-----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, WQqatKzSS0VY4pbQweNYOYAbyErsHcoPDiwsFSQuCz4pLjxdMAhFeAOnhfDOx4QS yidcBQA4mCYpwQeOCXoWVA== 0000912057-99-008027.txt : 19991203 0000912057-99-008027.hdr.sgml : 19991203 ACCESSION NUMBER: 0000912057-99-008027 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19991117 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19991202 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TODHUNTER INTERNATIONAL INC CENTRAL INDEX KEY: 0000098544 STANDARD INDUSTRIAL CLASSIFICATION: MALT BEVERAGES [2082] IRS NUMBER: 591284057 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-20624 FILM NUMBER: 99767849 BUSINESS ADDRESS: STREET 1: 222 LAKEVIEW AVE STE 1500 CITY: WEST PALM BEACH STATE: FL ZIP: 33401 BUSINESS PHONE: 4076558977 MAIL ADDRESS: STREET 1: 222 LAKEVIEW AVE STE 1500 STREET 2: 222 LAKEVIEW AVE STE 1500 CITY: WEST PALM BEACH STATE: FL ZIP: 33401 8-K 1 8-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ----------------------- FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): NOVEMBER 17, 1999 TODHUNTER INTERNATIONAL, INC. ----------------------------- (Exact name of registrant as specified in its charter) Delaware 1-13453 59-1284057 - ----------------------- ---------------------- -------------------- (State of Incorporation) (Commission File Number) (IRS Employer Identification No.) 222 Lakeview Avenue, Suite 1500, West Palm Beach, Florida 33401 - -------------------------------------------------------------------------------- (Address of principal executive office) (Zip Code) Registrant's telephone number, including area code: (561) 655-8977 -------------- ---------------------------------------------------------- (Former Name or Former Address, if Changed Since Last Report) TODHUNTER INTERNATIONAL, INC. FORM 8-K CURRENT REPORT ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS. On November 17, 1999, Todhunter International, Inc., a Delaware corporation ("Todhunter"), completed the acquisition of substantially all of the assets of Adams Wine Company d/b/a Monarch Wine Company of Georgia, a Georgia corporation ("Monarch"), pursuant to the terms and conditions of that certain Asset Purchase Agreement, dated September 27, 1999, by and among Todhunter, Monarch, Howard J. Weinstein, David Paszamant, Jay Paszamant and Matthew Paszamant. The aggregate purchase price paid by Todhunter in connection with the acquisition was approximately $23.5 million in cash, subject to a post-closing purchase price adjustment. The aggregate purchase price was determined through arms'-length negotiations between the parties. Monarch specializes in the manufacture of wines, including custom blended wines and cooking wines for the food industry and base wines for producers of vinegar and cordials. Todhunter intends to continue the historical business of Monarch through Todhunter's existing facilities. Howard J. Weinstein, President and a major stockholder of Monarch, has agreed to become the President of the Monarch Wine Division of Todhunter. The funds utilized by Todhunter for completion of the acquisition were financed pursuant to a $71 million credit facility provided by SOUTHTRUST BANK, National Association, as Administrative Agent and Funding Agent, and a syndicate of lenders. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. (a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED. No financial statements of Monarch are provided in this Current Report on Form 8-K. Such financial statements will be provided when they become available, and prior to the expiration of 60 days from the date on which this Form 8-K must be filed. (b) PRO FORMA FINANCIAL INFORMATION. No pro forma financial information is provided in this Current Report on Form 8-K. Such pro forma financial information will be provided when it becomes available, and prior to the expiration of 60 days from the date on which this Form 8-K must be filed. (c) EXHIBITS. See Exhibit Index. 2 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. TODHUNTER INTERNATIONAL, INC. Date: NOVEMBER 29, 1999 By: /s/ A. Kenneth Pincourt, Jr. ---------------------- --------------------------------------- A. Kenneth Pincourt, Jr. Chairman and Chief Executive Officer 3 EXHIBIT INDEX
Exhibit No. Description - ----------- ------------ 2.1 Asset Purchase Agreement, dated September 27, 1999, by and among Todhunter, Monarch, Howard J. Weinstein, David Paszamant, Jay Paszamant and Matthew Paszamant. Todhunter agrees to furnish supplementally a copy of any omitted schedule of the Asset Purchase Agreement to the Securities and Exchange Commission upon request. 99.1 Credit Agreement, dated as of November 17, 1999, by and among Todhunter SOUTHTRUST BANK, National Association, as Administrative Agent and Funding Agent, and each of the Financial Institutions set forth on EXHIBIT A attached thereto, together with those assignees pursuant to Section 13.06 thereof. 99.2 Copy of Todhunter's Press Release issued November 18, 1999.
4 EX-2.1 2 EXHIBIT 2.1 ASSET PURCHASE AGREEMENT AMONG TODHUNTER INTERNATIONAL, INC. AND ADAMS WINE COMPANY (D/B/A/ MONARCH WINE COMPANY OF GEORGIA) AND HOWARD J. WEINSTEIN, DAVID PASZAMANT, JAY PASZAMANT AND MATTHEW PASZAMANT TABLE OF CONTENTS
PAGE ---- ARTICLE I DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 ARTICLE II SALE AND PURCHASE OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . 10 2.1 Sale and Purchase of the Assets. . . . . . . . . . . . . . . . . . . . 10 2.2 Excluded Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 2.3 Assumption of Liabilities. . . . . . . . . . . . . . . . . . . . . . . 12 2.4 No General Assumption of Liabilities.. . . . . . . . . . . . . . . . . 12 ARTICLE III PURCHASE PRICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 3.1 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 3.2 Post-Closing Adjustments . . . . . . . . . . . . . . . . . . . . . . . 14 3.3 Allocation of Purchase Price and Assumed Liabilities . . . . . . . . . 15 ARTICLE IV SELLER'S AND PRINCIPALS' REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . 15 4.1 Organization and Good Standing . . . . . . . . . . . . . . . . . . . . 15 4.2 Authority; No Conflict.. . . . . . . . . . . . . . . . . . . . . . . . 15 4.3 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 4.4 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . 16 4.5 Books and Records. . . . . . . . . . . . . . . . . . . . . . . . . . . 17 4.6 Title to and Character of Assets; Facility Lease; Real Property. . . . 17 4.7 Receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 4.8 Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 4.9 No Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . 18 4.10 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 4.11 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . 19 4.12 Employee Benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . 19 4.13 Compliance with Legal Requirements; Governmental Authorizations. . . . 21 4.14 Legal Proceedings; Orders. . . . . . . . . . . . . . . . . . . . . . . 22 4.15 Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 4.16 Absence of Certain Changes and Events. . . . . . . . . . . . . . . . . 23 4.17 Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 4.18 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 4.19 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . . . 26 4.20 Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 4.21 Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . . . 28 4.22 Relationships with Related Persons . . . . . . . . . . . . . . . . . . 29 4.23 Conditions Affecting Seller. . . . . . . . . . . . . . . . . . . . . . 29 4.24 No Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 i ARTICLE V REPRESENTATIONS AND WARRANTIES OF PURCHASER. . . . . . . . . . . . . . . . . 30 5.1 Organization and Good Standing . . . . . . . . . . . . . . . . . . . . 30 5.2 Authority; No Conflict . . . . . . . . . . . . . . . . . . . . . . . . 30 5.3 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 5.4 Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 5.5 Financial Ability. . . . . . . . . . . . . . . . . . . . . . . . . . . 31 5.6 Business Operation.. . . . . . . . . . . . . . . . . . . . . . . . . . 31 5.7 Year 2000. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 ARTICLE VI COVENANTS OF SELLER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 6.1 Operation of the Business. . . . . . . . . . . . . . . . . . . . . . . 31 6.2 Access and Investigation; HSR Filing by Purchaser and Seller . . . . . 33 6.3 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 6.4 Negative Covenant. . . . . . . . . . . . . . . . . . . . . . . . . . . 34 6.5 Required Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . 34 6.6 No Shop. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 6.7 Consulting Arrangement . . . . . . . . . . . . . . . . . . . . . . . . 