class, given in person or by proxy at a meeting at which the holders of such shares shall be entitled to vote separately as a class, or by written consent, the Corporation shall not (and shall not permit or authorize any subsidiary to): (i) authorize, create or issue any class or series, or any shares of any class or series, of stock having any preference or priority as to voting, dividends or upon liquidation, dissolution or winding up over the Series C Preferred Stock ("Senior Stock"); (ii) authorize, create or issue any class or series, or any shares of any class or series, of stock ranking on a parity as to voting, dividends or upon liquidation, dissolution or winding up with the Series C Preferred Stock ("Parity Stock") other than the issuance of shares of Series A Preferred Stock of the Corporation (the "Series A Preferred Stock") as dividends in accordance with such stock's terms; (iii) reclassify any shares of stock of the Corporation into shares of Senior Stock or Parity Stock; (iv) authorize any security exchangeable for, convertible into, or evidencing the right to purchase any shares of Senior Stock or Parity Stock other than the exchange of Series B Exchangeable Convertible Preferred Stock of the Corporation (the "Series B Preferred Stock") for shares of Series A Preferred Stock and Series C Preferred Stock; (v) alter or change the rights, preferences or privileges of the Series C Preferred Stock; (vi) increase or decrease the authorized number of shares of Series C Preferred Stock or issue shares of Series C Preferred Stock other than to holders of Series C Preferred Stock pursuant to its terms; or (vii) amend or waive any provision of the Corporation's Certification of Incorporation or bylaws in a manner adverse in any respect to the holders of Series C Preferred Stock. Section 4. Mandatory Repurchase by the Corporation. ---------------------------------------- (a) On the twelfth anniversary of the Closing Date of the Securities Purchase Agreement, the Corporation shall repurchase from each holder of shares of Series C Preferred Stock the number of shares of the Series C Preferred Stock held by such holder on such twelfth anniversary. Repurchases made pursuant to this Section 4(a) shall be effected on such anniversary date (or such other day as the holder and the Corporation may agree) and shall be for the Liquidation Preference. The Corporation, at its election, may pay the Liquidation Preference in cash, in Common Stock valued at the Current Market Price on the date of repurchase, or any combination thereof. The place of payment shall be at an office or agency fixed therefor by the Corporation or, if not fixed, at the principal executive office of the Corporation. (b) On or after the sixth anniversary of the Closing Date of the Securities Purchase Agreement or, if earlier, the fifth Business Day after the Corporation has sufficient shares of Common Stock authorized to permit the repurchase of the oustanding Series C Preferred Stock, any holder of shares of Series C Preferred Stock shall have the right (a person exercising such right, an "Electing Holder") to require the Corporation to repurchase all, but not less than all, of the shares of Series C Preferred Stock owned by such Electing Holder by giving the Corporation at least one-hundred twenty (120) days prior written notice of his/her/its intent to have the Corporation repurchase his/her/its shares of Series C Preferred Stock in exchange for the Liquidation Preference. The notice shall set forth the date set for repurchase, which date shall be a Business Day, and the number of shares owned by the Electing Holder. The Corporation, at its election, may choose to pay the Liquidation Preference in cash, in Common Stock valued at the Current Market Price on the date of the written notice to the Corporation, or any combination of thereof. (c) (i) On the date fixed for repurchase, each holder of shares of Series C Preferred Stock shall surrender the certificate representing such shares to the Corporation at the place designated in such notice and shall thereupon be entitled to receive payment in cash and/or Common Stock therefor provided in this Section 4. Such shares shall no longer be deemed outstanding after such date and the holders thereof shall cease to be holders of Series C Preferred Stock of the Corporation and all rights whatsoever with respect to the shares so purchased shall terminate. As promptly as practicable, and in any event within three Business Days after the surrender of such certificate or certificates, the Corporation shall deliver or cause to be delivered cash, Common Stock, or any combination thereof as specified above. To the extent Common Stock is issued, certificates therefore shall be registered in the name of such holder representing the number of validly issued, fully paid and nonassessable full shares of Common Stock to which the holder of shares of Series C Preferred Stock so repurchased shall be entitled. Such repurchase shall be deemed to have been made at the close of business on the date of surrender of the certificate or certificates representing the shares of Series C Preferred Stock to be repurchased so that the rights of the Electing Holder as to the shares being repurchased shall cease except for the right to receive cash and/or shares of Common Stock (and, to the extent the person received the shares of Common Stock, such person shall be treated for all purposes as having become the record holder of such shares of Common Stock at such time). (ii) If the cash legally available and Common Stock authorized by the board of directors of the Corporation for such purchase are not sufficient to purchase all the shares of Series C Preferred Stock tendered to the Corporation for purchase pursuant to paragraph (a) or (b) of this Section 4, the Corporation shall purchase the greatest number of whole shares for which such funds and stock are so available on a pro rata basis among all tendering holders based on the ratio of the number of shares tendered by each of them to the aggregate amount of all shares so tendered, and the certificates representing the unpurchased shares shall be deemed not to be surrendered for repurchase, such unpurchased shares shall remain outstanding and the rights of the holders of shares of Series C Preferred Stock thereafter shall continue to be those of a holder of shares of the Series C Preferred Stock; provided, however, the -------- ------- Corporation shall thereafter be required to repurchase all such remaining shares at the first date it has sufficient funds legally available and Common Stock authorized for such purpose at the price it would have paid at the date such shares were actually tendered and the Corporation shall give notice as aforesaid to each holder whose shares were not repurchased for such reason and such holder shall thereafter have the right to elect to have such shares repurchased, such election to be made within 30 days of receipt of such notice. For purposes of this Section, the Corporation shall be deemed not to have sufficient funds legally available for any such purchase if the Board of Directors reasonably determines that immediately after such repurchase the Corporation would be insolvent or if such repurchase would conflict with the terms or conditions of, or result in a default under, any instrument or agreement applicable to or binding upon the Corporation, pursuant to which the Corporation has incurred indebtedness for borrowed money in an aggregate principal amount in excess of $50 million. (d) Whenever the Corporation shall not have redeemed the shares of Series C Preferred Stock within five (5) Business Days of the date such redemption is required by Section 4(a) or 4(b), thereafter and until all redemption payments shall have been made, if and so long as any shares of Series C Preferred Stock remain outstanding, the Corporation shall not, nor shall it permit any of its Subsidiaries to: (i) declare or pay dividends, or make any other distributions, on any shares of Common Stock or other capital stock of the Corporation ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series C Stock ("Junior Stock"), other than dividends or distribution payable in Junior Stock; (ii) declare or pay dividends, or make any other distributions, on any shares of Parity Stock (other than Series A Preferred Stock), other than dividends or distributions payable in Junior Stock, except dividends paid ratably on the Series C Preferred Stock and all Parity Stock on which dividends are payable or in arrears, in proportion to the total amounts to which the holders of all such shares are then entitled; (iii) redeem or purchase or otherwise acquire for consideration (other than Junior Stock) any shares of Junior Stock or Parity Stock (other than, with respect to Parity Stock, ratably with the Series C Preferred Stock); or (iv) purchase or otherwise acquire for consideration any shares of Series C Preferred Stock, other than purchases ratably among all holders of the Series C Preferred Stock. (e) The Corporation shall not permit any Subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of capital stock of the Corporation unless the Corporation could, pursuant to paragraph (d) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner. Section 5. Reacquired Shares. ----------------- Any shares of Series C Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof, and, if necessary to provide for the lawful purchase of such shares, the capital represented by such shares shall be reduced in accordance with the General Corporation Law of the State of Delaware. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock, par value $1.00 per share, of the Corporation and may be reissued as part of another series of Preferred Stock, par value $1.00 per share, of the Corporation subject to the conditions or restrictions on authorizing, or creating or issuing any class or series, or any shares of any class or series, set forth in Section 3. Section 6. Liquidation, Dissolution or Winding Up. --------------------------------------- If the Corporation shall adopt a plan of liquidation or of dissolution, or commence a voluntary case under the Federal bankruptcy laws or any other applicable state or Federal bankruptcy, insolvency or similar law, or consent to the entry of an order for relief in any involuntary case under any such law or to the appointment of a receiver, liquidator, assignee, custodian, trustee or sequestrator (or similar official) of the Corporation or of any substantial part of its property, or make an assignment for the benefit of its creditors, or admit in writing its inability to pay its debts generally as they become due, or if a decree or order for relief in respect of the Corporation shall be entered by a court having jurisdiction in the premises in an involuntary case under the Federal bankruptcy laws or any other applicable Federal or state bankruptcy, insolvency or similar law, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Corporation or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and any such decree or order shall be unstayed and in effect for a period of ninety (90) consecutive days and on account of such event the Corporation shall liquidate, dissolve or wind up, or upon any other liquidation, dissolution or winding up of the Corporation, no distribution shall be made (i) to the holders of shares of Junior Stock, unless prior thereto, the holders of shares of Series C Preferred Stock shall have received in cash the Liquidation Preference, or (ii) to the holders of shares of Parity Stock, except distributions made ratably on the Series C Preferred Stock and all such Parity Stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up of the Corporation. A consolidation, merger, corporate reorganization, recapitalization or other similar transaction as a result of which the beneficial holders of the Corporation's Common Stock immediately prior to such transaction do not hold, directly or indirectly, in excess of 50% of the combined voting securities entitled to vote generally in the election of the directors of the surviving or resulting corporation immediately after such transaction, and a sale or other disposition of all or substantially all of the assets of the Corporation in one transaction or series of related transactions, each shall be deemed to be a "liquidation" within the meaning of this Section 6; provided that no such transaction shall be deemed to be a "liquidation" if first approved by the Board of Directors of the Corporation and the Requisite Holders. Section 7. Rank. ---- The Series C Preferred Stock shall rank, with respect to dividend rights and rights upon liquidation, winding up and dissolution, prior to all classes and series of the Corporation's preferred stock authorized or outstanding on the date of initial issuance of the Series C Preferred Stock (other than the Series A Preferred Stock, which shall rank on a par with the Series C Preferred Stock) and prior to all classes of Common Stock. Section 8. Other Covenants. ---------------- (a) Transfer Taxes. The Corporation shall pay any and all issue or -------------- other taxes that may be payable in respect of any issue or delivery of shares of Series B Preferred Stock on exchange of the Series C Preferred Stock and other securities. The Corporation shall not, however, be required to pay any income tax or tax which may be payable in respect of any transfer involved in the issue or delivery of Series C Preferred Stock (or other securities or assets) in a name other than that in which the shares of Series C Preferred Stock so exchanged were registered, and no such issue or delivery shall be made unless and until the person requesting such issue has paid to the Corporation the amount of such tax or has established, to the satisfaction of the Corporation, that such tax has been paid. (b) Prior Notice of Certain Events. In case: ------------------------------ (i) the Corporation shall authorize the granting to all holders of Common Stock of rights or warrants to subscribe for or purchase any shares of stock of any class or of any other rights or warrants; or (ii) of any reclassification of Common Stock (other than a subdivision or combination of the outstanding Common Stock, or a change in par value, or from par value to no par value, or from no par value to par value), or of any consolidation or merger to which the Corporation is a party and for which approval of any stockholders of the Corporation shall be required, or of the sale or transfer of all or substantially all of the assets of the Corporation or of any compulsory share exchange whereby the Common Stock is converted into other securities, cash or other property; or (iii) of the voluntary or involuntary dissolution, liquidation or winding up of the Corporation; then the Corporation shall cause to be filed with the transfer agent for the Series C Preferred Stock, and shall cause to be mailed to the holders of record of the Series C Preferred Stock, at their last addresses as they shall appear upon the stock transfer books of the Corporation, at least fifteen days prior to the applicable record date hereinafter specified, a notice stating, as the case may be, (x) the record date (if any) for the purpose of such dividend, distribution, redemption, repurchase or granting of rights or warrants or, if no record date is to be set, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer, share exchange, dissolution, liquidation or winding up is expected to become effective, and the date, if any, as of which it is expected that holders of shares of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reclassification, consolidation, merger, sale, transfer, share exchange, dissolution, liquidation or winding up (but no failure to mail such notice or any defect therein or in the mailing thereof shall affect the validity of the corporate action required to be specified in such notice). Section 9. Remedies. -------- (a) The Corporation stipulates that the remedies at law of each holder of Series C Preferred Stock in the event of any failure in the performance of or compliance with any of the terms hereof are not and will not be adequate and that, to the fullest extent permitted by law, such terms may be specifically enforced by a decree for the specific performance of any agreement contained herein or by an injunction against a violation of any of the terms hereof or otherwise without requiring any holder to post a bond or other security except to the extent required by applicable law. (b) Any holder of Series C Preferred Stock shall be entitled to recover from the Corporation the reasonable attorneys' fees and expenses incurred by such holder in connection with the enforcement by such holder of any obligation of the Corporation hereunder. (c) No failure or delay on the part of any holder of Series C Preferred Stock in exercising any right, power or remedy hereunder or under applicable law or otherwise shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy hereunder or thereunder. The remedies herein provided are cumulative and not exclusive of any remedies provided by law or otherwise. Section 10. Severability of Provisions. --------------------------- Whenever possible, each provision hereof shall be interpreted in a manner as to be effective and valid under applicable law, but if any provision hereof 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 or otherwise adversely affecting the remaining provisions hereof. If a court of competent jurisdiction should determine that a provision hereof would be valid or enforceable if a period of time were extended or shortened or a particular percentage were increased or decreased, then such court may make such change as shall be necessary to render the provision in question effective and valid under applicable law. Section 11. Definitions. ------------ For the purposes of the Certificate of Designation of Series C Preferred Stock which embodies this resolution: (a) "Business Day" shall mean any day other than a Saturday, Sunday, or a day on which commercial banks in the City of New York are authorized or obligated by law or executive order to close. (b) "Capital Stock" shall mean (i) in the case of a corporation, corporate stock, (ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, (iii) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited) and (iv) any other interest or participation that confers on a person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing person. (c) "Closing Price" per share of Common Stock on any date shall mean the last sale price, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, in either case as reported on the Nasdaq National Market or in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or American Stock Exchange, as the case may be, or, if the Common Stock is listed or admitted to trading on the New York Stock Exchange or American Stock Exchange, or, if the Common Stock is not listed or admitted to trading on any national securities exchange, the last quoted sale price or, if not so quoted, the average of the high bid and low asked prices in the over-the- counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotations System ("NASDAQ") or such other system then in use, or, if on any such date the Common Stock is not quoted by any such organization, the