35 6.8 Tax Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 ARTICLE VII COVENANTS OF PURCHASER . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 7.1 Required Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . 35 7.2 Bulk Transfer Compliance.. . . . . . . . . . . . . . . . . . . . . . . 35 ARTICLE VIII CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS. . . . . . . . . . . . . . . 36 8.1 True and Correct Representations . . . . . . . . . . . . . . . . . . . 36 8.2 Compliance with Covenants. . . . . . . . . . . . . . . . . . . . . . . 36 8.3 Delivery of Documents. . . . . . . . . . . . . . . . . . . . . . . . . 36 8.4 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 8.5 Environmental Audit(s) . . . . . . . . . . . . . . . . . . . . . . . . 37 8.6 Due Diligence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 8.7 HSR Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 ARTICLE IX CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS . . . . . . . . . . . . . . . . 37 9.1 True and Correct Representations . . . . . . . . . . . . . . . . . . . 37 9.2 Compliance with Covenants. . . . . . . . . . . . . . . . . . . . . . . 37 9.3 Delivery of Documents. . . . . . . . . . . . . . . . . . . . . . . . . 37 9.4 HSR Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 ARTICLE X DELIVERIES AT CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 10.1 Deliveries by Seller and Principals. . . . . . . . . . . . . . . . . . 37 ii 10.2 Deliveries by Purchaser. . . . . . . . . . . . . . . . . . . . . . . . 39 10.3 Possession by Purchaser. . . . . . . . . . . . . . . . . . . . . . . . 40 10.4 Failure to Obtain Consents, Licenses, Permits and Approvals. . . . . . 40 ARTICLE XI POST-CLOSING COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 11.1 After the Closing Date . . . . . . . . . . . . . . . . . . . . . . . . 40 11.2 Payments Received by Seller Subsequent to the Closing Date . . . . . . 40 11.3 Access to Records. . . . . . . . . . . . . . . . . . . . . . . . . . . 40 11.4 Pending Disputes . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 ARTICLE XII SURVIVAL; INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . 41 12.1 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 12.2 Indemnification Obligation . . . . . . . . . . . . . . . . . . . . . . 42 12.3 Indemnification Notice . . . . . . . . . . . . . . . . . . . . . . . . 44 12.4 Indemnification Payment and Limitations. . . . . . . . . . . . . . . . 45 ARTICLE XIII MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 13.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 13.2 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 13.3 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 13.4 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 13.5 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 13.6 Pronouns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 13.7 Third Parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 13.8 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . 47 13.9 Schedules Included in Exhibits; Incorporation by Reference . . . . . . 47 13.10 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 13.11 Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 13.12 Jurisdiction and Venue . . . . . . . . . . . . . . . . . . . . . . . . 47 13.13 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 13.14 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 13.15 No Construction Against Draftsmen. . . . . . . . . . . . . . . . . . . 48 13.16 Enforcement Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . 48 13.17 Equitable Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . 48 13.18 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 13.19 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . 49 13.20 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 13.21 Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . . 49
iii EXHIBITS A - Form of Purchaser's Legal Opinion B - Form of Seller's Legal Opinion C - Form of Bill of Sale and Assignment D - Form of Non-Competition Agreement E - Form of Employment Agreement SCHEDULES 2.1(c)(ii) - Independent Contractor 2.1(f) - Prepaid Items 2.1(k) - Permits 2.2 - Excluded Assets 2.3(e) - Liabilities and Obligations of Seller 3.3 - Allocation of Purchase Price 4.1 - Seller's Governing Documents 4.3 - Consents 4.6(a) - Title to and Character of Assets 4.8 - Inventory 4.12(a)(i) - List of Company Plans, Company Other Benefit Obligations and Company VEBAs 4.12(a)(iv) - Post-Retirement Benefits 4.12(c) - ERISA 4.12(d) - Collective Bargaining Agreements 4.13(a)(iii) - Compliance with Legal Requirements 4.13(b) - Governmental Authorizations 4.13(b)(iii) - Compliance with Governmental Authorizations 4.14(b) - Legal Proceedings 4.14(d)(iv) - Seller's Payments 4.16 - Absence of Certain Changes and Events 4.17(a) - Contracts 4.17(c) - Violations of Contracts 4.18 - Insurance Policies 4.20(a) - Employee Information 4.20(c) - Retired Employee Information 4.21(a) - Intellectual Property 4.21(b) - Encumbrances 4.21(d) - Marks 11.4 - Pending Disputes iv ASSET PURCHASE AGREEMENT This ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered into as of the 27th day of September, 1999, by and among TODHUNTER INTERNATIONAL, INC., a Delaware corporation ("Purchaser"), ADAMS WINE COMPANY (d/b/a Monarch Wine Company of Georgia), a Georgia corporation ("Seller"), and HOWARD J. WEINSTEIN, DAVID PASZAMANT, JAY PASZAMANT and MATTHEW PASZAMANT (collectively, the "Principals"). PRELIMINARY STATEMENTS: WHEREAS, Purchaser desires to purchase from Seller, and Seller desires to sell to Purchaser, certain of the Assets (as hereinafter defined) used in Seller's business of producing, buying, or otherwise acquiring, holding, owning, mixing, flavoring, labeling, storing, shipping, exporting, marketing and selling bulk wines and brandies, including, but not limited to, cooking wines (collectively, the "Business"). WHEREAS, as material and specific inducements to Purchaser and Seller to purchase and sell the Assets, Purchaser, Seller and the Principals desire to make certain representations and warranties and agree to be bound by certain covenants and obligations provided in this Agreement. NOW, THEREFORE, in consideration of the mutual covenants, agreements, representations and warranties contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereby agree as follows: ARTICLE I DEFINITIONS 1.1 DEFINITIONS. For purposes of this Agreement, the following terms have the meanings set forth below: (a) "ACQUISITION PROPOSAL" means an inquiry, offer or proposal regarding any of the following (other than the transactions contemplated by this Agreement) involving Seller: any merger, reorganization, consolidation, share exchange, recapitalization, business combination, liquidation, dissolution, or other similar transaction involving, or, any sale, lease, exchange, mortgage, pledge, transfer or other disposition of, all or any significant portion of the Assets or 100% or more of the equity interests of Seller in a single transaction or series of related transactions which could reasonably be expected to interfere with the completion of the transactions contemplated herein. (b) "AFFILIATE" means a Person who, with respect to any other Person (i) directly or indirectly controls, is controlled by or is under common control with such other Person, (ii) owns or controls ten percent (10%) or more of the outstanding voting interests of such other Person, (iii) is an officer, director, partner or member of such other Person, or (iv) if such other Person is an officer, director, partner or member of any Person for which such other Person acts in any such capacity. (c) "AGREEMENT" means this Asset Purchase Agreement. (d) "ASSETS" has the meaning set forth in Section 2.1 of this Agreement. (e) "ASSUMED LIABILITIES" has the meaning set forth in Section 2.3 of this Agreement. (f) "CLOSING" means the closing of the transactions contemplated by this Agreement, which shall be held at the offices of Gunster, Yoakley, Valdes-Fauli & Stewart, P.A., 777 South Flagler Drive, Suite 500-East Tower, West Palm Beach, Florida 33401, on the Closing Date. (g) "CLOSING DATE" means 10:00 A.M. local time, on September __, 1999, or on such other date and at such other place as may be mutually agreed upon by the parties. (h) "CODE" means the Internal Revenue Code of 1986, as amended, or any successor law and any successor regulations issued by the IRS pursuant to the Internal Revenue Code or any successor law. (i) "COLLECTIVE BARGAINING AGREEMENT" means the Collective Bargaining Agreement with The International Brotherhood of Firemen and Oilers, AFL-CIO, on behalf of its Local 288, and all amendments thereto. (j) "COMPANY OTHER BENEFIT OBLIGATION" means an Other Benefit Obligation owed, adopted, or followed by Seller or an ERISA Affiliate of Seller, if any. (k) "COMPANY PLAN" means all Plans of which Seller or an ERISA Affiliate (as hereinafter