average of the Closing bid and asked prices as furnished by a professional market maker making a market in the Common Stock selected by the Board of Directors and reasonably acceptable to the Requisite Holders. (d) "Current Market Price" per share of Common Stock on any date shall mean the average of the Closing Prices of a share of Common Stock for the twenty (20) consecutive Trading Days ending on the date in question. If on any such Trading Day the Common Stock is not quoted by any organization referred to in the definition of Closing Price, the fair value of the Common Stock on such day, as reasonably determined in good faith by the Board of Directors of the Corporation, shall be used. (e) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. (f) "Liquidation Base Amount" shall mean $21.70; provided, however, -------- ------- that in case the Corporation shall at any time or from time to time after the original issuance of the Series C Preferred Stock declare a dividend, or make a distribution, on the outstanding shares of Common Stock in either case, in shares of Common Stock, or effect a subdivision, combination, consolidation or reclassification of the outstanding shares of Common Stock into a greater or lesser number of shares of Common Stock, then, and in each such case, the Liquidation Base Amount in effect immediately prior to such event or the record date therefor, whichever is earlier, shall be adjusted by multiplying the Liquidation Base Amount by a fraction, the numerator of which is the number of shares of Common Stock that were outstanding immediately prior to such event and the denominator of which is the number of shares of Common Stock outstanding immediately after such event. An adjustment made pursuant to this definition shall become effective (x) in the case of any such dividend or distribution, immediately after the close of business on the record date for the determination of holders of shares of Common Stock entitled to receive such dividend or distribution, or (y) in the case of any such subdivision, reclassification, consolidation or combination, at the close of business on the day upon which such corporate action becomes effective. (g) "Liquidation Multiplier" shall mean eight (8); provided, -------- however, that in case the Corporation shall at any time or from time to time - ------- after the original issuance of the Series C Preferred Stock declare a dividend, or make a distribution, on the outstanding shares of Common Stock in either case, in shares of Common Stock, or effect a subdivision, combination, consolidation or reclassification of the outstanding shares of Common Stock into a greater or lesser number of shares of Common Stock, then, and in each such case, the Liquidation Multiplier in effect immediately prior to such event or the record date therefor, whichever is earlier, shall be adjusted by dividing the Liquidation Multiplier by a fraction, the numerator of which is the number of shares of Common Stock that were outstanding immediately prior to such event and the denominator of which is the number of shares of Common Stock outstanding immediately after such event. An adjustment made pursuant to this definition shall become effective (x) in the case of any such dividend or distribution, immediately after the close of business on the record date for the determination of holders of shares of Common Stock entitled to receive such dividend or distribution, or (y) in the case of any such subdivision, reclassification, consolidation or combination, at the close of business on the day upon which such corporate action becomes effective. In addition to the foregoing, (I) if the Corporation fails to authorize sufficient common shares to permit the repurchase of the Series C Preferred Stock on or prior to the sixth anniversary or if the Corporation fails to repurchase the Series C Preferred Stock as requested by an Electing Holder pursuant to Section 4(b) on or prior to the sixth anniversary of the Closing Date (whether or not such repurchase is permitted under the terms of the Corporation's debt facilities), then immediately following the sixth anniversary the Liquidation Multiplier shall be 1.25 times the Liquidation Multiplier in effect immediately prior to such date for purposes of the repurchase pursuant to Section 4(a) and 4(b) for repurchases after that time; and (II) if the Corporation fails to repurchase the shares requested by an Electing Holder pursuant to Section 4(b) on or prior to the eighth anniversary (whether or not such repurchase is permitted under the terms of the Corporation's debt facilities), then immediately following the eighth anniversary the Liquidation Multiplier shall be 1.6 times the Liquidation Multiplier in effect immediately prior to the eighth anniversary for repurchases after that time. The adjustment specified in clause (II) shall be cumulative to, and not in place of, the adjustment specified in clause (I). (h) "Liquidation Preference" shall mean an amount per share of Series C Preferred Stock equal to the sum of (i) $50.00 plus (ii) the greater of (y) zero or (z) the product of the Liquidation Multiplier times the excess, if any, of the Current Market Price on the date set for repurchase pursuant to Section 4(a) or the date of the written notice pursuant to Section 4(b), as the case may be, over the Liquidation Base Amount. (i) "Person" shall mean an individual, partnership, corporation, limited liability company or partnership, unincorporated organization, trust or joint venture, or a governmental agency or political subdivision thereof, or other entity of any kind. (j) "Requisite Holders" shall mean the holders of sixty-seven percent (67%) of the then-outstanding shares of Series C Preferred Stock. (k) "Securities Purchase Agreement" shall mean that certain agreement dated as of May 5, 1999 by and among the Corporation and certain purchasers of the Series C Preferred Stock party thereto. (l) "Subsidiary" of any Person shall mean any corporation or other entity of which a majority of the voting power of the voting equity securities or equity interest is owned, directly or indirectly, by such Person. (m) "Trading Day" shall mean a day on which the principal national securities exchange on which the Common Stock is quoted, listed or admitted to trading is open for the transaction of business or, if the Common Stock is not quoted, listed or admitted to trading on any national securities exchange (including the Nasdaq Stock Market), any day other than a Saturday, Sunday, or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close. [Remainder of Page Intentionally Left Blank] IN WITNESS WHEREOF, the Corporation has caused this Certificate of Designation of Series C Preferred Stock to be duly executed by its President and attested to by its Secretary and has caused its corporate seal to be affixed hereto, this 9th day of June, 1999. URS CORPORATION By: /s/ Kent P. Ainsworth --------------------- Kent P. Ainsworth EXHIBIT 1.32 TO THE SECURITIES PURCHASE AGREEMENT REGISTRATION RIGHTS AGREEMENT ----------------------------- REGISTRATION RIGHTS AGREEMENT (the "Agreement"), dated as of June 9, 1999, among URS Corporation, a Delaware corporation (the "Corporation"), and RCBA Strategic Partners, L.P., a Delaware limited partnership (the "Purchaser"). WHEREAS, the Corporation is a party to a Securities Purchase Agreement, dated as of May 5, 1999 (as amended, the "Securities Purchase Agreement"), with the Purchaser, pursuant to which the Corporation agreed to sell to the Purchaser and the Purchaser agreed to purchase from the Corporation for an aggregate purchase price of $100 million, upon the terms and subject to the conditions set forth therein, (x) 46,082.95 shares of Series A Preferred Stock of the Corporation (the "Series A Preferred Stock") and (y) 450,000 shares of Series C Preferred Stock of the Corporation (the "Series C Preferred Stock"); WHEREAS, pursuant to the Securities Purchase Agreement, the Corporation and Purchaser agreed that, upon receipt of stockholder approval of (x) certain amendments to the Corporation's charter and (y) the issuance of convertible preferred stock to Purchaser, the Series A Preferred Stock and Series C Preferred Stock would be converted into Series B Convertible Exchangeable Preferred Stock of the Corporation (the "Series B Preferred Stock"); WHEREAS, in order to induce the Purchaser to enter into the Securities Purchase Agreement, the Corporation has agreed to provide the registration rights set forth in this Agreement for the benefit of the Purchaser and its direct and indirect transferees; WHEREAS, the execution and delivery of this Agreement is a condition to the Purchaser's obligations pursuant to the Securities Purchase Agreement. NOW, THEREFORE, in consideration of the premises and of the respective representations, warranties, covenants, agreements and conditions contained herein, each of Purchaser and the Corporation (together "Parties") agree as follows: ARTICLE I DEFINITIONS For purposes of this Agreement, the following terms have the following respective meanings: 1.1 "Affiliate" means, with respect to any Person, any other Person directly or indirectly Controlling, Controlled by or under common Control with such first Person. "Control" means the power to direct or cause the direction of management or policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise. Any director, member of management or other employee of the Corporation or any of its Subsidiaries who would not otherwise be an Affiliate of the Purchaser shall not be deemed to be an Affiliate of the Purchaser. 1.2 "Agreement" is defined in the first paragraph of this Agreement. 1.3 "Business Day" means a day other than a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required to close. 1.4 "Closing Date" means the date the closing of the securities purchase under the Securities Purchase Agreement. 1.5 "Common Stock" means the Common Stock, par value of $.01 per share, of the Corporation. 1.6 "Conversion Shares" means the shares of Common Stock issued to a holder upon the conversion of the Series B Preferred Stock. 1.7 "Corporation" is defined in the first paragraph of this Agreement. 1.8 "DTC" means the Depository Trust Company. 1.9 "Distributee" means any person that is a member, stockholder or partner of Purchaser, or any person that is a member, stockholder or partner of a Distributee to which Registrable Securities are transferred or distributed by Purchaser or Distributee. 1.10 "Exchange Act" means the Securities Exchange Act of 1934, as amended, or any successor federal statute, and the rules and regulations thereunder which shall be in effect at the time. Any reference to a particular section thereof shall include a reference to the corresponding section, if any, of any such successor federal statute, and the rules and regulations thereunder. 1.11 "Holder" means Purchaser and any other holder of Registrable Securities under this Agreement, including an Affiliate, a Distributee or other successors, assigns and transferees of Purchaser or a Holder that has received Registrable Securities pursuant to Section 3.4 and agree to be bound by the terms of this Agreement as contemplated by Section 3.4. 1.12 "NASD" means the National Association of Securities Dealers. 1.13 "NYSE" means the New York Stock Exchange. 1.14 "Person" means any natural person, firm, partnership, association, corporation, company, trust, business trust, governmental entity or other entity. 1.15 "Postponement Period" is defined in Section 2.3(n). 1.16 "Prospectus" means the prospectus included in any Registration Statement (including, without limitation, a prospectus that discloses information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by such Registration Statement and all other amendments and supplements to the prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such prospectus. 1.17 "Purchaser" is defined in the introduction to this Agreement. 1.18 "Registrable Securities" means (i) the Series A Preferred Stock, (ii) the Series C Preferred Stock; (iii) the Conversion Shares and the Repurchase Shares, and (iv) any securities issued or issuable with respect to any of the foregoing clauses (i) through (iii), (x) upon any conversion or exchange thereof, (y) by way of stock dividend or other distribution, stock split or reverse stock split or (z) in connection with a combination of shares, recapitalization, merger, consolidation, exchange offer or other reorganization. As to any particular Registrable Securities, once issued such securities shall cease to be Registrable Securities when (A) a Registration Statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been disposed of in accordance with such Registration Statement, (B) such securities shall have been distributed to the public in reliance upon Rule 144 or may be so distributed pursuant to Rule 144(k), (C) subject to the provisions of Section 2.1(b)(ii), such securities shall have been otherwise transferred, new certificates for such securities not bearing a legend restricting further transfer shall have been delivered by the Corporation and subsequent disposition of such securities shall not require registration or qualification of such securities under the Securities Act or any similar state law then in force, (D) such securities shall have been acquired by the Corporation or (E) sold in a private transaction in which the transferor's rights under this Agreement were not assigned. In determining the number of Registrable Securities outstanding at any time or whether the Holders of the requisite number of Registrable Securities have taken any action hereunder and in calculating the number of Registrable Securities for all other purposes under this Agreement, each share of Series A Preferred Stock shall be deemed to have been convertible into Common Stock (on the same terms and conditions as the Series B Preferred Stock) and to have converted (to the fullest extent then determinable) and such calculation shall include the number of Conversion Shares that then would be deliverable upon the conversion of such stock (as if such stock were convertible), and each share of Series C Preferred Stock shall be deemed to have been repurchased by the Corporation (to the fullest extent then determinable) and such calculation shall include the number of Repurchase Shares then deliverable upon the repurchase of such Series C Preferred Stock (to the fullest extent then determinable). 1.19 "Registration Expenses" means all fees and expenses incident to the performance of or compliance with the provisions of this Agreement, whether or not any registration statement is filed or becomes effective, including, without limitation, all (i) registration and filing fees (including, without limitation, (A) fees with respect to filings required to be made with the NASD in connection with an underwritten offering, (B) fees and expenses of compliance with state securities or blue sky laws, and (C) fees and other expenses associated with admitting for trading on the NYSE or any other applicable exchange or automated dealer system) the Series A Preferred Stock, the Series C Preferred Stock, Conversion Shares and Repurchase Shares, (ii) printing expenses, (iii) fees and disbursements of all independent certified public accountants referred to in Section 2.3 (including, without limitation, the reasonable expenses of any special audit and "cold comfort" letters required by or incident to such performance), (iv) the fees and expenses of any "qualified independent underwriter" or other independent appraiser participating in an offering pursuant to Rule 2720 of the NASD Rules of Conduct, (v) fees and expenses of all attorneys, advisers, appraisers and other persons retained by the Corporation or any Subsidiary of the Corporation, (vi) internal expenses of the Corporation and its Subsidiaries, (vii) the expense of any annual audit, (viii) the expenses relating to printing, word processing and distributing all registration statements, underwriting agreements, securities sales agreements, indentures and any other documents necessary in order to comply with this Agreement, and (ix) the reasonable out-of-pocket expenses and, as to in-house counsel, allocated costs of the Holders of the Registrable Securities being registered in such registration incurred in connection therewith including, without limitation, the reasonable fees and disbursements of not more than one outside counsel and one in-house counsel (who may be employed by an Affiliate of a Holder) chosen by the Holders of a majority of the Registrable Securities to be included in such Registration Statement. "Registration Expenses" shall not include any underwriting discounts or commissions or any transfer taxes payable in respect of the sale of Registrable Securities, which such expenses shall be paid or borne by the Holders thereof. Nor shall "Registration Expenses" include any fees or expenses incurred by or on behalf of any Holder who, without cause, either withdraws a request for registration or withdraws from a registration. 1.20 "Registration Statement" means any registration statement of the Corporation that covers any of the Registrable Securities pursuant to the provisions of this Agreement, and all amendments and supplements to any such registration statement, including post-effective amendments, in each case including the Prospectus, all exhibits and all material incorporated by reference or deemed to be incorporated by reference in such registration statement. 1.21 "Repurchase Shares" means the shares of Common Stock issued to a holder upon the repurchase of the Series C Preferred Stock. 1.22 "Rule 144" means Rule 144 (or any successor provision) under the Securities Act. 1.23 "Rule 145" means Rule 145 (or any successor provision) under the Securities Act. 1.24 "Securities Act" means the Securities Act of 1933, as amended, or any successor federal statute, and the rules and regulations thereunder which shall be in effect at the time. Any reference to a particular section thereof shall include a reference to the corresponding section, if any, of any such successor federal statute, and the rules and regulations thereunder. 1.25 "SEC" means the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act or the Exchange Act. 1.26 "Series A Preferred Stock" has the meaning given it in the first recital. 1.27 "Series B Preferred Stock" has the meaning given it in second recital. 1.28 "Special Registration" means the registration of shares of equity securities and/or options or other rights in respect thereof to be offered solely to directors, members of management, employees, consultants or sales agents, distributors or similar representatives of the Corporation or its direct or indirect Subsidiaries, solely on Form S-8 or any successor form. 1.29 "Subsidiary" means, with respect to any Person, any corporation or Person, a majority of the outstanding voting stock or other equity interests of which is owned, directly or indirectly, by that Person. 