defined) of Seller, if any, is or was a Plan Sponsor, or to which Seller or an ERISA Affiliate of Seller, if any, otherwise contributes or has contributed, or in which Seller or an ERISA Affiliate of Seller, if any, otherwise participates or has participated. All references to Plans are to Company Plans unless the context requires otherwise. (l) "CONSENT" means any approval, permit, consent, ratification, satisfaction of waiting periods, waiver, or other authorization (including any Governmental Authorization). (m) "CONTEMPLATED TRANSACTIONS" means all of the transactions contemplated by this Agreement. (n) "CONTRACTS" means all written or oral contracts, licenses, agreements, purchase orders, or commitments relating to the Assets or the Business to which Seller or a Principal is a party or is bound, including, but not limited to, the Facility Lease and the Pending Contracts. (o) "DAMAGES" means any loss, liability, claim, damage (excluding, however, consequential damages), expenses (including, but not limited to, reasonable legal fees, accounting fees, paralegal fees and other expenses) or diminution of value, whether or not involving a third party claim. (p) "DECEMBER BALANCE SHEET" has the meaning set forth in Section 4.4 of this Agreement. (q) "ENCUMBRANCE" means any option, right of first refusal, lien, claim, or restriction of any kind. 2 (r) "ENVIRONMENT" means soil, land surface or subsurface strata, surface waters (including navigable waters, ocean waters, streams, ponds, drainage basins, and wetlands), groundwaters, drinking water supply, stream sediments, ambient air (including indoor air), plant and animal life, and any other environmental medium or natural resource. (s) "ENVIRONMENTAL, HEALTH, AND SAFETY LIABILITIES" means any Damages, obligation, or other responsibility arising from or under Environmental Law or Occupational Safety and Health Law and consisting of or relating to: (i) any environmental, health, or safety matters or conditions (including on-site or off-site contamination, occupational safety and health, and regulation of chemical substances or products); (ii) fines, penalties, judgments, awards, settlements, legal or administrative proceedings, damages, losses, claims, demands and response, investigative, remedial, or inspection costs and expenses arising under Environmental Law or Occupational Safety and Health Law; (iii) financial responsibility under Environmental Law or Occupational Safety and Health Law for cleanup costs or corrective action, including any investigation, cleanup, removal, containment, or other remediation or response actions ("Cleanup") required by applicable Environmental Law or Occupational Safety and Health Law (whether or not such Cleanup has been required or requested by any Governmental Body or any other Person) and for any natural resource damages; or (iv) any other compliance, corrective, investigative, or remedial measures required under Environmental Law or Occupational Safety and Health Law. The terms "removal," "remedial," and "response action," include the types of activities covered by the United States Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq., as amended. (t) "ENVIRONMENTAL LAW" means any Legal Requirement that requires or relates to: (i) advising appropriate authorities, employees, and the public of intended or actual releases of pollutants or hazardous substances or materials, violations of discharge limits, or other prohibitions and of the commencements of activities, such as resource extraction or construction, that could have significant impact on the Environment; (ii) preventing or reducing to acceptable levels the release of pollutants or hazardous substances or materials into the Environment; (iii) reducing the quantities, preventing the release, or minimizing the hazardous characteristics of wastes that are generated; 3 (iv) assuring that products are designed, formulated, packaged, and used so that they do not present unreasonable risks to human health or the Environment when used or disposed of; (v) protecting resources, species, or ecological amenities; (vi) reducing to acceptable levels the risks inherent in the transportation of hazardous substances, pollutants, oil, or other potentially harmful substances; (vii) cleaning up pollutants that have been released, preventing the Threat of Release, or paying the costs of such clean up or prevention; or (viii) making responsible parties pay private parties, or groups of them, for damages done to their health or the Environment, or permitting self-appointed representatives of the public interest to recover for injuries done to public assets. (u) "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, or any successor law, and regulations and rules issued pursuant to that Act or any successor law. (v) "EXCLUDED ASSETS" means only those items listed on SCHEDULE 2.2 of this Agreement, which shall include Seller's automobiles and Seller's tangible personal property located in New Jersey. (w) "FACILITY" means the property located at 451 Sawtell Avenue, S.E., Atlanta, Georgia 30315, used by Seller to manufacture, market and sell bulk wines and brandies and otherwise operate the Business. (x) "FACILITY LEASE" means that certain lease agreement, dated as of April 1, 1969, by and between Seller and Gilstar Corporation and relating to the Facility, together with the amendments thereto reflected in SCHEDULE 4.17(a). (y) "FF&E" has the meaning set forth in Section 2.1(a) of this Agreement. (z) "FOUR DIGIT YEAR FORMAT" means a format that allows entry or processing of a four digit year date where the first two digits will designate the century and the second two digits will designate the year with the century. (aa) "GAAP" means generally accepted United States accounting principles. (bb) "GOVERNMENTAL AUTHORIZATION" means any approval, consent, license, permit, waiver, or other authorization issued or granted by or under the authority of any Governmental Body or pursuant to any Legal Requirement applicable to Seller. 4 (cc) "GOVERNMENTAL BODY" means any: (i) nation, state, county, city, town, village, district, or similar jurisdiction; or (ii) federal, state, local, municipal, government, agency, court, or similar entity; or (iii) governmental or quasi-governmental authority of any nature (including any governmental agency, branch, department, official, or entity and any court or other tribunal); or (iv) body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory, or taxing authority or power of any nature. (dd) "HAZARDOUS ACTIVITY" means the distribution, generation, handling, importing, management, manufacturing, processing, production, refinement, Release (as hereinafter defined), storage, transfer, transportation, treatment, or use (including any withdrawal or other use of groundwater) of Hazardous Materials (as hereinafter defined) in, on, under, about, or from the Facility or any part thereof into the Environment, and any other act, business, operation, or thing that increases the danger, or risk of danger, or poses an unreasonable risk of harm to persons or property on or off the Facility, or that may affect the Facility, the Assets or the Business PROVIDED, HOWEVER, that this definition shall not include Seller's use of ethyl alcohol, ethyl acetate or laboratory chemicals in the Ordinary Course of Business in accordance with Environmental Laws. (ee) "HAZARDOUS MATERIALS" means any waste or other substance that is listed, defined, designated, or classified as hazardous, radioactive, or toxic or a pollutant or a contaminant under or pursuant to any Environmental Law, including any admixture or solution thereof, and specifically including petroleum and all derivatives thereof or synthetic substitutes therefor and asbestos or asbestos-containing materials. (ff) "HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976 or any successor law, and regulations and rules issued pursuant to that Act or any successor law. (gg) "INSURANCE POLICIES" means all of the policies of fire, casualty, fidelity, liability, professional liability or other form of insurance relating to the Business, as set forth in SCHEDULE 4.18, which shall not include any Key-Man Life Insurance policies. (hh) "INTELLECTUAL PROPERTY" means any and all rights of Seller in: (i) the name "Monarch Wine Company of Georgia" and derivations thereof, trade names, registered or unregistered trademarks, service marks and applications (collectively, "Marks"); (ii) all patents, patent applications, and inventions and discoveries that may be patentable with respect to the Business (collectively, "Patents"); 5 (iii) all copyrights in both published works and unpublished works with respect to the Business (collectively, "Copyrights"); (iv) all rights in mask works with respect to the Business (collectively, "Rights in Mask Works"); and (v) all know-how, formulas, trade secrets, confidential information (including, without limitation, sales volume information specific to each customer), customer lists, hardware and software (and related documentation), technical information, data, process technology, plans, drawings, blue prints and other intangible property and rights with respect to the Business (collectively, "Trade Secrets"), owned, used, licensed by Seller as licensee or licensor or that Seller has any interest in or has ever used in connection with the Business. (ii) "INTERIM BALANCE SHEET" has the meaning set forth in Section 4.4 of this Agreement. (jj) "INVENTORY" means all inventory owned by Seller. (kk) "IRS" means the United States Internal Revenue Service or any successor agency, and, to the extent relevant, the United States Department of the Treasury. (ll) "KNOWLEDGE" means with respect to any Person, that such Person will be deemed to have "Knowledge" of a particular fact or other matter if such Person, or an executive officer of such Person is actually aware of such fact or matter. A Person (other than an individual) will be deemed to have "Knowledge" of a particular fact or other matter if any individual who is serving, or who has at any time served, as a director, officer, partner, executor, or trustee of such Person (or in any similar capacity) has, or at any time had, Knowledge of such fact or other matter. (mm) "LEAP YEAR" means the year during which an extra day is added in February (February 29th). Leap Year occurs in all years evenly divisible by the number divisible by 400 or evenly divisible by four (4) and not evenly divisible by 100. (nn) "LEGAL REQUIREMENT" means any federal, state, local, municipal, or other administrative order, law, ordinance or regulation, which pertains to Seller. (oo) "NON-COMPETITION AGREEMENTS" has the meaning as set forth in Section 10.1 of this Agreement. (pp) "NOTICE OF CLAIM" has the meaning as set forth in Section 12.3(a) of this Agreement. (qq) "OCCUPATIONAL SAFETY AND HEALTH LAW" means any Legal Requirement designed to provide safe and healthful working conditions and to reduce occupational safety and health hazards, and any program, whether governmental or private (including those promulgated or sponsored by industry associations and insurance companies), designed to provide safe and healthful working conditions. 6 (rr) "ORDER" means any award, decision, injunction, judgment, order, ruling, subpoena, or verdict entered, issued, made, or rendered by any court, administrative agency, or other Governmental Body or by any arbitrator having jurisdiction over Seller or the Assets. (ss) "ORDINARY COURSE OF BUSINESS" means an action taken by a Person (as hereinafter defined) will be deemed to have been taken in the "Ordinary Course of Business" only if: (i) such action is consistent with the past practices of such Person and is taken in the ordinary course of the normal day-to-day operations of such Person; and (ii) such action is not required to be authorized by the board of directors of such Person (or by any Person or group of Persons exercising similar authority). (tt) "OTHER BENEFIT OBLIGATIONS" means all obligations, arrangements, or customary practices, whether or not legally enforceable, to provide benefits, other than salary, as compensation for services rendered, to present or former directors, employees, or agents, other than obligations, arrangements, and practices that are Plans (as hereinafter defined). Other Benefit Obligations includes, but is not limited to, consulting agreements under which the compensation paid does not depend upon the amount of service rendered, sabbatical policies, severance payment policies, and fringe benefits within the meaning of Code Section 132. (uu) "PBGC" means the Pension Benefit Guaranty Corporation, or any successor thereto. (vv) "PENDING CONTRACTS" means contracts between Seller and its third party customers. (ww) "PERMITS" means all governmental, quasi-governmental or regulatory agency licenses, consents, certificates of authority, accreditations, permits, registrations, orders, credentials, authorizations, certifications and approvals held or obtained by or issued to Seller in connection with the operation of the Business. (xx) "PERSON" means any individual, corporation (including any non-profit corporation), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, labor union, or other entity or Governmental Body. (yy) "PLAN" has the meaning given in ERISA Section 3(3). (zz) "PLAN SPONSOR" has the meaning given in ERISA Section 3(16)(B). (aaa) "PROCEEDING" means any action, arbitration, audit, hearing, investigation, litigation, or suit (whether civil, criminal, administrative, investigative, or informal) commenced, brought, conducted, or heard by or before, or otherwise involving, any Governmental Body or arbitrator. (bbb) "PURCHASE PRICE" has the meaning set forth in Section 3.1 of this Agreement. (ccc) "PURCHASER" has the meaning set forth in the first paragraph of this Agreement. 7 (ddd) "PURCHASER LEGAL OPINION" means an opinion of legal counsel to Purchaser, dated as of the Closing Date, substantially in the form of EXHIBIT A attached hereto. (eee) "PURCHASER'S CLOSING DOCUMENTS" has the meaning set forth in Section 5.2(a) of this Agreement. (fff) "PURCHASER'S INDEMNIFIED PARTIES" has the meaning set forth in Section 12.2(b) of this Agreement. (ggg) "PURCHASER'S SYSTEMS" means all equipment, hardware, computerized devices and software used by Purchaser in its business, including but not limited to, all purchased applications, software development packages, customer-developed software, files, databases, operating systems, database management systems, firmware and imbedded microchips. (hhh) "QUALIFIED PLAN" means any Plan that meets or purports to meet the requirements of Code Section 401(a). (iii) "RECEIVABLES" means all receivables of Seller, including, but not limited to, all accounts receivable, notes receivable, and receivables from vendors, customers or suppliers of Seller relating to the Business. (jjj) "RELATED PERSON" means with respect to a particular individual: (i) each other member of such individual's Family (as hereinafter defined); (ii) any Person that is directly or indirectly controlled by such individual or one or more members of such individual's Family; (iii) any Person in which such individual or members of such individual's Family hold (individually or in the aggregate) a Material Interest (as hereinafter defined); and (iv) any Person with respect to which such individual or one or more members of such individual's Family serves as a director, officer, partner, member, executor, or trustee (or in a similar capacity). With respect to a specified Person other than an individual: (i) any Person that directly or indirectly controls, is directly or indirectly controlled by, or is directly or indirectly under common control with such specified Person; (ii) any Person that holds a Material Interest in such specified Person; (iii) each Person that serves as a director, officer, partner, member, executor, or trustee of such specified Person (or in a similar capacity); (iv) any Person in which such specified Person holds a Material Interest; 8 (v) any Person with respect to which such specified Person serves as a general partner or a trustee (or in a similar capacity); and (vi) any Related Person of any individual described in clause (b) or (c). For purposes of this definition, (a) the "Family" of an individual includes (i) the individual, (ii) the individual's spouse, (iii) any other natural person who is related to the individual or the individual's spouse within the second degree, and (iv) any other natural person who resides with such individual, and (b) "Material Interest" means direct or indirect beneficial ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934) of voting securities or other voting interests representing at least 50% of the outstanding voting power of a Person or equity securities or other equity interests representing at least 50% of the outstanding equity securities or equity interests in a Person. (kkk) "RELEASE" means any spilling, leaking, emitting, discharging, depositing, escaping, leaching, dumping, or other releasing into the Environment, whether intentional or unintentional. (lll) "RETAINED LIABILITIES" has the meaning set forth in Section 2.4 of this Agreement. (mmm) "SELLER" has the meaning set forth in the first paragraph of this Agreement. (nnn) "SELLER'S CLOSING DOCUMENTS" has the meaning set forth in Section 4.2 of this Agreement. (ooo) "SELLER INDEMNIFIED PARTIES" has the meaning set forth in Section 12.2(a) of this Agreement. (ppp) "SELLER LEGAL OPINION" means an opinion of Smith Helms Mulliss & Moore, L.L.P., dated as of the Closing Date, substantially in the form of EXHIBIT B attached hereto. (qqq) "SYSTEMS" means all equipment, hardware, computerized devices and software used by the Business, including but not limited