1.30 "underwritten registration" or "underwritten offering" means a registration in which securities of the Corporation (including Registrable Securities) are sold to an underwriter for reoffering to the public. ARTICLE II REGISTRATION 2.1 Demand Registration. ------------------- (a) Requests. Subject to the provisions of Section 2.6, at any time or from time to time after 12 months from the date of this Agreement, Holders of not less than 50% of the then outstanding Registrable Securities shall have the right to make written requests that the Corporation effect up to two registrations under the Securities Act of all or part of the Registrable Securities of the Holders making such request, which requests shall specify the intended method of disposition thereof by such Holders, including whether the registration requested is for an underwritten offering. For a registration to be underwritten, a majority of the Holders requesting registration (as measured by ownership of Registrable Securities) must so request. The Corporation shall not be required to effect more than two registrations under this Section 2.1. (b) Obligation to Effect Registration. (i) Within 10 business days after receipt by the Corporation of any request for registration pursuant to Section 2.1, the Corporation shall promptly give written notice of such requested registration to all Holders, and as soon as practicable will use its best efforts to effect the registration under the Securities Act of (1) the Registrable Securities which the Corporation has been so requested to register pursuant to Section 2.1, and (2) all other Registrable Securities which the Corporation has been requested to register by the Holders thereof by written request given to the Corporation within 10 days after the Corporation has given such written notice (which request shall specify the intended method of disposition of such Registrable Securities), all to the extent required to permit the disposition (in accordance with the intended methods thereof as aforesaid) of the Registrable Securities so to be registered. (ii) The Corporation's obligations under Section 2.1(a)(i) shall be subject to the following limitations: (1) the Corporation shall not be required to effect a registration pursuant to this Section 2.1 during the period starting with the date of filing of, and ending on the date one hundred eighty (180) days following the effective date of, the registration statement pertaining to a public offering by the Corporation; provided, however, that unless the Holders -------- ------- are permitted to register and sell in such offering all such Registrable Securities as they have requested be included in such offering without cutback under Section 2.2(b)(ii), then the Corporation may not decline to register shares pursuant to this clause (1) more than once every two years (such time period to commence upon the expiration of the end of the one hundred eighty (180) day period referred to above); and (2) the Corporation shall not be required to effect a registration on Form S-1 if it has filed and has maintained an effective "shelf" Registration Statement on Form S-3 pursuant to Section 2.1(c) and such Form S-3 is permitted to be used by the Holders demanding registration. (c) Shelf Registration. If requested by Holders of a majority of the Registrable Securities as to which registration has been requested pursuant to this Section 2.1, and if the Corporation is eligible to file such Registration Statement on Form S-3, the Registration Statement covering such Registrable Securities shall provide for the sale by the Holders thereof of the Registrable Securities from time to time on a delayed or a continuous basis under Rule 415 under the Securities Act. If more than one underwritten offering is requested under any particular shelf registration, each such additional underwritten offering shall constitute a separate "demand" registration for purposes of Section 2.1. (d) Effective Registration Statement. A registration requested pursuant to Section 2.1 shall not be deemed to have been effected unless it is declared effective by the SEC and remains effective for the period specified in Section 2.3(b). Notwithstanding the preceding sentence, a registration requested pursuant to Section 2.1 that does not become effective after the Corporation has filed a Registration Statement with respect thereto by reason of the refusal to proceed of the Holders of Registrable Securities requesting the registration, or by reason of a request by a majority of the Selling Holders participating in such registration that such registration be withdrawn, shall be deemed to have been effected by the Corporation at the request of such Holders. (e) Pro Rata Allocation. If the Corporation determines, based on consultation with the managing underwriters or, in an offering which is not underwritten, with an investment banker, that the number of securities to be sold in any such offering should be limited due to market conditions or otherwise, Holders of Registrable Securities proposing to sell their securities in such registration shall share pro rata in the number of securities being offered (as determined by the Holders holding a majority of the Registrable Securities for which registration is being requested in consultation with the managing underwriters or investment banker, as the case may be) and registered for their account, such sharing to be based on the number of Registrable Securities as to which registration was requested by such Holders. (f) Inclusion of Other Securities in Demand Registration. Notwithstanding any other provision of this Section 2.1, and subject to the Registration Rights Agreement dated February 21, 1990 (the "1990 Registration Rights Agreement") by and among the Corporation, Wells Fargo Bank, N.A., a national banking association, BK Capital Partners I, BK Capital Partners II, BK Capital Partners III, Executive Life Insurance Company, Novato Partners, the Common Fund, Richard C. Blum & Associates I, and the Management Holders (as defined therein): (i) The Corporation may, subject to the remainder of this Section 2.1(f), elect to include in any Registration Statement made pursuant to Section 2.1(a), authorized but unissued shares of Common Stock or shares of Common Stock held as treasury stock; (ii) The Corporation shall not register securities (other than Registrable Securities) for sale for the account of any Person (other than the Corporation) in any registration requested pursuant to Section 2.1(a); and (iii) If any Registration Statement made pursuant to Section 2.1(a) involves an underwritten offering and the managing underwriter of such offering (or, in connection with an offering that is not underwritten, an investment banker) shall advise the Corporation that, in its view, the number of securities requested to be included in such Registration exceeds the largest number that can be sold in an orderly manner in such offering within a price range acceptable to the selling Holders, the Corporation shall include in such Registration: (1) first, all shares of Common Stock requested to be included in such Registration by the selling Holders as provided in Section 2.1(e); and (2) second, to the extent that the number of securities to be registered pursuant to clause (1) is less than the largest number that can be sold in an orderly manner in such offering within a price range acceptable to the selling Holders, securities that the Corporation proposes to register. 2.1 Piggyback Registration. If the Corporation at any time proposes to ---------------------- register any of its common stock under the Securities Act (other than a Registration relating solely to the sale of securities to participants in a Company stock plan, on Form S-4 with respect to any merger, consolidation or acquisition, pursuant to Section 2.1 or pursuant to a Special Registration), whether or not for sale for its own account, and the registration form to be used may be used for the registration of Registrable Securities, it shall each such time give prompt written notice to all Holders of Registrable Securities of its intention to do so and, upon the written request of any Holder of Registrable Securities given to the Corporation within 10 days after the Corporation has given any such notice (which request shall specify the Registrable Securities intended to be disposed of by such holder and the intended method of disposition thereof), the Corporation will use its best efforts to effect the registration under the Securities Act of all Registrable Securities which the Corporation has been so requested to register by the Holders thereof, to the extent required to permit the disposition (in accordance with the intended methods thereof as aforesaid) of the Registrable Securities so to be registered, provided that: (a) if, at any time after giving written notice of its intention to register any securities and prior to the effective date of the Registration Statement filed in connection with such registration, the Corporation shall determine for any reason not to register such securities, the Corporation may, at its election, give written notice of such determination to each Holder that was previously notified of such registration and, thereupon, shall not register any Registrable Securities in connection with such registration (but shall nevertheless pay the Registration Expenses in connection therewith), without prejudice, however, to the rights of any Holders to request that a registration be effected under Section 2.1; and (b) if the Corporation shall be advised in writing by the managing underwriters (or, in connection with an offering which is not underwritten, by an investment banker) that in their or its opinion the number of securities requested to be included in such registration (whether by the Corporation, pursuant to this Section 2.2 or pursuant to any other rights granted by the Corporation to a holder or holders of its securities to request or demand such registration or inclusion of any such securities in any such registration) exceeds the number of such securities which can be sold in such offering in an orderly manner within a price range that is acceptable to the Corporation, the Corporation shall include in such Registration: (i) first, all shares of Common Stock that the Company proposes to register for its own account; and (ii) subject to the 1990 Registration Rights Agreement: (1) second, to the extent that the number of shares registered pursuant to clause (i) is less than the largest number that can be sold in an orderly manner in such offering within a price range acceptable to the Corporation, the Registrable Securities requested to be included by the Holders; and (2) third, to the extent that the number of shares registered pursuant to clauses (i) and (ii) is less than the largest number that can be sold in an orderly manner in such offering within a price range acceptable to the Corporation, the securities requested to be included by any other holders, and the Corporation shall so provide in any registration agreement hereinafter entered into with respect to any of its securities. The securities to be included in any such registration pursuant to clause (ii) or (iii) shall be allocated on a pro rata basis among all holders requesting that securities be included in such registration pursuant to such clause on the basis of the number of securities requested to be included by such holders. No registration effected under this Section 2.2 shall relieve the Corporation from its obligation to effect registrations upon request under Section 2.1. The Corporation shall not be obligated to cause any "piggyback" registration to be underwritten. 2.3 Registration Procedures. If and whenever the Corporation is required ----------------------- to use its best efforts to effect the registration of any Registrable Securities under the Securities Act as provided in Sections 2.1 and 2.2, the Corporation shall: (a) prepare and file with the SEC, as soon as practicable, a Registration Statement with respect to such securities, make all required filings with the NYSE and use best efforts to cause such Registration Statement to become effective at the earliest possible date; (b) prepare and file with the SEC such amendments and supplements to such Registration Statement and the Prospectus used in connection therewith and such other documents as may be necessary to keep such Registration Statement effective until the earlier of (i) 30 days after the effective date of such Registration Statement (360 days in the case of a Shelf Registration pursuant to Section 2.1(c)) or (ii) the consummation of the disposition by the Holders of all the Registrable Securities covered by such Registration Statement and otherwise comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such Registration Statement; (c) furnish to counsel (if any) selected by the Holders of a majority of the Registrable Securities covered by such Registration Statement and to counsel for the underwriters in any underwritten offering copies of all documents proposed to be filed with the SEC in connection with such registration a reasonable time prior to the proposed filing thereof and give reasonable consideration in good faith to any comments of such Holders, counsel and underwriters. The Corporation shall not file any Registration Statement or Prospectus or any amendments or supplements thereto pursuant to a registration under Section 2.1(a) if the Holders of a majority of the Registrable Securities covered by such Registration Statement, their counsel, or the underwriters, if any, shall reasonably object in writing; (d) furnish to each seller of Registrable Securities, without charge, such reasonable number of conformed copies of such Registration Statement and of each such amendment and supplement thereto (in each case, including all exhibits (including exhibits incorporated by reference), financial statements, schedules and all documents incorporated therein, deemed to be incorporated therein by reference or filed therewith, except that the Corporation shall not be obligated to furnish any seller of securities with more than two copies of such exhibits and documents), such number of copies of the Prospectus included in such Registration Statement (including each preliminary prospectus and any summary prospectus) in conformity with the requirements of the Securities Act, and such other documents, as such seller may reasonably request in order to facilitate the disposition of the securities owned by such seller; (e) use its best efforts to register or qualify and cooperate with the Holders of Registrable Securities, the underwriters and their respective counsels in connection with the registration or qualification (or exemption from such registration or qualification) of the securities covered by such Registration Statement under such other securities or blue sky laws of such jurisdictions as each seller shall request; provided, however, that where Registrable Securities are offered other than through an underwritten offering, the Corporation agrees to cause its counsel to perform blue sky investigations and file registrations and qualifications required to be filed pursuant to this Section 2.3(e); keep each such registration or qualification (or exemption therefrom) effective during the period such Registration Statement is required to be effective hereunder and do any and all other acts and things which may be necessary or advisable to enable such seller to consummate the disposition in such jurisdictions of the securities owned by such seller, except that the Corporation shall not for any such purpose be required to qualify generally to do business as a foreign corporation in any jurisdiction wherein it is not so qualified, subject itself to taxation in any jurisdiction wherein it is not so subject, or take any action which would subject it to general service of process in any jurisdiction wherein it is not so subject; (f) (i) notify each Holder of Registrable Securities subject to such Registration Statement if such Registration Statement, at the time it or any amendment thereto became effective, (x) contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading upon discovery by the Corporation of such material misstatement or omission or (y) upon discovery by the Corporation of the happening of any event as a result of which the Corporation believes there would be such a material misstatement or omission, and, as promptly as practicable, prepare and file with the SEC a post-effective amendment to such registration statement and use best efforts to cause such post-effective amendment to become effective such that such registration statement, as so amended, shall not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and (ii) notify each Holder of Registrable Securities subject to such Registration Statement, at any time when a Prospectus relating thereto is required to be delivered under the Securities Act, if the Prospectus included in such Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading in each case upon discovery by the Company of such material misstatement or omission or upon discovery by the Corporation of the happening of any event as a result of which the Company believes there would be a material misstatement or omission, and, as promptly as is practicable, prepare and furnish to such Holder a reasonable number of copies of a supplement to or an amendment of such Prospectus as may be necessary so that, as thereafter delivered to the purchasers of such securities, such Prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (g) otherwise use its best efforts to comply with all applicable rules and regulations of the SEC, and make available to its security holders, as soon as reasonably practicable, an earnings statement of the Corporation complying with the provisions of Section 11(a) of the Securities Act and Rule 158 under the Securities Act (or any similar rule promulgated under the Securities Act) no later than 45 days after the end of any 12-month period (or 90 days after the end of any 12-month period if such period is a fiscal year) (i) commencing at the end of any fiscal quarter in which Registrable Securities are sold to an underwriter or to underwriters in a firm commitment or best efforts underwritten offering and (ii) if not sold to an underwriter or to underwriters in such an offering, commencing on the first day of the first fiscal quarter of the Corporation after the effective date of the relevant Registration Statement, which statements shall cover said 12-month periods; (h) promptly notify each Holder of any Registrable Securities covered by such Registration Statement, their counsel and the underwriters (i) when such Registration Statement, or any post-effective amendment to such Registration Statement, shall have become effective, or any amendment of or supplement to the Prospectus used in connection therewith shall have been filed, (ii) of any request by the SEC to amend such Registration Statement or to amend or supplement such Prospectus or for additional information, (iii) of the issuance by the SEC of any stop order suspending the effectiveness of such Registration Statement or of any order preventing or suspending the use of any preliminary prospectus or the initiation or threatening of any proceedings for any of such purposes, (iv) of the suspension of the qualification of such securities for offering or sale in any jurisdiction, or of the institution of any proceedings for any of such purposes and (v) if at any time when a Prospectus is to be required by the Securities Act to be delivered in connection with the sale of the Registrable Securities, the representations and warranties of the Company contained in the underwriting agreement contemplated in Section 2.4(b) below, to the knowledge of the Corporation, cease to be true and correct in any material respect; (i) use its best efforts to prevent the issuance of any order suspending the effectiveness of the Registration Statement or of any order preventing or suspending the use of a Prospectus or suspending the qualification (or exemption from qualification) of any of the Registrable Securities covered thereby for sale in any jurisdiction, and, if any such order is issued, to obtain the withdrawal of any such order at the earliest possible moment; (j) if requested by the managing underwriter, if any, or the Holders of a majority of the Registrable Securities being sold in connection with an underwriting offering, (i) promptly incorporate in a prospectus supplement or post-effective amendment such information as the managing underwriter, if any, or such Holders reasonably request to be included therein to comply with applicable law and (ii) make all required filings of such prospectus supplement or such post-effective amendment as soon as practicable after the Corporation has received notification of the matters to be incorporated in such prospectus supplement or post-effective amendment; (k) cooperate with the Holders and the managing underwriter, if any, to facilitate the timely preparation and delivery of new certificates representing Registrable Securities to be sold against delivery by the Holders of any old certificates representing such Registrable Securities, which new certificates shall not bear any restrictive legends whatsoever and shall be in a form eligible for deposit with DTC, and enable such Registrable Securities to be in such denominations and registered in such names as the underwriters, if any, or Holders may reasonably request at least two business days prior to any sale of Registrable Securities in a firm commitment underwritten public offering; (l) prior to the effective date of the Registration Statement, (i) provide the registrar for the Common Stock or such other Registrable Securities with printed certificates for such securities in a form eligible for deposit with DTC and (ii) provide a CUSIP number for such securities; (m) cause the Conversion Shares and Repurchase Shares, and use its best efforts to cause the Series A Preferred Stock and Series C Preferred Stock, to be admitted for trading on the NYSE (or such other exchange or automated trading system as shall be the primary trading system or exchange for the Common Stock) in the event that the Registrable Securities covered by such Registration Statement include any Series A Preferred Stock, Series C Preferred Stock, Conversion Shares and Repurchase Shares not already so listed; and (n) have the right -- if the Board of Directors of the Company, in its good faith judgment, determines that any Registration of shares of Common Stock should not be made or continued because it would materially interfere with any material financing, acquisition, corporation reorganization, merger, or other transaction involving the Company or any of its subsidiaries, or would require premature disclosure of material non-public information (a "Valid Business Reason") -- (i) to postpone filing a Registration Statement until such Valid Business Reason no longer exists, but in no event for more than 180 days, and (ii) to cause any Registration Statement that has already been filed to be withdrawn and its effectiveness terminated or to postpone amending or supplementing such Registration Statement until such Valid Business Reason no longer exists, but in no event for more than 90 days (the "Postponement Period"); provided, however, that in no event shall the Company be permitted to postpone or withdraw a Registration Statement within 180 days after the expiration of the Postponement Period; and (o) have the right to require each Holder of any Registrable Securities as to which any registration is being effected to furnish to the Corporation such information regarding such Holder and the distribution of such securities as the Corporation may from time to time reasonably request in writing and as shall be required by law in connection therewith. Each such Holder agrees to furnish promptly to the Corporation all information required to be disclosed in order to make the information previously furnished to the Corporation by such Holder not materially misleading. The Corporation agrees not to file or make any amendment to any Registration Statement with respect to any Registrable Securities, or any amendment of or supplement to the Prospectus used in connection therewith, which refers to any seller of any securities covered thereby by name, or otherwise identifies such seller as the holder of any securities of the Corporation, without the consent of such seller, such consent not to be unreasonably withheld, except that no such consent shall be required for any disclosure that is required by law. By the acquisition of Registrable Securities, each Holder shall be deemed to have agreed that upon receipt of any notice from the Corporation pursuant to Section 2.3(f) or (n), such Holder will promptly discontinue such Holder's disposition of Registrable Securities pursuant to the Registration Statement covering such Registrable Securities until such Holder shall have received, in the case of clause (i) of Section 2.3(f), notice from the Corporation that such Registration Statement has been amended, as contemplated by Section 2.3(f); in the case of clause (ii) of Section 2.3(f), copies of the supplemented or amended Prospectus contemplated by Section 2.3(f); or, in the case of Section 2.3(n), the time period specified has elapsed or such Holder has received notice from the Corporation that the Postponement Period has been terminated. If so directed by the Corporation, each Holder will deliver to the Corporation (at the Corporation's expense) all copies, other than permanent file copies, in such Holder's possession of the Prospectus covering such Registrable Securities at the time of receipt of such notice. In the event that the Corporation shall give any such notice, the period mentioned in Section 2.3(b) shall be extended by the number of days during the period from and including the date of the giving of such notice to and including the date when each seller of any Registrable Securities covered by such Registration Statement shall have received the copies of the supplemented or amended Prospectus contemplated by Section 2.3(f). 2.1 Underwritten Offerings. The provisions of this Section 2.4 do not ---------------------- establish additional registration rights but instead set forth procedures applicable, in addition to those set forth in Sections 2.1 through 2.3, to any registration that is an underwritten offering. (a) Underwritten Offerings Exclusive. Whenever a registration requested pursuant to Section 2.1 is for an underwritten offering, only securities that are to be distributed by the underwriters may be included in the registration. (b) Underwriting Agreement. If requested by the underwriters for any underwritten offering by Holders pursuant to a registration requested under Section 2.1, the Corporation shall enter into an underwriting agreement with such underwriters for such offering, such agreement to be reasonably satisfactory in substance and form to the Holders of a majority of the Registrable Securities to be covered by such registration and to the underwriters and to contain such representations and warranties by the Corporation and such other terms and provisions as are customarily contained in agreements of this type, including, but not limited to, indemnities to the effect and to the extent provided in Section 2.7, provisions for the delivery of officers' certificates, opinions of counsel and accountants' "cold comfort" letters, and hold-back arrangements. The Holders of Registrable Securities to be distributed by such underwriters shall be parties to such underwriting agreement. (c) Selection of Underwriters. Whenever a registration requested pursuant to Section 2.1 is for an underwritten offering, the Holders of a majority of the Registrable Securities to be registered pursuant to such offering shall have the right to select one or more underwriters to administer the offering, subject to the consent of the Corporation, which shall not be unreasonably withheld. If the Corporation at any time proposes to register any of its securities under the Securities Act for sale for its own account and such securities are to be distributed by or through one or more underwriters, the Corporation shall have the right to select one or more underwriters to administer the offering, subject to the consent of the Holders of a majority of Registrable Securities to be registered pursuant to such offering, which shall not be unreasonably withheld. In all cases in this Section 2.4(c), at least one of the underwriters chosen by the Holders or the Corporation shall be an underwriter of nationally recognized standing. (d) Hold Back Agreements. If and whenever the Corporation proposes to register any of its equity securities under the Securities Act, whether or not for its own account (other than pursuant to a Special Registration), or is required to use its best efforts to effect the registration of any Registrable Securities under the Securities Act pursuant to Section 2.1 or 2.2, each Holder, if required by the managing underwriter in an underwritten offering, agrees by acquisition of such Registrable Securities not to effect (other than pursuant to such registration) any public sale or distribution, including, but not limited to, any sale pursuant to Rule 144, of any Registrable Securities, any other equity securities of the Corporation or any securities convertible into or exchangeable or exercisable for any equity securities of the Corporation during the 10 days prior to, and for 180 days after, the effective date of such registration, to the extent timely notified in writing by the Corporation or the managing underwriter, and the Corporation agrees to cause each holder of any equity security, or of any security convertible into or exchangeable or exercisable for any equity security, of the Corporation purchased from the Corporation at any time other than in a public offering to enter into a similar agreement with the Corporation. The foregoing provisions shall not apply to any Holder if such Holder is prevented by applicable statute or regulation from entering into any such agreement; provided, however, that any such Holder shall undertake, in its request to participate in any such underwritten offering, not to effect any public sale or distribution of any applicable class of Registrable Securities commencing on the date of sale of such applicable class of Registrable Securities unless it has provided 45 days prior written notice of such sale or distribution to the underwriter or underwriters. The Corporation further agrees not to effect (other than pursuant to such registration or pursuant to a Special Registration) any public sale or distribution, or to file any Registration Statement (other than such registration or a Special Registration) covering any, of its equity securities, or any securities convertible into or exchangeable or exercisable for such securities, during the 10 days prior to, and for 90 days after, the effective date of such registration if required by the managing underwriter. (e) in connection with an underwritten public offering only, furnish to each underwriter (i) an opinion of counsel for the Corporation experienced in securities law matters, dated the effective date of the Registration Statement, and (ii) a "cold comfort" letter signed by the independent public accountants who have issued an audit report on the Corporation's financial statements included in the Registration Statement, subject to each seller having executed and delivered to the independent public accountants such certificates and documents as such accountants shall reasonably request, covering substantially the same matters with respect to the Registration Statement (and the Prospectus included therein) and, in the case of such accountants' letter, with respect to events subsequent to the date of such financial statements, as are customarily covered in opinions of issuer's counsel and in accountants' letters delivered to the underwriters in underwritten public offerings of securities. 2.5 Preparation; Reasonable Investigation. In connection with the ------------------------------------- preparation and filing of each Registration Statement registering Registrable Securities under the Securities Act, the Corporation shall give the Holders of such Registrable Securities so to be registered and their underwriters, if any, and their respective counsel and accountants, the opportunity to participate in the preparation of such Registration Statement, each Prospectus included therein or filed with the SEC, and each amendment thereof or supplement thereto, and shall give each of them such access to all pertinent financial, corporate and other documents and properties of the Corporation and its Subsidiaries, and such opportunities to discuss the business of the Corporation with its officers, directors, employees and the independent public accountants who have issued audit reports on its financial statements as shall be necessary, in the reasonable opinion of such Holders' and such underwriters' respective counsel, to conduct a reasonable investigation within the meaning of the Securities Act. 2.6 to use its best efforts to effect the registration of any Registrable Securities under the Securities Act pursuant to Section 2.1 or 2.2, and if such registration shall not have been withdrawn or abandoned, the Corporation shall not be obligated to and shall not file any Registration Statement with respect to any of its securities (including Registrable Securities) under the Securities Act (other than a Special Registration), whether of its own accord or at the request or demand of any holder or holders of such securities, until a period of 180 days shall have elapsed from the effective date of such previous registration, provided that the Corporation shall not be excused from filing a registration statement by virtue of this Section 2.6 more than once in a 360 day period. 2.7 Indemnification. --------------- (a) Indemnification by the Corporation. In the event of any registration of any Registrable Securities under the Securities Act pursuant to Section 2.1 or 2.2, the Corporation shall indemnify and hold harmless the seller of such securities, its directors, officers, and employees, each other person who participates as an underwriter, broker or dealer in the offering or sale of such securities and each other person, if any, who controls such seller or any such participating person within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act, against any and all losses, claims, damages or liabilities, joint or several, to which such seller or any such director, officer, employee, participating person or controlling person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement under which such securities were registered under the Securities Act, any Prospectus or preliminary prospectus included therein, or any amendment or supplement thereto, or (ii) any omission or alleged omission to state a material fact required to be stated in any such Registration Statement, Prospectus, preliminary prospectus, amendment or supplement or necessary to make the statements therein not misleading; and the Corporation shall reimburse such seller and each such director, officer, employee, participating person and controlling person for any legal or any other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, liability, action or proceeding as such expenses are incurred; provided that the Corporation shall not be liable in any such case to the extent that any such loss, claim, damage, liability or expense arises out of or is based upon an untrue statement or omission made in any such Registration Statement, Prospectus, preliminary prospectus, amendment or supplement in reliance upon and in conformity with written information furnished to the Corporation by such seller or participating person expressly for use in the preparation thereof; provided further that the Corporation shall not be liable and indemnification shall not apply to amounts paid in any settlement effected without the consent of the Corporation. (b) Indemnification by the Sellers. In the event of any registration of any Registrable Securities under the Securities Act pursuant to Section 2.1 or 2.2, each of the prospective sellers of such securities, will indemnify and hold harmless the Corporation, each director of the Corporation, each officer of the Corporation who shall sign such Registration Statement, and each other person, if any, who controls the Corporation or any such participating person within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, against any and all losses, claims, damages or liabilities, joint or several, to which the Corporation or any such director, officer, employee, participating person or controlling person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement under which such securities were registered under the Securities Act, any Prospectus or preliminary prospectus included therein, or any amendment or supplement thereto, or any omission or alleged omission to state a material fact with respect to such seller required to be stated in any such Registration Statement, Prospectus, preliminary prospectus, amendment or supplement or necessary to make the statements therein not misleading if such statement or omission was made in reliance upon and in conformity with written information furnished to the Corporation by such seller expressly for use in the preparation of any such Registration Statement, Prospectus, preliminary prospectus, amendment or supplement; provided that the liability of each such seller shall be in proportion to and limited to the gross amount received by such seller from the sale of Registrable Securities pursuant to such Registration Statement; provided further that any Seller shall not be liable and indemnification shall not apply to amounts paid in any settlement effected without the consent of that Seller. (c) Notices of Claims, etc. Promptly after receipt by an indemnified party of notice of the commencement of any action or proceeding involving a claim referred to in the preceding paragraphs of this Section 2.7, such indemnified party shall, if a claim in respect thereof is to be made against an indemnifying party hereunder, give prompt written notice to the latter of the commencement of such action, provided that the failure of any indemnified party to give notice as provided therein shall not relieve the indemnifying party of its obligations under the preceding paragraphs of this Section 2.7 unless the failure to provide prompt written notice shall cause actual prejudice to the indemnifying party. In case any such action is brought against an indemnified party and it notifies the indemnifying party of the commencement thereof, the indemnifying party shall have the right to retain counsel reasonably satisfactory to such indemnified party