to, all purchased applications, software development packages, custom-developed software, files, databases, operating systems, database management systems, firmware and imbedded microchips. (rrr) "TAXES" means all federal, state, local, foreign, and other net income, gross income, gross receipts, sales, use, ad valorem, transfer, franchise, profits, license, lease, service, service use, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property, windfall profits, customs, duties, or other taxes, fees, assessments, or charges of any kind whatever, together with any interest and any penalties, additions to tax, or additional amounts with respect thereto, and the term "Tax" means any one of the foregoing Taxes imposed by any Governmental Body on Seller or any of the Assets. (sss) "TAX RETURNS" means any return (including any information return), report, statement, schedule, notice, form, or other document or information filed with or submitted to, or required to be filed with or submitted to, any Governmental Body in connection with the determination, 9 assessment, collection, or payment of any Tax or in connection with the administration, implementation, or enforcement of or compliance with any Legal Requirement relating to any Tax. (ttt) "THIRD PARTY CLAIM" has the meaning set forth in Section 12.3(b) of this Agreement. (uuu) "THREAT OF RELEASE" means a substantial likelihood of a Release that according to applicable law requires action by Seller in order to prevent or mitigate damage to the Environment that may result from such Release. (vvv) "THREATENED" means a claim, Proceeding, dispute, action, or other matter will be deemed to have been "Threatened" if any demand or statement has been made (orally or in writing) or any notice has been given (orally or in writing), or if any other event has occurred or any other circumstances exist, that would likely result in such a claim, Proceeding, dispute, action, or other matter being asserted, commenced, taken, or otherwise pursued in the future. (www) "TRADE PAYABLES" shall mean current liabilities incurred by Seller that are expected to be repaid during the following twelve (12) months (including, without limitation, trade and accounts payable such as sales commissions to brokers and sales agents and royalties which are payable), but only to the extent directly attributable to Receivables and Inventory purchased by Purchaser pursuant to this Agreement and only in the Ordinary Course of Business. (xxx) "WORKING CAPITAL" means all current assets of Seller other than cash and prepaid expenses, LESS Trade Payables. (yyy) "YEAR 2000 COMPLIANT" shall mean that dates outside of the range 1900-1998, including the years 1999, 2000 and thereafter, encountered and/or processed by the Systems will be correctly recognized, calculated, sorted, stored, displayed and/or otherwise processed in any level of computer hardware or software, including, but not limited to, firmware, application programs, system software, utilities, files and databases. ARTICLE II SALE AND PURCHASE OF ASSETS 2.1 SALE AND PURCHASE OF THE ASSETS. Subject to the terms and conditions set forth in this Agreement, Seller agrees to sell, convey, transfer, assign and deliver to Purchaser, and Purchaser agrees to purchase from Seller, on the Closing Date, all of Seller's right, title and interest in and to all assets relating to the Business, including, but not limited to, the following (collectively, the "Assets"): (a) All equipment, furniture, fixtures, supplies, furnishings, machinery, tools, parts, office equipment, computer equipment, vehicles and all other tangible personalty owned by Seller with respect to the Business (the "FF&E"); (b) The Facility Lease; (c) All rights and interests of Seller in and to the following Contracts: 10 (i) all Pending Contracts (excluding all collective bargaining agreements); (ii) all independent contractor and other such agreements entered into by Seller and relating to, or for the benefit of, the Business, including those which are listed on SCHEDULE 2.1(c)(ii); and (iii) all management agreements, services agreements and distribution agreements entered into by Seller and relating to, or for the benefit of, the Business; (d) All express or implied warranties applicable to any of the items listed in this Section 2.1 received by Seller from manufacturers or suppliers (to the extent such warranties are transferable); (e) Two Hundred Thousand and No/100 Dollars ($200,000.00) in cash; (f) Those certain prepaid items relating to the Business which are listed on SCHEDULE 2.1(F) attached hereto; (g) All Receivables; (h) All Inventory; (i) All rights of Seller under non-solicitation agreements entered into for the benefit of Seller with regard to the Business; (j) All rights of Seller under indemnification agreements entered into for the benefit of Seller with regard to the Business, except to the extent such indemnification agreements relate to Retained Liabilities; (k) All Permits relating to the Business, including those set forth on SCHEDULE 2.1(k) attached hereto (to the extent such Permits are transferable); (l) All rights, title and interest in and to the Intellectual Property relating to the Business (including the name "Monarch Wine Company of Georgia"), in each case together with all registrations thereof, all common and civil law rights thereto, all rights to royalties or fees paid by others in respect thereof, and all claims or causes of action for infringement thereof; (m) All operating data, business records, employee records and computer records of Seller relating to the Business, including, but not limited to, supplier lists, customer lists, payment invoices, billing records, correspondence, all records, documents or data relating to accounting and financial information and all other sales and marketing information which relate to the Business; PROVIDED, HOWEVER, Seller shall maintain those certain business records, computer records, billing and accounting records as required under Bureau of Alcohol, Tobacco and Firearms ("BATF") regulations until such time as final BATF audit of Seller is completed (the "BATF Documents"); PROVIDED, FURTHER, that Seller shall promptly provide copies of all BATF Documents to Purchaser as Purchaser may reasonably request from time to time; and 11 (n) All rights of Seller in all telephone and telecopier numbers and post office boxes utilized in connection with the Business. At Closing, the Assets shall be conveyed to Purchaser free and clear of all Encumbrances. 2.2 EXCLUDED ASSETS. The parties expressly agree that the Assets shall not include any asset or property listed in SCHEDULE 2.2 of this Agreement (the "Excluded Assets"). 2.3 ASSUMPTION OF LIABILITIES. At the Closing, Purchaser shall assume, as of the Closing Date, and pay when due, otherwise discharge and perform thereunder, or satisfy, the obligations and liabilities of Seller set forth in this Section 2.3 (collectively, the "Assumed Liabilities"): (a) The Facility Lease with respect to the post-Closing period, subject to Section 8.4; (b) Payroll and employment liability associated with any employees of Seller hired by Purchaser at or after Closing, but only for periods after the Closing; (c) Except as set forth in Section 2.4(e) and Section 13.1 herein, Trade Payables; (d) Any liability subject to the indemnification obligation of Purchaser arising under Section 12.2(a); (e) Those liabilities and obligations of Seller set forth on SCHEDULE 2.3(e) attached hereto; and (f) Except as set forth in Section 2.4, any claim against Seller based upon acts or omissions by Purchaser occurring subsequent to the Closing Date regardless of the manner in which asserted or the nature of the claim or cause of action alleged (including, but not limited to, negligence, product liability, breach of contract, intentional tort or injury to person or property) arising from or related to the Business (collectively, "Claims"); 2.4 NO GENERAL ASSUMPTION OF LIABILITIES. Except for the Assumed Liabilities, Purchaser shall not assume any liabilities of Seller of any nature whatsoever, including, but not limited to, the following (collectively, the "Retained Liabilities"): (a) Taxes; (b) Except as set forth in Section 2.3(c) herein, wages, salaries, commissions, fees, reimbursements, benefits, bonuses, obligations for severance or compensation of any kind payable to any past or present employees, officers agents or independent contractors of Seller; (c) Except as set forth in Section 2.3(c) or Section 2.3(e), any claim against Seller regardless of the manner in which asserted or the nature of the claim or cause of action alleged, including, but not limited to, negligence, product liability, breach of contract, intentional tort or injury to person or property arising from or related to the Business of Seller, or from or related to employees, 12 independent