to defend against such proceeding and shall pay the reasonable fees and disbursements of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel and the payment of such fees by the indemnifying party or (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them or (iii) the indemnifying party has not retained counsel to defend such proceeding, in which case (under any of such clauses (i), (ii) or (iii)) it is understood that (x) the indemnifying party shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees and expenses of more than one separate firm for all such indemnified parties and (y) such firm shall be designated in writing by the Holders of a majority of the Registrable Securities included in such Registration Statement in the case of parties indemnified pursuant to Section 2.7(a) and by the Corporation in the case of parties indemnified pursuant to Section 2.7(b). All fees and expenses that an indemnified party is entitled to receive from an indemnifying party under this Section 2.7 shall be reimbursed as they are incurred, provided that each such indemnified party shall promptly repay such fees and expenses if it is finally judicially determined that such indemnified party is not entitled to indemnification hereunder. No indemnifying party, in the defense of any such claim or litigation, shall, except with the consent of such indemnified party, which consent shall not be unreasonably withheld, consent to entry of any judgment or enter into any settlement of any pending or threatened action in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party unless such judgment or settlement includes as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation. (d) Other Indemnification. Indemnification similar to that specified in the preceding paragraphs of this Section 2.7 (with appropriate modifications) shall be given by the Corporation and each seller of Registrable Securities with respect to any required registration or other qualification of such Registrable Securities under any federal or state law or regulation of governmental authority other than the Securities Act. (e) Other Remedies. If for any reason the foregoing indemnity is unavailable, or is insufficient to hold harmless an indemnified party, other than by reason of the exceptions provided therein, then the indemnifying party shall contribute to the amount paid or payable by the indemnified party as a result of such losses, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Corporation or the Holders of Registrable Securities covered by the Registration Statement in question and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Corporation and the Holders agree that it would not be just and equitable if contribution pursuant to this Section 2.7 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an indemnified party as a result of the losses, claims, damages and liabilities referred to in the immediately preceding paragraph of this Section 2.7 shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. No party shall be liable for contribution under this Section 2.7(e) except to the extent and under such circumstances as such party would have been liable to indemnify under this Section 2.7 if such indemnification were enforceable under applicable law. (f) Officers and Directors. As used in this Section 2.7, the terms "officers" and "directors" shall include the partners of Holders which are partnerships and the members of Holders which are limited liability companies. 2.8 Expenses. The Corporation shall pay all Registration Expenses in -------- connection with each registration of Registrable Securities pursuant to this Section 2, as provided in this Agreement. ARTICLE III MISCELLANEOUS 3.1 Legended Securities; etc. The Corporation shall issue new ------------------------ certificates for Registrable Securities without a legend restricting further transfer if (I) such securities have been sold to the public pursuant to an effective Registration Statement under the Securities Act (other than Form S-8 if the Holder of such Registrable Securities is an Affiliate) or Rule 144, or (ii) (x) such issuance is otherwise permitted under the Securities Act, (y) the Holder of such shares has delivered to the Corporation an opinion of counsel, which opinion and counsel shall be reasonably satisfactory to the Corporation, to such effect and (z) the Holder of such shares expressly requests the issuance of such certificates in writing. 3.2 Amendments and Waivers. This Agreement may be amended, modified or ---------------------- supplemented, and the Corporation may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Corporation shall have obtained the written consent to such amendment, action or omission to act, of the Holder or Holders of at least a majority of the Registrable Securities. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders whose securities are being sold pursuant to a Registration Statement and that does not directly or indirectly affect, impair, limit or compromise the rights of other Holders may be given by Holders of at least a majority of the Registrable Securities being sold by such Holders pursuant to such Registration Statement; provided, however, that the provisions -------- ------- of this sentence may not be amended, modified or supplemented except in accordance with the provisions of the immediately preceding sentence. No amendment, modification or discharge of this Agreement, and no waiver hereunder, shall be valid or binding unless set forth in writing. Any such waiver shall constitute a waiver only with respect to the specific matter described in such writing and shall in no way impair the rights of the party or parties granting such waiver in any other respect or at any other time. 3.3 Nominees for Beneficial Owners. In the event that any Registrable ------------------------------ Securities are held by a nominee for the beneficial owner thereof, the beneficial owner thereof may, at its election and unless notice is otherwise given to the Corporation by the record owner, be treated as the holder of such Registrable Securities for purposes of any request or other action by any Holder or Holders pursuant to this Agreement or any determination of any number or percentage of shares of Registrable Securities held by any Holder or Holders contemplated by this Agreement. If the beneficial owner of any Registrable Securities so elects, the Corporation may require assurances reasonably satisfactory to it of such owner's beneficial ownership of such Registrable Securities. 3.4 Successors, Assigns and Transferees. This Agreement shall be binding ----------------------------------- upon and shall inure to the benefit of the parties hereto and their respective successors assign and transferees. Purchaser or a Holder may assign its rights hereunder in whole or in part to an Affiliate or to a Distributee or to other successors, assigns and transferees of Purchaser or such Holder; provided that such Affiliate, Distributee or successor, assignee or transferee expressly agrees to be bound by this Agreement by written supplement. This Agreement shall survive any transfer of Registrable Securities to and shall inure to the benefit of an Affiliate, a Distributee or such other successors, assigns and transferees of Purchaser or such Holder. 3.5 Notices. All notices or other communications given or made under this ------- Agreement shall be validly given or made if in writing and delivered by facsimile transmission or in person at, or mailed by overnight courier to, the following addresses (and shall be deemed effective at the time of receipt thereof): If to Seller: URS Corporation 100 California Street, Suite 500 San Francisco, California 94111 Attn: Kent P. Ainsworth Facsimile: (415) 398-2621 with a copy to: Cooley Godward LLP One Maritime Plaza, 20th Floor San Francisco, California 94111-3580 Attn: Samuel M. Livermore Facsimile: (415) 951-3699 If to Purchaser: RCBA Strategic Partners, L.P. 909 Montgomery Street, Suite 400 San Francisco, California 94133 Attn: Murray A. Indick Facsimile: (415) 434-3130 with a copy to: Wilmer, Cutler & Pickering 2445 M Street, N.W. Washington, D.C. 20037 Attn: Michael R. Klein and Eric R. Markus Facsimile: (202) 663-6363 or to such other address as the party to whom notice is to be given may have previously furnished notices to the other in the manner set forth above. 3.6 No Inconsistent Agreements. The Corporation shall not hereafter enter -------------------------- into any agreement, or amend any existing agreement, with respect to its securities if such agreement would be inconsistent with the rights granted to the Holders by this Agreement. 3.7 Remedies; Attorneys' Fees. Each Holder of Registrable Securities, in ------------------------- addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, shall be entitled to specific performance of its rights under this Agreement. The Corporation agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of any provision of this Agreement and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate. As between the parties to this Agreement, in any action or proceeding brought to enforce any provision of this Agreement, or where any provision hereof is validly asserted as a defense, the successful party shall be entitled to recover reasonable attorney's fees in addition to its costs and expenses and any other available remedy. 3.8 Severability. If any clause, provision or section of this Agreement ------------ shall be invalid, illegal or unenforceable, the invalidity, illegality or unenforceability of such clause, provision or section shall not affect the enforceability or validity of any of the remaining clauses, provisions or sections hereof to the extent permitted by applicable law. The invalidity of any one or more phrases, sentences, clauses, Sections or subsections of this Agreement shall not affect the remaining portions of this Agreement. 3.9 Headings. The headings contained in this Agreement are for purposes of -------- convenience only and shall not affect the meaning or interpretation of this Agreement. 3.10 Counterparts. This Agreement may be executed in several counterparts, ------------ each of which shall be deemed an original and all of which together constitute one and the same instrument. 3.11 No Third Party Beneficiaries. Except as provided in Sections 2.7 and ---------------------------- 3.4, nothing in this Agreement shall confer any rights upon any person or entity other than the parties hereto, each such party's respective successors and permitted assigns. 3.12 Governing Law; Jurisdiction. This Agreement shall be governed by and --------------------------- construed in accordance with the laws of the State of Delaware as applied to contracts made and performed within the State of Delaware, without regard to principles of conflicts of law. IN WITNESS WHEREOF, each of the undersigned has executed this Agreement or caused this Agreement to be executed on its behalf as of the date first written above. RCBA STRATEGIC PARTNERS, URS CORPORATION L.P. By: /s/ Murray A. Indick By: /s/ Kent P. Ainsworth -------------------- --------------------- Name: Murry A. Indick Name: Kent P. Ainsworth Title: Member Title: Executive Vice President and Chief Financial Officer EX-23.1 5 CONSENT OF INDEPENDENT AUDITORS Exhibit 23.1 The Board of Directors Dames and Moore Group: We consent to the inclusion of our report dated May 21, 1999 with respect to the consolidated statements of financial position of Dames and Moore Group and subsidiaries as of March 26, 1999 and March 27, 1998, and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the years in the three-year period ended March 26, 1999, which report appears in the Form 8-K of URS Corporation. /s/ KPMG LLP Los Angeles, California June 10, 1999 EX-99.2 6 FINANCIAL STATEMENTS OF DAMES & MOORE GROUP EXHIBIT 99.2 INDEX TO FINANCIAL STATEMENTS
Page ---- Independent Auditors' Report.............................................. F-2 Consolidated Statements of Financial Position as of March 26, 1999 and March 27, 1998........................................................... F-3 Consolidated Statements of Operations for the years ended March 26, 1999, March 27, 1998 and March 28, 1997........................................ F-4 Consolidated Statements of Changes in Shareholders' Equity for the years ended March 26, 1999, March 27, 1998 and March 28, 1997.................. F-5 Consolidated Statements of Cash Flows for the years ended March 26, 1999, March 27, 1998 and March 28, 1997........................................ F-6 Notes to Consolidated Financial Statements................................ F-7 Supplementary Financial Information--Selected Quarterly Financial Data (unaudited).............................................................. F-26 Schedule II--Valuation and Qualifying Accounts............................ F-27
F-1 INDEPENDENT AUDITORS' REPORT The Shareholders and Board of Directors Dames & Moore Group We have audited the consolidated financial statements of Dames & Moore Group and subsidiaries as listed in the accompanying index. In connection with our audits of the consolidated financial statements, we have also audited the financial statement schedule listed in the accompanying index. These consolidated financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Dames & Moore Group and subsidiaries as of March 26, 1999 and March 27, 1998 and the results of their operations and their cash flows for each of the years in the three-year period ended March 26, 1999 in conformity with generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. /s/ KPMG LLP ------------------------------------- KPMG LLP Los Angeles, California May 21, 1999 F-2 DAMES & MOORE GROUP CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (In thousands, except share and per share amounts)
March 26, March 27, 1999 1998 -------- --------- ASSETS Current: Cash and cash equivalents................................ $ 15,880 $ 9,493 Marketable securities.................................... 336 1,031 Accounts receivable, net of allowance for doubtful accounts of: 1999--$9,526 and 1998--$3,408.............. 193,051 135,298 Billed contract retentions............................... 22,071 10,992 Unbilled................................................. 98,256 55,844 -------- -------- Total accounts receivable.............................. 313,378 202,134 Deferred income taxes.................................... 10,705 4,303 Prepaid expenses and inventories......................... 14,841 7,310 Other current assets..................................... 11,366 3,858 -------- -------- Total current assets................................... 366,506 228,129 Property and equipment, net................................ 57,518 23,397 Goodwill of acquired businesses, net of accumulated amortization of: 1999--$20,070 and 1998--$12,535.......... 159,918 117,849 Investments in affiliates.................................. 10,461 4,868 Other assets............................................... 40,176 12,118 -------- -------- $634,579 $386,361 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current: Current portion of long-term debt........................ $ 18,433 $ 9,614 Accounts payable......................................... 57,842 31,990 Accrued payroll and employee benefits.................... 38,934 26,364 Current income taxes payable............................. 6,245 6,864 Accrued expenses and other liabilities................... 60,882 23,727 -------- -------- Total current liabilities.............................. 182,336 98,559 Long-term debt............................................. 284,147 132,010 Other long-term liabilities................................ 21,176 5,883 Contingencies (Note 11) Shareholders' equity: Preferred stock, $0.01 par value, shares authorized: 1,000,000; shares issued: none.......................... -- -- Common stock and capital in excess of $0.01 par value, shares authorized: 54,000,000; shares issued: 1999-- 22,781,000, 1998--22,740,000............................ 108,045 107,512 Retained earnings........................................ 102,264 104,952 Treasury stock: 1999--4,451,000, 1998--4,573,000 shares.. (59,373) (61,157) Accumulated other comprehensive income................... (3,594) (1,289) Other shareholders' equity............................... (422) (109) -------- -------- Total shareholders' equity............................. 146,920 149,909 -------- -------- $634,579 $386,361 ======== ========
The accompanying notes are an integral part of the consolidated financial statements. F-3 DAMES & MOORE GROUP CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts)
March March March 26, 27, 28, 1999 1998 1997 ---------- -------- -------- Gross revenues................................ $1,029,967 $703,902 $653,378 Direct costs of outside services.............. 390,621 221,398 198,970 ---------- -------- -------- Net revenues................................ 639,346 482,504 454,408 ---------- -------- -------- Operating expenses: Salaries and related costs.................. 445,594 337,474 315,896 General expenses............................ 123,206 88,401 86,275 Depreciation and amortization............... 12,840 9,216 8,832 Amortization of goodwill.................... 5,504 4,600 3,893 Acquisition related restructuring and other charges.................................... 28,276 -- 2,651 ---------- -------- -------- 615,420 439,691 417,547 ---------- -------- -------- Earnings from operations...................... 23,926 42,813 36,861 Investment and other income................. 1,231 997 2,014 Interest expense............................ (18,481) (10,292) (7,386) ---------- -------- -------- Earnings before income taxes.................. 6,676 33,518 31,489 Income taxes................................ 4,129 14,188 12,949 ---------- -------- -------- Earnings before extraordinary item............ $ 2,547 $ 19,330 $ 18,540 Extraordinary item (less applicable income tax benefit of $1,737)........................... (2,850) -- -- ---------- -------- -------- Net (loss) earnings........................... $ (303) $ 19,330 $ 18,540 ========== ======== ======== Basic earnings (loss) per share: Earnings before extraordinary item.......... $ 0.14 $ 1.08 $ 0.91 Extraordinary item.......................... (0.16) -- -- ---------- -------- -------- $ (0.02) $ 1.08 $ 0.91 ========== ======== ======== Weighted average number of shares............. 18,237 17,890 20,287 ========== ======== ======== Diluted earnings (loss) per share: Earnings before extraordinary item.......... $ 0.14 $ 1.07 $ 0.91 Extraordinary item.......................... (0.16) -- -- ---------- -------- -------- $ (0.02) $ 1.07 $ 0.91 ========== ======== ======== Weighted average number of shares............. 18,319 18,048 20,446 ========== ======== ========
The accompanying notes are an integral part of the consolidated financial statements. F-4 DAMES & MOORE GROUP CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (In thousands)
Common Accumulated Stock & Other Other Comprehensive Capital in Retained Treasury Comprehensive Shareholders' Earnings Excess of Par Earnings Stock Income Equity (Loss) ------------- -------- -------- ------------- ------------- ------------- Balances at March 29, 1996.................. $106,804 $ 75,295 $(13,859) $ -- $(293) -- Issued pursuant to stock option plan........... 438 -- -- -- (140) -- Net earnings........... -- 18,540 -- -- -- $18,540 Cash dividends, $0.12 per share............. -- (2,366) -- -- -- -- Treasury stock acquired.............. -- -- (58,675) -- -- -- Treasury stock issued.. -- (3,490) 9,464 -- -- -- Amortization of deferred compensation.......... -- -- -- -- 218 -- Change in foreign currency translation, net of tax - $190..... -- -- -- (313) -- (313) -------- -------- -------- ------- ----- ------- Balances at March 28, 1997.................. $107,242 $ 87,979 $(63,070) $ (313) $(215) $18,227 -------- -------- -------- ------- ----- ======= Issued pursuant to stock option plan........... 450 -- -- -- (100) -- Restricted shares repurchased........... (180) -- -- -- 15 -- Net earnings........... -- 19,330 -- -- -- 19,330 Cash dividends, $0.12 per share............. -- (2,168) -- -- -- -- Treasury stock acquired.............. -- -- (350) -- -- -- Treasury stock issued.. -- (189) 2,263 -- -- -- Amortization of deferred compensation.......... -- -- -- -- 191 -- Unrealized gain on securities, net of tax - $17...... -- -- -- 30 -- 30 Change in foreign currency translation, net of tax - $613..... -- -- -- (1,006) -- (1,006) -------- -------- -------- ------- ----- ------- Balances at March 27, 1998.................. $107,512 $104,952 $(61,157) $(1,289) $(109) $18,354 -------- -------- -------- ------- ----- ======= Issued pursuant to stock option plan........... 578 -- -- -- (140) -- Restricted shares repurchased........... (60) -- (14) -- 20 -- Net (loss)............. -- (303) -- -- -- (303) Cash dividends, $0.12 per share............. -- (2,203) -- -- -- -- Treasury stock acquired.............. -- -- (745) -- -- -- Treasury stock issued.. 15 (182) 2,543 -- (412) -- Amortization of deferred compensation.......... -- -- -- -- 219 -- Unrealized loss on securities, net of tax - $110................ -- -- -- (196) -- (196) Change in foreign currency translation, net of tax, net of tax - $641..... -- -- -- (1,052) -- (1,052) Minimum pension liability, net of tax - $678..... -- -- -- (1,057) -- (1,057) -------- -------- -------- ------- ----- ------- Balances at March 26, 1999.................. $108,045 $102,264 $(59,373) $(3,594) $(422) $(2,608) ======== ======== ======== ======= ===== =======
The accompanying notes are an integral part of the consolidated financial statements. F-5 DAMES & MOORE GROUP CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
Fiscal Year Ended ------------------------------- March 26, March 27, March 28, 1999 1998 1997 --------- --------- --------- Cash flows from operating activities: Net earnings (loss)............................ $ (303) $ 19,330 $ 18,540 Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: Depreciation and amortization............... 20,789 14,032 12,943 Non-cash special charges.................... 26,976 -- -- Losses (earnings) from equity investments... 859 252 (80) Deferred income taxes....................... (7,672) (354) (2,437) Change in assets and liabilities net of effects of purchases of businesses: Marketable securities..................... -- 5,984 8,952 Accounts receivable....................... (48,130) (21,725) (24,297) Prepaid expenses and other assets......... (13,319) (2,496) 1,285 Income tax receivable..................... (413) 593 121 Accounts payable and accrued expenses..... 23,116 3,404 (9,247) --------- -------- -------- Net cash provided by operating activities....... 1,903 19,020 5,780 --------- -------- -------- Cash flows from investing activities: Purchases of businesses, net of cash acquired.. (128,146) (13,463) (22,118) Purchases of property and equipment............ (18,615) (11,958) (9,524) Investments and other assets................... (10,188) (3,600) (18,630) Proceeds from sales of investments and other property...................................... 7,354 7,387 -- --------- -------- -------- Net cash used in investing activities........... (149,595) (21,634) (50,272) --------- -------- -------- Cash flows from financing activities: Repayments on lines of credit.................. (194,561) (21,000) -- Debt issuance costs............................ (3,867) -- -- Proceeds from debt instruments................. 355,080 22,700 62,551 Issuance of common stock....................... 428 364 357 Stock repurchased.............................. (798) (515) (58,675) Dividends...................................... (2,203) (2,168) (2,366) --------- -------- -------- Net cash (used) provided by financing activities..................................... 154,079 ( 619) 1,867 --------- -------- -------- Net (decrease) increase in cash and cash equivalents.................................... 6,387 (3,233) (42,625) Cash and cash equivalents, beginning of year.... 9,493 12,726 55,351 --------- -------- -------- Cash and cash equivalents, end of year.......... $ 15,880 $ 9,493 $ 12,726 ========= ======== ======== Supplemental disclosures of cash flow information: Interest paid.................................. $ 13,897 $ 9,785 $ 3,263 Income taxes paid.............................. 11,276 10,751 14,810 Non cash investing activities--business acquisitions................................... 16,027 5,110 9,879
The accompanying notes are an integral part of the consolidated financial statements. F-6 DAMES & MOORE GROUP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts) Note 1--Summary of Significant Accounting Policies: Basis of Presentation: The consolidated financial statements include the accounts of all majority- owned domestic and foreign subsidiaries. Investments in companies in which Dames & Moore Group (the "Company") does not have control, but has the ability to exercise significant influence over operating and financial policies are accounted for by the equity method. Other investments are accounted for by the cost method. All significant intercompany transactions and balances have been eliminated. Certain items in the prior years' financial statements have been reclassified to be consistent with the 1999 presentation. Use of Estimates in the Preparation of Consolidated Financial Statements: The preparation of the consolidated financial statements, in conformity with generally accepted accounting principles, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results may differ from the estimates and assumptions used in preparing the consolidated financial statements. Cash and Cash Equivalents: Cash and cash equivalents consist of unrestricted deposits with banks and highly liquid investments with an original maturity of three months or less. Marketable Securities: Marketable securities consist of equity and debt securities that are considered either available-for-sale or trading securities as defined by Statement of Financial Accounting Standard (SFAS) No. 115. Debt securities with maturity dates beyond a year are classified as Other Assets. Marketable securities are recorded at fair market value. Changes in unrealized gains and losses for trading securities are included in earnings; for available-for-sale securities, they are charged or credited as a component of accumulated other comprehensive income, net of tax. A decline in the fair value of an available- for-sale security below cost that is deemed other than temporary is charged to earnings. Management determines the appropriate classifications of investments at the time of purchase and reevaluates such designations as of each balance sheet date. Depreciation and Amortization: Property and equipment are depreciated on a straight-line basis over estimated useful lives ranging from 3 to 10 years and leasehold improvements are amortized over the lesser of estimated useful lives or the term of the lease. Goodwill of Acquired Businesses: The goodwill of acquired businesses represents the difference between the purchase cost and the fair value of the net assets of acquired businesses, and is being amortized on a straight-line basis over 3 to 40 years. The Company annually evaluates the realizability of goodwill based upon undiscounted forecasted operating earnings over the remaining amortization period for each investment having a significant goodwill balance. If an impairment in the value of the goodwill were to occur, the Company would reflect the impairment through a reduction in the carrying value of the goodwill based upon the estimated fair value of the investment. F-7 DAMES & MOORE GROUP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (In thousands, except share and per share amounts) Note 1--Summary of Significant Accounting Policies: (continued) Foreign Currency Translation: The functional currencies for the Company's significant foreign subsidiaries and branches are their respective local currencies. The assets and liabilities of these entities are translated into U.S. dollars using exchange rates in effect at period end. Revenue and expenses are translated at the average rates of exchange prevailing during the period. The resulting translation adjustments are reported as a component of accumulated other comprehensive income, net of tax. In situations where the functional currency is the U.S. dollar, translation adjustments are included in earnings. The Company enters into forward foreign currency exchange contracts to reduce the impact of foreign currency fluctuations on certain project revenues and costs, and the asset and liability positions of foreign subsidiaries. The terms of the currency derivatives are generally one year or less. Commencing in fiscal 1997 the gains or losses from these contracts are generally also reported as a separate component of shareholders' equity; previously they were included in earnings. Recognition of Revenue: The Company recognizes revenue generally at the time services are performed. On fixed price contracts, revenue is recognized on the basis of the estimated percentage of completion of services rendered. On cost reimbursement contracts, revenue is recognized as costs are incurred and includes applicable fees earned essentially in the proportion that costs incurred bear to total estimated final costs. Materials and subcontract costs reimbursed by clients are included in gross revenues. Anticipated losses are recognized in the period in which the losses are reasonably determinable. Substantially all unbilled receivables are expected to be collected within the next 12 months and retentions at the close of the respective project. Approximately $7,157 of unbilled receivables and contract retentions not collectible within 12 months have been classified as other assets. A major portion of contracts with the United States Government, are subject to audit and adjustment. Revenue has been recorded in amounts expected to be realized on final settlement. Income Taxes: The Company accounts for income taxes in accordance with SFAS No. 109, "Accounting for Income Taxes." Tax provisions are recorded at statutory rates for taxable items included in the consolidated statements of earnings regardless of the period such items are reported for tax purposes. Deferred income taxes are recognized for temporary differences between financial statement and income tax bases of assets and liabilities for which income tax effects will be realized in future years. Stock-Based Compensation: Prior to March 30, 1996, the Company accounted for its stock option plan in accordance with the provisions of Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations. As such, compensation expense would be recorded on the date of grant only if the current market price of the underlying stock exceeded the exercise price. On March 30, 1996, the Company adopted SFAS No. 123, "Accounting for Stock-Based Compensation," which permits entities to recognize as expense over the vesting period the fair value of all stock-based awards on the date of grant. Alternatively, SFAS No. 123 also allows entities to continue to apply the provisions of APB Opinion No. 25 and provide pro forma net income and proforma earning per share disclosures for employee stock option grants made in fiscal 1996 and future years as if the fair-value-based method defined in SFAS No. 123 had been applied. The Company has elected to continue to apply the provisions of APB Opinion No. 25 and provide the pro forma disclosure provisions of SFAS No. 123. F-8 DAMES & MOORE GROUP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (In thousands, except share and per share amounts) Note 1--Summary of Significant Accounting Policies: (continued) Earnings Per Share: Basic earnings per share is computed by dividing net earnings by the weighted-average number of common shares outstanding for the period. Diluted earnings per share adjusts the weighted-average number of common shares to reflect the potential dilution that could occur if restricted stock was unrestricted and the assumed exercise of the dilutive stock options outstanding. This change did not have a material impact on the computation of the earnings per share data. Comprehensive Income: The Financial Accounting Standards Board issued SFAS No. 130, "Reporting Comprehensive Income," which establishes new standards for reporting and display of comprehensive income and its components. Other comprehensive income refers to revenues, expenses, gains and losses that under generally accepted accounting principles are included in comprehensive income but are excluded from net earnings as these amounts are recorded directly as an adjustment to shareholders' equity. The Company adopted SFAS No. 130 in fiscal 1999. The Company's other comprehensive income is primarily comprised of foreign currency translation adjustments, unrealized gain or loss on securities, and adjustments made to recognize additional minimum liabilities associated with the Company's defined benefit pension plans. Reclassifications related to the components of other comprehensive income were not significant. Segment and Related Information: In 1997, the Financial Accounting Standards Board issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information," which established new standards for reporting information about operating segments in interim and annual financial statements, in accordance with the "management approach," The management approach designates the internal reporting that is used by management for making operating decisions and assessing performance as the source of the Company's reportable segments. The Company adopted SFAS No. 131 with its annual financial statements ending March 26, 1999 which did affect the disclosure of segment information but did not affect results of operations or the financial position of the Company. Recent Accounting Pronouncements: In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," which requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure all derivatives at fair value. Implementation of this statement is effective for fiscal years beginning after June 15, 1999 commencing with interim periods. The Company is in the process of determining the impact that the adoption of SFAS No. 133 will have on its financial position and results of operations. Fiscal Year: The Company uses a 52-53 week fiscal year ending the last Friday in March. The fiscal years were comprised of 52 weeks in 1999, 1998 and 1997. F-9 DAMES & MOORE GROUP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (In thousands, except share and per share amounts) Note 2--Acquisitions: On July 31, 1998, the Company acquired all of the membership interests of Radian International LLC ("Radian"), a multinational engineering, consulting and construction firm. The purchase price of $117 million in cash is subject to a post-closing adjustment which is currently under discussion with the seller. The purchase price in excess of the fair value of the net assets acquired, plus estimated office closure costs and severance costs are classified as goodwill and are being amortized over 40 years. The Company also completed thirteen smaller acquisitions during fiscal 1999 for $16,555 one of which included the issuance of 157,991 shares of the Company's treasury stock. Seven of the acquisitions have additional future payments contingent on future earnings. The total purchase cost in excess of fair value of identifiable assets acquired is classified as goodwill and is being amortized over the period of expected benefit, which range from 3 to 25 years. The Company also completed six smaller acquisitions during fiscal 1998 for $5,740 one of which included the issuance of 163,107 shares of the Company's treasury stock. Four of the acquisitions have additional future payments contingent on future earnings. The total purchase cost in excess of fair value of identifiable assets acquired is classified as goodwill and is being amortized over the period of expected benefit, which range from 3 to 20 years. On June 24, 1997, the Company acquired SRA Technologies, Inc., a professional services company providing specialized clinical laboratory services, contract research, analysis and management services in the areas of life sciences, environmental health service studies, and energy. The purchase price of $8,924 was paid in cash, and no additional payments are due. The purchase price in excess of the fair value of the identifiable assets acquired is classified as goodwill and is being amortized over 30 years. The following schedule summarizes the unaudited pro forma results of operations as if the acquisition of Radian had occurred at the beginning of fiscal 1998. Certain adjustments, such as amortization of goodwill, increased interest expense and income tax have been reflected.
1999 1998 -------- -------- Net revenues............................................. $693,000 $655,042 ======== ======== Earnings (loss) before extraordinary item................ $ (8,560) $ 7,618 ======== ======== Earnings (loss) per share before extraordinary item Basic.................................................. $ (.47) $ 0.43 ======== ======== Diluted................................................ $ (.47) $ 0.42 ======== ======== Net earnings (loss)...................................... $(11,410) $ 7,618 ======== ======== Earnings (loss) per share Basic.................................................. $ (.63) $ 0.43 ======== ======== Diluted................................................ $ (.63) $ 0.42 ======== ========
The pro forma information is intended to show how the acquisitions might have affected historical results of operations if the transactions had occurred at an earlier time. The pro forma results are not necessarily indicative of the periods presented or to be expected in the future. All acquisitions have been accounted for as purchases. Results of operations for all acquisitions have been included in the consolidated financial statements from the date of the respective acquisition. F-10 DAMES & MOORE GROUP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (In thousands, except share and per share amounts) Note 3--Investments in Debt and Equity Securities: The cost and estimated fair value of equity and debt securities by classification and major category follow. At March 26, 1999, $5,804 of debt and equity securities were classified as other assets. At March 27, 1998, $4,536 of the U.S. Government securities have a maturity greater than 1 year but within 5 years, and are classified as other assets.