contractors, agents, partners, officers, directors or shareholders of Seller, and all liabilities under the Facility Lease for the period ending on and through the Closing Date (collectively, "Claims"). (d) Except as set forth in Section 2.3(c) herein, any liabilities or obligations of Seller to creditors attributable to the Business existing as of the date of this Agreement or arising between the date of this Agreement and the Closing Date; (e) Any liability or obligation of Seller arising or incurred in connection with the negotiation, preparation and execution of this Agreement and the transactions contemplated by this Agreement and the fees and expenses of counsel, accountants and other experts retained by Seller; (f) The liabilities and obligations described in Section 12.2(b) of this Agreement; (g) Any Plan or any liability or obligation of Seller arising out of or relating to (i) any Plans, (ii) any fines, penalties, taxes, or related charges under Section 502(c) or Section 4071 of ERISA or Chapter 43 of the Code resulting from any act or omission by Seller or any ERISA Affiliate or (iii) any unfunded Multi-Employer Pension Fund liabilities arising out of any collective bargaining agreements; and (h) Any liability arising out of any collective bargaining agreement. Notwithstanding anything herein to the contrary, nothing contained in this Section 2.4 shall be deemed to be inconsistent with Section 12.2 herein. Seller shall retain all Retained Liabilities, and shall discharge all such liabilities (to the extent they may create any Encumbrances on any Assets) as and when due. After the Closing Date, Seller shall have complete control over the payment, settlement or other disposition of, or any dispute involving, any of the Retained Liabilities and Seller shall have the right to conduct and control all negotiations and proceedings with respect thereto, except as otherwise provided in Section 12.3 hereof. ARTICLE III PURCHASE PRICE 3.1 PURCHASE PRICE. Subject to the adjustments set forth in Section 3.2 herein, as consideration to Seller for the sale of the Assets, at the Closing, Purchaser shall deliver to Seller the aggregate sum of Twenty-Two Million Four Hundred Ninety-Six Thousand and No/100 Dollars ($22,496,000.00), (i) PLUS the prepaid items relating to the Business, as identified and pro-rated on SCHEDULE 2.1(f), (ii) PLUS the excess Working Capital, if any, in Seller's Working Capital stated in the unaudited financial statements of Seller as of the last day of the month immediately preceding the Closing Date (the "Closing Date Balance Sheet") as compared to the December Balance Sheet and, (iii) to the extent Seller's Working Capital as stated on the Closing Date Balance Sheet is less than Seller's Working Capital as stated on the December Balance Sheet, MINUS such negative amount (collectively, the "Purchase Price"). 13 3.2 POST-CLOSING ADJUSTMENTS. (a) The Purchase Price shall be appropriately adjusted following the Closing based upon the difference between Seller's Working Capital as derived from the Closing Date Balance Sheet and the Seller's Working Capital as derived from an audited balance sheet produced by Purchaser's independent certified public accountants, McGladrey & Pullen, L.L.P. (or another independent certified public accountant approved by Purchaser) ("Purchaser's Accountants"), as of the Closing Date (the "Adjusted Balance Sheet"). The Purchase Price shall (i) be adjusted upward on a dollar-for-dollar basis to the extent the Working Capital determined from the Adjusted Balance Sheet is more than the Working Capital determined from the Closing Date Balance Sheet (an "Increase") and (ii) downward on a dollar-for-dollar basis to the extent the Working Capital determined from the Adjusted Balance Sheet is less than the Working Capital determined from the Closing Date Balance Sheet (a "Decrease"). Accordingly, following the Closing Date, Purchaser and Seller shall determine the difference between the Working Capital set forth on the Closing Balance Sheet and the Adjusted Balance Sheet in the manner set forth in Section 3.2(b) below. (b) Within forty-five (45) days following the Closing, Purchaser's Accountants will prepare and deliver to Seller the Adjusted Balance Sheet, which shall be prepared in accordance with generally accepted accounting principles and applied on a consistent basis with Seller's year-end audited financial statements dated as of December 31, 1998. The expense of Purchaser's Accountants shall be borne by Purchaser. Seller shall, within fifteen (15) days after the delivery by Purchaser of the Adjusted Balance Sheet, complete its review of the same. In the event that Seller determines that the Adjusted Balance Sheet has not been determined on the basis set forth in this Section 3.2(b), Seller shall inform Purchaser in writing ("Seller's Objection") setting forth a specific description of Seller's Objection and the adjustments to the Purchase Price which the Seller believes should be made, on or before the last day of such fifteen (15) day period. Purchaser shall then have twenty (20) days to review and respond to Seller's Objection. If Seller and Purchaser are unable to resolve all of their disagreements with respect to the determination of the adjustment to the Purchase Price within ten (10) days following the completion of Purchaser's review of Seller's Objection, they shall refer their remaining differences to Ernst & Young, LLP (the "CPA Firm"), who shall, acting as experts and not as arbitrators, determine on the basis of the standard set forth in this Section 3.2(b), and only with respect to the remaining differences so submitted, whether and to what extent, if any, the Working Capital as derived from the Adjusted Balance Sheet requires adjustment. The parties shall instruct the CPA Firm to deliver its written determination to Purchaser and Seller no later than the twentieth (20th) day after the matter is referred to the CPA Firm; PROVIDED, HOWEVER, that during such twenty (20) day period, Purchaser and Seller may waive any determination made by the CPA Firm or may mutually instruct the CPA Firm to cease its review of the Adjusted Balance Sheet. The CPA Firm's determination shall be conclusive and binding upon Purchaser and Seller. The fees and disbursements of the CPA Firm shall be shared equally by Purchaser and Seller. Seller and Purchaser shall make readily available to the CPA Firm all relevant books and records and any work papers and all other items reasonably requested by the CPA Firm. (c) Upon a final determination (a "Final Determination") of the Working Capital derived from the Adjusted Balance Sheet pursuant to Section 3.2(b) above, (i) to the extent there is an Increase, Purchaser shall pay Seller an amount equal to the Increase within ten (10) days of such Final Determination and (ii) to the extent there is a Decrease, Seller and the Principals shall pay Purchaser an amount equal to the Decrease within ten (10) days of such Final Determination. 14 3.3 ALLOCATION OF PURCHASE PRICE AND ASSUMED LIABILITIES. The Purchase Price shall be allocated for tax reporting purposes as agreed to by Purchaser and Seller in the manner set forth in SCHEDULE 3.3 attached to this Agreement, which SCHEDULE 3.3 shall be delivered by Purchaser's Accountants and mutually agreed upon and initialed by the parties on or before the Closing. SCHEDULE 3.3 shall value the Assets at estimated fair market value as of the Closing Date. Purchaser and Seller declare that the valuation of the Assets and the Assumed Liabilities has been determined in good faith and as the result of arms' length bargaining and Purchaser and Seller agree that no position inconsistent with the allocation agreed to by Purchaser and Seller shall be taken by either party before any governmental or judicial authority. Purchaser and Seller agree to file Internal Revenue Service Form 8594 in accordance with the agreed upon allocation referenced in SCHEDULE 3.3. ARTICLE IV SELLER'S AND PRINCIPALS' REPRESENTATIONS AND WARRANTIES With the understanding that Purchaser intends to rely hereon, Seller and each of the Principals, jointly and severally, represent and warrant to Purchaser (which warranties and representations shall survive the Closing to the extent set forth in Section 12.1 hereof regardless of what examinations, inspections, audits and other investigations Purchaser has heretofore made or may hereafter make, with respect to such warranties and representations), as of the date hereof and as of the Closing Date as follows: 4.1 ORGANIZATION AND GOOD STANDING. Seller is a corporation duly organized, validly existing, and in good standing under the laws of its jurisdiction of incorporation, with full corporate power and authority to conduct its business as it is now being conducted, to own or use the properties and assets that it purports to own or use, and to perform all its obligations under the Contracts. To Seller's Knowledge, Seller is duly qualified to do business as a foreign corporation and is in good standing under the laws of each state or other jurisdiction in which either the ownership or use of the properties owned or used by it, or the nature of the activities conducted by it, requires such qualification. True, complete and correct copies of Seller's articles of incorporation, bylaws and any shareholder agreements (including all amendments or modifications thereto) are attached hereto as SCHEDULE 4.1. 