Estimated Fair Cost Value ------ --------- At March 26, 1999: Available-for-sale: Debt securities.......................................... $2,126 $2,122 Equity securities........................................ 4,302 4,018 ------ ------ $6,428 $6,140 ====== ====== At March 27, 1998: Available-for-sale: Securities of the U.S. Government........................ $4,502 $4,536 Equity securities........................................ 1,018 1,031 ------ ------ $5,520 $5,567 ====== ======
Note 4--Investments in Affiliates: The Company through its subsidiary Dames & Moore Ventures has a 50% interest in Dames & Moore/ Brookhill L.L.C. (DMB) and affiliated companies. DMB was formed to acquire environmentally impaired properties and to remediate; to develop, redevelop, or reposition; and to maintain, operate and lease such properties until their disposition. DMB acquires an interest in assets by purchasing either a fee interest or a property-related mortgage note. At March 26, 1999, DMB holds 6 assets. Effective January 1, 1999, DMB agreed to complete the redevelopment and disposition of existing assets, and to cease the acquisition of any new assets. Acquisitions have been financed 75% with senior debt, 20% subordinated debt and 5% equity from DMB. The senior debt bears interest at London Interbank Offshore Rate (LIBOR) plus 275 basis points, and requires monthly payments of principal and interest. Cash flow from the properties, including sale proceeds will generally be distributed 80% to the subordinated lender and 20% to DMB, until the subordinated lender and DMB each receives its loan advances or capital contributions, and a return on investment of 20% per annum. Thereafter, cash flow will be distributed 50% to the subordinated lender and DMB. The borrowings are all due on December 31, 1999, but may be extended under certain terms and conditions. F-11 DAMES & MOORE GROUP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (In thousands, except share and per share amounts) Note 4--Investments in Affiliates: (continued) The Company accounts for its investment of $1,388 in fiscal 1999 and $3,144 in fiscal 1998 in DMB under the equity method of accounting. Condensed financial information follows:
March 26, March 27, 1999 1998 ---------- ---------- Mortgage notes receivables........................... $ 1,316 $ 4,137 Property............................................. 28,877 33,508 Other assets......................................... 3,426 17,038 ------- ------- Total assets....................................... $33,619 $54,683 ======= ======= Mortgages payable.................................... $27,676 $41,958 Other liabilities.................................... 4,191 6,726 Shareholders' equity................................. 1,752 5,999 ------- ------- Total liabilities and equity....................... $33,619 $54,683 ======= ======= Company's share of equity............................ $ 1,330 $ 3,000 ======= ======= Year Ended Year Ended March 26, March 27, 1999 1998 ---------- ---------- Revenues............................................. $ 209 $ 18 Costs and expenses................................... (2,280) (1,450) Net gain on asset dispositions....................... 733 1,061 ------- ------- Net loss........................................... $(1,338) $ (371) ======= ======= Company's share of net loss (investments and other income)............................................. $ (756) $ (179) ======= =======
Equity investments in other unconsolidated investments amounted to $9,131 at fiscal 1999 and $1,868 in fiscal 1998. F-12 DAMES & MOORE GROUP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (In thousands, except share and per share amounts) Note 5--Composition of Certain Financial Statement Captions:
1999 1998 -------- ------- Property and equipment, at cost: Computer equipment........................................ $ 54,713 $36,145 Office equipment and furniture............................ 18,064 13,719 Technical and field equipment............................. 27,780 13,482 Leasehold improvements.................................... 10,799 5,847 -------- ------- 111,356 69,193 Less accumulated depreciation and amortization............ 53,838 45,796 -------- ------- $ 57,518 $23,397 ======== ======= Other assets: Notes and other receivables............................... $ 26,705 $ 5,457 Other assets.............................................. 13,471 6,661 -------- ------- $ 40,176 $12,118 ======== ======= Accrued payroll and employee benefits: Salaries, wages and related taxes......................... $ 21,940 $12,901 Accrued vacation.......................................... 16,377 12,192 Accrued pension costs..................................... 617 1,271 -------- ------- $ 38,934 $26,364 ======== ======= Accrued expenses and other liabilities: Accrued insurance costs................................... $ 17,833 $ 6,913 Accrued occupancy......................................... 4,413 4,232 Accrued interest.......................................... 8,700 4,283 Deferred acquisition payments............................. 2,440 1,639 Restructuring and acquisition reserves.................... 10,174 -- Deferred income and client advances....................... 3,435 2,700 Other accrued expenses.................................... 3,987 837 Other liabilities......................................... 9,900 3,123 -------- ------- $ 60,882 $23,727 ======== =======
F-13 DAMES & MOORE GROUP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (In thousands, except share and per share amounts) Note 6--Long-Term Debt:
1999 1998 -------- -------- Long-term debt consists of the following: Term loan................................................ $265,000 $ -- Revolving lines of credit................................ 37,232 20,015 Other notes payable...................................... 348 1,609 Senior Notes: 6.54% Series A notes, due March 29, 2001................ -- 40,000 6.87% Series B notes, due March 29, 2003................ -- 30,000 6.92% Series C notes, due September 29, 2003............ -- 10,000 7.19% Series F notes, due December 16, 2004............. -- 10,000 7.23% Series G notes, due December 16, 2005............. -- 10,000 7.20% Series D notes, due March 29, 2006................ -- 5,000 7.25% Series E notes, due September 29, 2006............ -- 15,000 -------- -------- 302,580 141,624 Current portion of long-term debt......................... 18,433 9,614 -------- -------- $284,147 $132,010 ======== ========
The funding of the Radian acquisition resulted in the early extinguishment of the Company's Senior Notes and certain bank lines of credit. Pre-payment obligations and deferred financing costs resulted in a pretax charge of $4,587; after the tax benefit of $1,737, the extraordinary charge was $2,850, or ($.16) per share, basic and diluted. The Company's amended long-term debt facility includes a term commitment of $265,000 and a revolving commitment of $75,000. Interest is charged under several options, including a base rate or at LIBOR, plus the applicable margin, at the Company's option. Interest is payable quarterly for base rate borrowings and for LIBOR borrowings the earlier of the last day of the interest rate period or three months from the first day of the interest rate period. The effective interest rate was 6.8% at March 26, 1999. The agreement contains limitations on additional indebtedness, sales of assets, acquisitions and capital expenditures, as well as maintenance of certain financial ratios. The Company was in compliance with all such ratios at March 26, 1999. The term loan requires quarterly principal payments commencing on June 30, 1999, with $40,000 of the unpaid balance due on June 30, 2004 and the remaining unpaid balance of $94,500 due in full on December 31, 2004. The revolving commitment matures on June 30, 2004. Furthermore, mandatory principal pre-payments or commitment reductions are required in the event of the occurrence of certain transactions, as defined in the agreement. As of March 26, 1999, under these lines, the Company had borrowings of $302,232, and standby letters of credit totaling $14,156 principally for project performance, advance payment guarantees and the Company's domestic insurance program. The fair value of the Company's long-term debt approximates carrying value based on current rates offered to the Company for debt of the same remaining maturities. Annual maturities of long-term debt over the next five fiscal years are as follows: 2000--$18,433; 2001--$16,147; 2002--$26,000; 2003--$36,000; and 2004--$41,000. F-14 DAMES & MOORE GROUP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (In thousands, except share and per share amounts) Note 7--Foreign Currency Contracts: In the past, the Company has entered into foreign exchange forward contracts, all having maturities of less than one year. The amounts noted below serve solely as a basis for the calculation of payment streams to be exchanged. The Company is exposed to credit loss in the event of nonperformance by counter parties for these contracts. The Company selects major international banks and financial institutions as counter parties to manage this credit risk. Transaction gains and losses including the effect of foreign currency contracts and currency exchange rate conversion were a gain of $3 in 1999, a loss of $206 in 1998, and a loss of $222 in 1997. The Company did not have any open foreign currency contracts at March 26, 1999.
1998 ------ Australian dollars.................................................. $1,000 United States dollars............................................... $ 644
Note 8--Fair Values of Financial Instruments: The carrying amount of marketable securities is based on quoted market prices at the reporting date for those investments and as such equal fair value. The fair value of the Company's long-term debt is estimated based on current rates offered to the Company for debt of the same remaining maturities, which approximates carrying value. All other financial instruments bear relatively short-term maturities, and accordingly, the carrying amount of these investments approximates fair value. Note 9--Income Taxes: Income taxes consist of the following:
1999 1998 1997 ------- ------- ------- U.S. Federal taxes: Current.......................................... $ 5,643 $ 9,560 $11,761 Deferred......................................... (5,583) (478) (1,736) ------- ------- ------- 60 9,082 10,025 State and local taxes: Current.......................................... 1,117 1,706 1,841 Deferred......................................... (749) (115) (166) ------- ------- ------- 368 1,591 1,675 Non-U.S. taxes: Current.......................................... 4,003 3,541 1,249 Deferred......................................... (302) (26) -- ------- ------- ------- 3,701 3,515 1,249 ------- ------- ------- $ 4,129 $14,188 $12,949 ======= ======= =======
The sources of earnings before income taxes consist of the following:
1999 1998 1997 ------ ------- ------- U.S. earnings before income taxes.................... $3,937 $27,438 $31,178 Non-U.S. earnings before income taxes................ 2,739 6,080 311 ------ ------- ------- Earnings before income taxes....................... $6,676 $33,518 $31,489 ====== ======= =======
F-15 DAMES & MOORE GROUP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (In thousands, except share and per share amounts) Note 9--Income Taxes: (continued) Income taxes differ from amounts computed by applying the statutory U.S. Federal income tax rate of 35% to earnings before income taxes as follows:
1999 1998 1997 ------ ------- ------- Statutory U.S. Federal income tax................... $2,337 $11,731 $11,021 State income taxes, net of Federal benefit.......... 240 1,034 1,089 Goodwill............................................ 682 653 499 Foreign operations.................................. 1,009 538 603 Other............................................... (139) 232 (263) ------ ------- ------- Total income taxes................................ $4,129 $14,188 $12,949 ====== ======= =======
Deferred income taxes result from temporary differences in the timing of the recognition of revenues and expenses for financial statement and tax return purposes. Management believes that it is more likely than not, that the results of future operations will generate sufficient taxable income to realize the deferred tax assets. The significant components of deferred taxes were as follows:
1999 1998 ------- ------- Current deferred net tax assets: Compensation expense...................................... $ 6,174 $ 3,975 Litigation reserve........................................ 788 410 Accrued expenses.......................................... 2,367 171 Allowance for doubtful accounts........................... 1,353 918 Other..................................................... 529 433 ------- ------- Total current deferred tax assets....................... 11,211 5,907 ------- ------- Cash to accrual adjustments from acquisitions............. 60 1,106 Other..................................................... 446 498 ------- ------- Total current deferred tax liabilities.................. 506 1,604 ------- ------- Net current deferred tax assets......................... $10,705 $ 4,303 ======= ======= Noncurrent deferred net tax liabilities: Foreign currency translation.............................. $ 1,502 836 Foreign tax credits....................................... 1,301 -- Other..................................................... 1,878 735 ------- ------- Total noncurrent deferred tax assets.................... 4,681 1,571 ------- ------- Depreciation and amortization............................. 3,457 2,481 Other..................................................... 1,020 569 ------- ------- Total noncurrent deferred tax liabilities............... 4,477 3,050 ------- ------- Net noncurrent deferred tax assets (liabilities)........ $ 204 $(1,479) ======= =======
F-16 DAMES & MOORE GROUP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (In thousands, except share and per share amounts) Note 10--Lease Commitments: The Company is obligated under various noncancelable leases for office facilities, furniture and equipment. Certain leases contain renewal options, escalation clauses and certain other operating expenses of the properties. In the normal course of business, leases that expire are expected to be renewed or replaced by leases for other properties. The following is a schedule by year of future rental payments required under operating leases that have initial or remaining noncancelable lease terms in excess of one year as of March 26, 1999:
Fiscal Year(s) Total -------------- -------- 2000.......................................................... $28,890 2001.......................................................... 25,934 2002.......................................................... 18,591 2003.......................................................... 13,871 2004.......................................................... 9,164 Thereafter.................................................... 11,455 -------- Total minimum lease payments................................ $107,905 ========
The following schedule shows the composition of total rental expenses for all operating leases:
1999 1998 1997 ------- ------- ------- Total rental expense............................. $32,986 $24,365 $23,617 Less sublease rentals.......................... 319 140 324 ------- ------- ------- $32,667 $24,225 $23,293 ======= ======= =======
Note 11--Contingencies: The Company in the ordinary course of business is a defendant in various lawsuits involving claims typically filed against the engineering and consulting professions, primarily alleging professional errors or omissions. The Company through a wholly owned subsidiary insures the Company's risks for professional liability, workers compensation, and general and automobile claims up to certain policy limits. Claims in excess of these limits are covered by unrelated insurance carriers. Management makes estimates and assumptions that affect the reported amount of liability and the disclosure of contingent liabilities. As claims develop, it is possible that the ultimate results of these claims may differ from management's estimates. In the opinion of management, based upon information it presently possesses, the resolution of these claims will not have a material adverse effect on the Company's consolidated financial position or results of operations. Note 12--Stock Option Plans: Long-Term Incentive Plan The Company's Amended and Restated 1991 Long-Term Incentive Plan (the "Plan"), which provides for the granting of stock options and the sale of restricted stock to officers and key employees of the Company, has authorized and reserved a total of 2,700,000 shares of common stock for issuance under this Plan. Stock options granted or restricted stock sold under the Plan may be granted or sold at a price and for such terms as determined by the Compensation Committee of the Board of Directors. Restricted stock sales are offered to newly elected officers and existing officers, these shares are subject to restrictions on transfer and risk of forfeiture until earned by continued employment. Should employment terminate before ownership vests, shares are repurchased by the Company at the lesser of the price originally F-17 DAMES & MOORE GROUP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (In thousands, except share and per share amounts) Note 12--Stock Option Plans: (continued) paid for the stock or its market value on the date of termination. During the restriction period, holders have the rights of shareholders, including the right to vote and receive dividends, but cannot transfer ownership. Restricted stock is generally being issued at 67% of market value on the date of issuance for newly elected officers and at no cost to existing officers, the stock vests 3 years after the issue date. These restricted stock sales give rise to unearned compensation that is amortized over the vesting period. Through March 26, 1999, 290,863 shares of restricted stock have been issued under the Plan.
1999 1998 1997 ------------------- ------------------- ------------------- Restricted stock issued................. 65,891 23,300 37,751 Weighted-average fair value of restricted stock granted during the year............... $12.62 $12.88 $11.13 Non-qualified stock options are granted at fair value at the date of grant and generally vest 25% per year commencing on the first anniversary after the grant date. Options expire 10 years after the grant date, and all awards need to be made by May 22, 2005. 1999 1998 1997 ------------------- ------------------- ------------------- Weighted Weighted Weighted Average Average Average Exercise Exercise Exercise Shares Price Shares Price Shares Price --------- -------- --------- -------- --------- -------- Outstanding at beginning of the year............ 1,593,009 $16.08 1,678,856 $16.09 1,517,823 $16.87 Granted................. 286,039 12.45 8,000 12.88 276,554 11.24 Exercised............... (13,373) 11.85 (6,902) 11.78 (2,737) 12.00 Canceled................ (85,215) 15.90 (86,945) 16.17 (112,784) 14.83 --------- --------- --------- Outstanding at the end of the year............ 1,780,460 $15.54 1,593,009 $16.08 1,678,856 $16.09 ========= ========= ========= Exercisable at year- end.................... 1,255,314 $16.99 1,166,549 $17.69 970,941 $18.58 Weighted-average fair value of options granted during the year................... $ 4.89 $ 5.46 $ 4.40
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions used for grants in 1999, 1998 and 1997, respectively: expected volatility of 27.91%, 28.28%, and 27.15%; risk-free interest rates of 5.53%, 6.81%, and 6.24%; expected lives of 6, 6, and 5.6 years and no dividends. F-18 DAMES & MOORE GROUP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (In thousands, except share and per share amounts) Note 12--Stock Option Plans: (continued) Directors' Stock Option Plan The Company's amended and restated 1995 Stock Option Plan for Non-Employee Directors of the Company (the "Plan") has 100,000 shares of common stock authorized for issuance under the Plan. Shares of common stock awarded under this Plan are non-qualified stock options, are granted at fair value at the date the option is granted, vest and become exercisable in three equal annual installments commencing on the first anniversary after the grant date. Options expire 10 years after the grant date.
1999 1998 1997 --------------- --------------- --------------- Weighted Weighted Weighted Average Average Average Exercise Exercise Exercise Shares Price Shares Price Shares Price ------ -------- ------ -------- ------ -------- Outstanding at beginning of the year.................. 40,000 $13.20 23,000 $12.97 15,000 $13.63 Granted.................... 10,000 12.63 17,000 13.50 8,000 $11.75 Exercised.................. -- -- -- -- -- -- ------ ------ ------ Outstanding at the end of the year.................. 50,000 $13.08 40,000 $13.20 23,000 $12.97 ====== ====== ====== Exercisable at year-end.... 25,995 $13.21 12,664 $13.23 4,998 $13.63 Weighted-average fair value of options granted during the year.................. $ 4.91 $ 5.59 $ 4.90
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions used for grants in 1999, 1998, and 1997, respectively: expected volatility of 27.82%, 28.51%, and 27.97%; risk-free interest rates of 5.4%, 6.3%, and 6.4%; expected lives of 6 years and no dividends. The following table summarizes both stock option plans' information on stock options outstanding at March 26, 1999:
Options Outstanding Options Exercisable -------------------------------- ------------------------ Weighted Average Weighted Weighted Number Remaining Average Number Average Range of Outstanding Contractual Exercise Exercisable Exercise Exercise Prices at 3/26/99 Life Price at 3/26/99 Price --------------- ----------- ----------- -------- ----------- -------- $11.13 to $13.63.. 977,755 7.3 $12.01 428,604 $11.88 $16.65 to $19.50.. 589,818 4.5 18.96 589,818 18.96 $20.00 to $21.75.. 262,887 3.0 20.53 262,887 20.53
Pro-Forma Disclosure The Company continues to apply APB Opinion No. 25 in accounting for both of its stock-based compensation plans. Accordingly, no compensation cost has been recognized for the stock option plans. There was no material difference in the Company's earnings or earnings per share had the stock option plans determined compensation cost based on the fair value at the grant dates consistent with the method of SFAS No. 123. F-19 DAMES & MOORE GROUP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (In thousands, except share and per share amounts) Note 13--Employee Retirement Plans: The Company and its domestic subsidiaries have several defined contribution retirement plans covering substantially all of the Company's U.S. employees with a minimum service requirement. Depending upon the plan, eligible employees can invest up to 15% of their earnings; certain plans will match by an equal amount from the Company generally up to the first 3% to 4.5% of the employee's contribution. Employer matching contributions for fiscal years 1999, 1998, and 1997 were $6,641, $2,930 and $3,315, respectively. Profit- sharing contributions to all plans are currently discretionary. However, prior to January 1, 1997 the largest of the plans had a profit-sharing contribution that was computed in accordance with a formula (set forth in the Plan) to provide for an annual contribution of 6% of pre-tax earnings, as defined. The contributions for 1999, 1998, and 1997 were $218, $1,381 and $1,684, respectively. Certain of the Company's foreign subsidiaries have trusteed retirement plans covering substantially all of their employees. These pension plans are not required to report to government agencies pursuant to ERISA and do not otherwise determine the actuarial value of accumulated benefits or net assets available for benefits. The aggregate pension expense for these plans for fiscal years 1999, 1998 and 1997 were $1,711, $1,498, and $1,719, respectively. The Company, upon acquiring Radian, assumed certain of Radian's defined benefit pension plans, including several post-retirement benefit plans. These plans cover a select group of Radian employees and former employees who will continue to be eligible to participate in the plans. The defined benefit plans include a Supplemental Executive Retirement Plan (SERP) and Salary Continuation Agreement (SCA) which are intended to supplement retirement benefits provided by other benefit plans upon the participant's meeting minimum age and years of service requirements. The plans are unfunded, however, at March 26, 1999, the Company had designated and deposited $6,309 in a trust account for the SERP. Radian also has a post- retirement benefit program that provides certain medical insurance benefits to participants upon meeting minimum age and years of service requirements, this plan is also unfunded. The Company recorded an additional minimum liability net of tax of $1,057 at March 26, 1999 as a component of comprehensive income. This amount represents the excess of the accumulated benefit obligations over the fair value of plan assets to the extent possible because the asset recognized may not exceed the amount of unrecognized prior service cost. Management's estimate of accumulated benefits for the SERP and SCA as of March 26, 1999 were as follows: Actuarial present value of accumulated benefits: Vested.......................................................... $10,464 Non-vested...................................................... 857 ------- Total......................................................... $11,321 =======
F-20 DAMES & MOORE GROUP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (In thousands, except share and per share amounts) Note 13--Employee Retirement Plans: (continued) The weighted-average discount rate used for the period was 6.75%.
1999 ------- Change in benefit obligation: Benefit obligation at August 1, Acquisition..................... $ 9,787 Service Cost.................................................... 57 Interest cost................................................... 451 Amortization of unrecognized service cost....................... 20 ------- Net period cost............................................... 528 ------- Acturial loss................................................... 1,814 Benefit payments................................................ (808) ------- Benefit obligation at March 26, 1999............................ $11,321 =======
The funded status of the plans at March 26, 1999:
1999 ------- Projected benefit obligation.................................. $11,321 Plan assets available for benefits............................ -- ------- Deficiency of assets over projected benefit obligations....... 11,321 Unrecognized actuarial loss................................... 1,814 Unrecognized prior service costs.............................. -- ------- Accrued pension liability..................................... $ 9,507 ======= The funded status of the post-retirement program at March 26, 1999 is as follows: Accumulated post-retirement benefit obligation ("APBO"): Retirees.................................................... $ 200 Active plan participants, fully eligible.................... 134 Active plan participants, not yet fully eligible............ 542 ------- Total APBO................................................ $ 876 Unrecognized net loss from past experience different from that assumed and from changes in assumptions...................... (79) ------- Accrued post-retirement benefits.............................. $ 797 =======
The weighted-average discount rate used in determining the APBO was 6.75% as of December 31, 1998. F-21 DAMES & MOORE GROUP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (In thousands, except share and per share amounts) Note 14--Segment and Related Information: Management has organized the Company by type of services provided. The general engineering and consulting division ("GE&C") provides environmental and specialized engineering services throughout the world to private sector clients and governmental agencies. Construction services division ("CSD") provides program, project and construction management services for public sector projects of all sizes and complexity. The process and chemical engineering division ("P&CE") provides process engineering and design services to the oil and gas, petrochemical, pulp and paper industries, and to the federal government. Transportation service division ("TSD") provides project planning, design and construction-phase engineering services for the transportation and infrastructure projects throughout the United States. Specialty companies ("SC") include other business units which provide services to both private sector clients and government agencies. Accounting policies for each of the reportable segments are the same as those described in Note 1, Notes to Consolidated Financial Statements. Management evaluates the performance of its business segments based on earnings from operations before acquisition-related restructuring and other charges. The following table shows summarized financial information on the Company's reportable segments. Included in the "Other" column are corporate-related items, results of shared operations, income and expense items from reportable segments not reported to management, and eliminations of inter-segment sales which are not significant.
GE&C CSD P&CE TSD SC Other Total 1999: -------- -------- -------- ------- ------- -------- -------- Net revenues from U.S. Government agencies and departments....... $ 36,967 $ 38,027 $ 34,721 $ 275 $ 4,838 $ -- $114,828 Other net revenues..... 228,813 139,563 83,958 55,651 16,961 (428) 524,518 Segment profit (loss).. 40,314 10,352 10,638 5,089 (25) (14,166) 52,202 Total assets........... 182,080 241,663 115,500 38,114 46,851 10,371 634,579 Total accounts receivable............ 125,932 122,117 32,743 25,259 9,732 (2,405) 313,378 Depreciation and amortization.......... 6,069 6,507 2,482 1,660 1,181 445 18,344 GE&C CSD P&CE TSD SC Other Total 1998: -------- -------- -------- ------- ------- -------- -------- Net revenues from U.S. Government agencies and departments....... $ 35,225 $ 6,559 $ 16,377 $ 791 $ 7,488 $ -- $ 66,440 Other net revenues..... 230,601 87,414 36,060 46,476 15,670 (157) 416,064 Segment profit (loss).. 47,666 5,412 1,759 3,793 1,029 (16,846) 42,813 Total assets........... 162,336 103,291 46,789 31,381 34,857 7,707 386,361 Total accounts receivable............ 115,205 48,184 11,878 19,114 8,702 (949) 202,134 Depreciation and amortization.......... 6,228 2,639 1,675 1,613 1,130 531 13,816 GE&C CSD P&CE TSD SC Other Total 1997: -------- -------- -------- ------- ------- -------- -------- Net revenues from U.S. Government agencies and departments....... $ 41,931 $ 3,647 $ 16,284 $ 1,321 $ -- $ -- $ 63,183 Other net revenues..... 220,253 77,919 36,480 42,937 13,637 (1) 391,225 Segment profit (loss).. 39,402 2,628 3,960 3,428 1,372 (11,278) 39,512 Total assets........... 145,779 88,147 49,042 29,037 28,425 17,852 358,282 Total accounts receivable............ 100,878 34,843 15,427 17,785 7,576 (797) 175,712 Depreciation and amortization.......... 6,078 2,239 1,560 1,458 869 521 12,725
F-22 DAMES & MOORE GROUP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (In thousands, except share and per share amounts) The next table provides a reconciliation of segment profit to consolidated earnings before income taxes and extraordinary items.
March 26, March 27, March 28, 1999 1998 1997 --------- --------- --------- Segment profit ............................ $ 52,202 $ 42,813 $39,512 Acquisition-related restructuring & other charges................................... (28,276) -- (2,651) Investment & other income.................. 1,231 997 2,014 Interest expense........................... (18,481) (10,292) (7,386) -------- -------- ------- Earnings before income taxes............... $ 6,676 $ 33,518 $31,489 ======== ======== =======
The company provides services throughout the world. Services to other countries may be performed within the United States, generally net revenues are classified within the geographic area where the services were performed. Selected geographic information is summarized as follows:
United Other States Countries Total -------- --------- -------- Net revenues............................... 1999 $558,511 $80,835 $639,346 1998 412,751 69,753 482,504 1997 388,671 65,737 454,408 Earnings from operations................... 1999 $ 21,819 $ 2,107 $ 23,926 1998 34,756 8,057 42,813 1997 34,531 2,330 36,861 Identifiable assets........................ 1999 $553,398 $81,181 $634,579 1998 329,256 57,105 386,361 1997 304,847 53,435 358,282
Note 15--Earnings Per Share (EPS): The following is a reconciliation of the weighted average shares outstanding used for computing basic and diluted EPS.
1999 1998 1997 ---------- ---------- ---------- Weighted average shares--Basic EPS......... 18,237,000 17,890,000 20,287,000 Dilutive securities: Restricted stock......................... 65,000 127,000 124,000 Stock options............................ 17,000 31,000 35,000 ---------- ---------- ---------- Weighted average shares--Diluted EPS....... 18,319,000 18,048,000 20,446,000 ========== ========== ==========
Stock options to purchase 1,144,000 941,000 and 965,000 shares of common stock as of March 26, 1999, March 27, 1998 and March 28, 1997, respectively, were outstanding but were not included in the computation of diluted EPS because the stock options' exercise price was greater than the average market price of the common shares. F-23 DAMES & MOORE GROUP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (In thousands, except share and per share amounts) Note 16--Stock Repurchases: The Company's Board of Directors authorized the Company to purchase up to 2,500,000 shares of its common stock on the open market. During fiscal 1999 the Company reacquired 67,000 shares of its common stock. As of March 26, 1999 the Company had repurchased 1,914,000 shares and reissued 1,132,000 shares. The Company may continue to purchase shares on the open market. Note 17--Common and Preferred Stock: The Company adopted a Shareholder's Rights Agreement on March 28, 1997 granting, for each outstanding share of common stock, one stock purchase right (each a "Right"). Each Right entitles the common stockholder to purchase, in certain circumstances generally relating to a change in control of the Company, one two-hundredth of a share of the Company's Series A Junior Participating Preferred Stock, par value $0.01 per share (the "Series A Preferred Stock") at the exercise price of $65 per share, subject to adjustment. Alternatively, the Right holder may purchase common stock of the Company having a market value equal to two times the exercise price, or may purchase shares of common stock of the acquiring corporation having a market value equal to two times the exercise price. The Series A Preferred Stock confers to its holders rights as to dividends, voting and liquidation that are in preference to common stockholders. The Rights are nonvoting, are not presently exercisable and currently trade in tandem with the common shares. The Rights may be redeemed at $0.01 per Right by the Company in accordance with the Rights Agreement. The Rights will expire on March 28, 2007, unless earlier exchanged or redeemed. The Rights Agreement was amended on May 5, 1999 excepting from the definition of a change in control of the Company, the contemplated Agreement and Plan of Merger of the Company with URS Corporation and Demeter Acquisition Corporation. Note 18--Acquisition Restructuring and Other Charges: During the second quarter of fiscal 1999, the Company took a charge for purchased in-process research and development technology that had not reached technological feasibility of $15,271. Additionally, the Company began consolidation of certain facilities and operations primarily as a result of the Radian acquisition, resulting in a charge of $9,213. This charge consisted of $2,699 for lease termination, $3,635 for severance costs, and $2,879 for unamortized goodwill and other costs related to the closure of certain business units that were operating at a loss and were duplicative of Radian's capabilities. Other charges also included $3,792 for consolidation of certain of the Company's operational activities and other job related costs. Approximately $5,892 remains to be expended at March 26, 1999 to complete the restructuring. In fiscal 1997 the Company determined it was necessary to restructure its international operations, and construction and project management subsidiary. Included in the 1997 restructuring costs are employee severance and termination costs, costs associated with office closures, losses on work in progress where there was extensive employee turnover and losses on other current assets, all of which impact the Company's working capital. The remaining balance represents losses on long-term assets. F-24 DAMES & MOORE GROUP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (In thousands, except share and per share amounts) Note 19--Subsequent Events: On May 5, 1999, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") with URS Corporation ("URS"). The Merger Agreement provides that URS will make a tender offer to purchase 100% of the outstanding common stock of the Company. Shares validly tendered shall be entitled to receive $16.00 in cash. Consummation of the Tender Offer and the merger is subject to certain conditions as specified in the Merger Agreement. F-25 Selected Quarterly Financial Data (Unaudited) (In thousands, except per share amounts):
First Second Third Fourth Quarter Quarter Quarter Quarter -------- -------- -------- -------- 1999: Gross revenues........................ $189,150 $263,606 $287,434 $289,777 Net revenues.......................... 128,804 152,987 172,298 185,257 Earnings (loss) from operations....... 11,063 (14,521) 14,089 13,295 Net earnings (loss)................... 4,687 (15,139) 5,291 4,858 ======== ======== ======== ======== Earnings (loss) per share--Basic...... $ 0.26 $ (0.83) $ 0.29 $ 0.27 ======== ======== ======== ======== Earnings (loss) per share--Diluted.... $ 0.26 $ (0.83) $ 0.29 $ 0.27 ======== ======== ======== ======== Weighted average number of shares-- Basic................................ 18,262 18,252 18,218 18,215 ======== ======== ======== ======== Weighted average number of shares-- Diluted.............................. 18,336 18,252 18,299 18,291 ======== ======== ======== ======== 1998: Gross revenues........................ $171,771 $176,214 $174,974 $180,943 Net revenues.......................... 119,785 123,254 118,725 120,740 Earnings from operations.............. 10,556 10,913 11,244 10,100 Net earnings.......................... 4,685 5,151 5,153 4,341 ======== ======== ======== ======== Earnings per share--Basic............. $ 0.26 $ 0.29 $ 0.29 $ 0.24 ======== ======== ======== ======== Earnings per share--Diluted........... $ 0.26 $ 0.28 $ 0.29 $ 0.24 ======== ======== ======== ======== Weighted average number of shares-- Basic................................ 17,890 17,884 18,873 17,914 ======== ======== ======== ======== Weighted average number of shares-- Diluted.............................. 18,041 18,047 18,031 18,074 ======== ======== ======== ========
F-26 DAMES & MOORE GROUP SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS (In thousands) Fiscal Years Ended March 26, 1999, March 27, 1998 and March 28, 1997
Additions --------------------- Balance at Charged to Charged to Balance at beginning costs and other end of Description of year expenses accounts Deductions year ----------- ---------- ---------- ---------- ---------- ---------- Year Ended March 26, 1999 Allowance for doubtful accounts.............. $3,408 $1,456 $5,210(1) $(548) $9,526 ====== ====== ====== ===== ====== Year Ended March 27, 1998 Allowance for doubtful accounts.............. $3,001 $ 915 $ -- $(508) $3,408 ====== ====== ====== ===== ====== Year Ended March 28, 1997 Allowance for doubtful accounts.............. $1,886 $1,208 $ 465(1) $(558) $3,001 ====== ====== ====== ===== ======
- -------- (1)Amount recorded on books of acquired entities at date of acquisition. F-27 -----END PRIVACY-ENHANCED MESSAGE-----