4.2 AUTHORITY; NO CONFLICT. (a) Except for Consents of third parties described in Section 4.3 below, upon the execution and delivery by Seller of this Agreement and all other documents contemplated hereby and required to be executed by Seller (collectively, the "Seller's Closing Documents"), Seller's Closing Documents will constitute the legal, valid and binding obligations of Seller, enforceable against Seller in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws from time to time in effect that affect creditors' rights generally and by legal and equitable limitations on the availability of specific remedies. Seller has the absolute and unrestricted right, power and authority to execute and deliver this Agreement and Seller's Closing Documents and to perform its obligations under this Agreement and Seller's Closing Documents. No other acts or proceedings on the part of Seller will be necessary to authorize the performance of this Agreement or the Seller's Closing Documents by Seller. 15 (b) Upon the execution and delivery by each of the Principals of this Agreement and all other documents contemplated hereby and required to be executed by each of the Principals, such documents will constitute the legal, valid and binding obligations of the Principals, enforceable against the Principals in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws from time to time in effect that affect creditors' rights generally and by legal and equitable limitations on the availability of specific remedies. No other acts or proceedings on the part of the Principals will be necessary to authorize the performance of this Agreement or any other documents contemplated hereby and required to be executed by the Principals. (c) Neither the execution and delivery of this Agreement and the Seller's Closing Documents, nor the consummation or performance of any of the Contemplated Transactions will, directly or indirectly (with or without notice or lapse of time): (i) contravene, conflict with, or result in a violation of any provision of Seller's Articles of Incorporation, Bylaws, Shareholders' Agreement or other organizational documents; (ii) to Seller's and Principals' Knowledge, conflict with, or result in a violation of, or give any Governmental Body or other Person the right to challenge any of the Contemplated Transactions or to exercise any remedy or obtain any relief under, any Legal Requirement or any Order to which Seller, or any of the Assets is subject except with respect to those Permits listed on SCHEDULE 2.1(k) which are not transferrable; (iii) conflict with, or result in a violation of any of the terms or requirements of, or give any Governmental Body the right to revoke, withdraw, suspend, cancel, terminate, or modify, any Governmental Authorization that is held by Seller or that otherwise relates to the Business or any of the Assets except with respect to those Permits listed on SCHEDULE 2.1(k) which are not transferrable; (iv) to Seller's and Principals' Knowledge, cause Purchaser to become subject to, or to become liable for the payment of, any Tax; (v) conflict with, or result in a violation or breach of any provision of, or give any Person the right to declare a default or exercise any remedy under, or to accelerate the maturity or performance of, or to cancel, terminate, or modify, any material Contract, except purchase orders, the Facility Lease and the Collective Bargaining Agreement; or (vi) result in the imposition or creation of any Encumbrance upon or with respect to any of the Assets. 4.3 CONSENTS. Except as set forth on SCHEDULE 4.3 (the "Consents") attached hereto, Seller is not nor will it be required to give any notice to or obtain any consent from any Person in connection with the execution and delivery of this Agreement or the consummation or performance of any of the Contemplated Transactions. 4.4 FINANCIAL STATEMENTS. Sellers have delivered to Purchaser: (a) audited balance sheets of Seller as at December 31 in each of the years 1996 through 1997, and the related audited statements of income, changes in stockholders' equity, and cash flow for each of the fiscal years then ended, together 16 with the report thereon of Babush, Neiman, Kornman & Johnson, LLP, independent certified public accountants, (b) an audited balance sheet of Seller as at December 31, 1998 (including the notes thereto, the "December Balance Sheet"), and the related audited statements of income, changes in stockholders' equity, and cash flow for the fiscal year then ended, together with the report thereon of Babush, Neiman, Kornman & Johnson, LLP, independent certified public accountants, and (c) an unaudited balance sheet of Seller as at June 30, 1999 (the "Interim Balance Sheet") and the related unaudited statements of income, changes in stockholders' equity, and cash flow for the six (6) months then ended. Such financial statements and notes for the audited financial statements fairly present the financial condition and the results of operations, changes in stockholders' equity, and cash flow of Seller as at the respective dates of and for the periods referred to in such financial statements, all in accordance with GAAP, subject, in the case of interim financial statements, to normal recurring year-end adjustments (the effect of which will not, individually or in the aggregate, be materially adverse) and the absence of notes (that, if presented, would not differ materially from those included in the December Balance Sheet). The financial statements referred to in this Section 4.4 reflect the consistent application of such accounting principles throughout the periods involved. 4.5 BOOKS AND RECORDS. The books of account, minute books, stock record books, sales records, payment records, invoices, shipment records, production records, customer complaint and recall records, purchasing records, and any and all formulations (including, without limitation, governmental formulations) of Seller, all of which have been made available to Purchaser, are true, complete and correct and have been maintained in accordance with sound business practices and on a consistent basis. The minute books of Seller contain accurate and complete records of all meetings held of, and corporate action taken by, the shareholders and the Boards of Directors of Seller. 4.6 TITLE TO AND CHARACTER OF ASSETS; FACILITY LEASE; REAL PROPERTY. (a) Except as set forth on SCHEDULE 4.6(a), Seller owns and has good and marketable title to all the Assets, free and clear of all Encumbrances, except for Encumbrances related to Taxes or assessments not yet due and payable (the "Permitted Encumbrances"). The Assets constitute all the tangible and intangible personal property deemed necessary by Seller for the conduct of the Business of Seller. (b) Upon the sale, transfer and assignment of the Assets pursuant to this Agreement, there shall be vested in Purchaser good and valid title to all of the Assets free and clear of any Encumbrances, except for Permitted Encumbrances. (c) All of the equipment is sold "as is," "where is" with all faults, other than Seller's computers which are in good operating condition. There are no outstanding agreements, options or commitments of any nature obligating Seller to transfer any of the Assets or the Assumed Liabilities or rights or interests therein to any other party, other than Inventory in the Ordinary Course of Business . (d) The Facility Lease is the only office and place of business relating to the Business, except for a sales office located at 850 U.S. Highway One, N., North Brunswick, New Jersey. (e) Seller does not own legal or equitable title to any real property. 17 4.7 RECEIVABLES. All Receivables of Seller that are reflected on the December Balance Sheet or the Interim Balance Sheet or on the accounting records of Seller as of the Closing Date represent or will represent valid obligations arising from sales actually made or services actually performed in the Ordinary Course of Business. Unless paid prior to the Closing Date, the Receivables are or will be as of the Closing Date current and collectible. Each of the Receivables either has been or will be collected in full, without any set-off, within ninety days after the day on which it first becomes due and payable. To Seller's and Principals' Knowledge, there is no contest, claim, or right of set-off, other than immaterial returns in the Ordinary Course of Business, which are consistent in amount with historical amounts, under any Contract with any obligor of Receivables relating to the amount or validity of such Receivables. It is understood that Seller retains payments made on Receivables prior to the Closing Date, subject to the requirement of Sections 2.1(e), 3.1 and 3.2 of this Agreement. 4.8 INVENTORY. All Inventory of Seller, whether or not reflected in the December Balance Sheet or the Interim Balance Sheet, consists of a quality and quantity usable and salable in the Ordinary Course of Business, except for obsolete items and items of below-standard quality, all of which have been written off or written down to net realizable value in the December Balance Sheet or the Interim Balance Sheet or on the accounting records of Seller as of the Closing Date, as the case may be or set forth on SCHEDULE 4.8 attached hereto. The quantities of each item of Inventory (whether raw materials, work-in-process, or finished goods) are reasonable in Seller's Ordinary Course of Business. 4.9 NO UNDISCLOSED LIABILITIES. To Seller's and Principals' Knowledge, Seller has no liabilities or obligations of any nature (whether absolute, accrued, contingent, or otherwise) except for Permitted Encumbrances, liabilities or obligations reflected or reserved against in the December Balance Sheet or the Interim Balance Sheet and current liabilities incurred in the Ordinary Course of Business since the respective dates thereof. 4.10 TAXES. (a) (i) Seller has filed or caused to be filed (on a timely basis) all Tax Returns (or extensions thereof) that are or were required to be filed by it pursuant to applicable Legal Requirements. Seller has delivered to Purchaser copies of all such Tax Returns filed since 1994. An extension of time to file any Tax Return that has not been filed has not been required or granted. Seller has paid all Taxes that have or may have become due pursuant to those Tax Returns or otherwise, or pursuant to any assessment received by Sellers through the date of this Agreement; (ii) Except as otherwise reserved against or reflected in the December Balance Sheet or the Interim Balance Sheet, all Taxes that Seller is or was required by Legal Requirements to withhold or collect have been duly withheld or collected and, to the extent required, have been paid to the proper Governmental Body or other Person; (iii) Seller has not incurred any liability with respect to any Taxes except in the Ordinary Course of Business; and (iv) the Tax Returns are true, accurate and complete in all respects and properly reflect the liabilities, if any, of Seller for Taxes for the periods, property or events covered thereby. 18 (b) To Seller's and Principals' Knowledge, there is no dispute as to Taxes payable by Seller that could have or result in any adverse effect on the Assets, the Business or, after the Closing Date, the Purchaser. (c) There is no tax sharing agreement that will require any payment by Seller after the date of this Agreement. (d) There are no liens for Taxes (other than for current Taxes not yet due and payable) on the Assets. 4.11 NO MATERIAL ADVERSE CHANGE. Since the date of the December Balance Sheet, there has not been any material adverse change in the business, operations, properties, assets, or condition of Seller, and to Seller's and Principals' Knowledge there has not been any material adverse change in Seller's prospects and no event has occurred or circumstance exists that may result in such a material adverse change; PROVIDED, HOWEVER, no representation or warranty is made as to political or legislative efforts to change laws or regulations which could have a material adverse affect on the Business, including without limitation Code Section 5010. 4.12 EMPLOYEE BENEFITS. (a) (i) SCHEDULE 4.12(a)(i) contains a complete and accurate list of all Company Plans and Company Other Benefit Obligations, and identifies as such all Company Plans that are Qualified Plans. (ii) Seller has no Affiliates that, together with Seller, would be treated as a single employer under Code Section 414. (iii) Seller has not established, maintained, or contributed to or otherwise participated in, or had an obligation to maintain, contribute to, or otherwise participate in, any Multi-Employer Plan; (iv) Seller has no post-retirement benefits other than the plan listed on SCHEDULE 4.12(a)(iv). (v) Seller has no obligations owed under any Company Plan or Company Other Benefit Obligation. (vi) Neither Seller nor any of its employees have established or participate in any voluntary employees' beneficiary association as described under Code Section 501(c)(9). (b) Seller has delivered to Purchaser, or will deliver to Purchaser within fifteen (15) days of the date of this Agreement: (i) all documents (and amendments or modifications thereto) that set forth the terms of each Company Plan, Company Other Benefit Obligation, or Company VEBA and of any related trust, including (A) all plan descriptions and summary plan descriptions of Company Plans for which Seller is required to prepare, file, and distribute plan descriptions and summary plan descriptions, 19 and (B) all summaries and descriptions furnished to participants and beneficiaries regarding Company Plans, Company Other Benefit Obligations, and Company VEBAs for which a plan description or summary plan description is not required; (ii) all current personnel, payroll, and employment manuals and policies; (iii) all collective bargaining agreements pursuant to which contributions have been made or obligations incurred (including both pension and welfare benefits) by Seller and the ERISA Affiliates of Seller, if any, and all collective bargaining agreements pursuant to which contributions are being made or obligations are owed by such entities; (iv) a written description of any Company Plan or Company Other Benefit Obligation that is not otherwise in writing; (v) all registration statements filed with respect to any Company Plan; (vi) all current insurance policies purchased by or to provide benefits under any Company Plan; (vii) all current contracts with third party administrators, actuaries, investment managers, consultants, and other independent contractors that relate to any Company Plan or Company Other Benefit Obligation; (viii) all reports submitted within the three years preceding the date of this Agreement by third party administrators, actuaries, investment managers, consultants, or other independent contractors with respect to any Company Plan or Company Other Benefit Obligation; (ix) all notifications to employees of their rights under ERISA Section 601 et seq. and Code Section 4980B that have been distributed within the three years preceding the date of this Agreement; (x) the Form 5500 filed in each of the most recent three plan years with respect to the Company Plan, including all schedules thereto and the opinions of independent accountants, if applicable; (xi) all notices that were given by Seller or any Company Plan to the IRS or any participant or beneficiary, pursuant to statute, within the three years preceding the date of this Agreement, including notices that are expressly mentioned elsewhere in this Section 4.12; (xii) all notices that were given by the IRS, the PBGC, or the Department of Labor to Seller or any Company Plan within the four years preceding the date of this Agreement; and (xiii) with respect to Qualified Plans, the most recent determination letter for each Plan of Seller that is a Qualified Plan. (c) (i) Seller has substantially performed its obligations under all Company Plans and Company Other Benefit Obligations. Seller has made appropriate entries in their financial 20 records and statements for all obligations and liabilities under such Plans and Obligations that have accrued but are not due; (ii) no statement, either written or oral, has been made by Seller to any Person with regard to any Plan or Other Benefit Obligation that is not in substantial accordance with the Plan or Other Benefit Obligation and that could have substantial adverse economic consequence to Seller, the Business, the Assets or to Purchaser; and (iii) except to the extent required under ERISA Section 601 et seq. and Code Section 4980B, Seller provides no health or welfare benefits for any retired or former employee or is obligated to provide health or welfare benefits to any active employee following such employee's retirement or other termination of service; (iv) Seller has the right to modify and terminate benefits to retirees (other than pensions) with respect to both retired and active employees; (v) Except as disclosed on SCHEDULE 4.12(c), Seller has complied with the provisions of ERISA Section 601 et seq. and Code Section 4980B; (vi) no payment that is owed or may become due to any director, officer, employee, or agent of Seller will be non-deductible to Seller or subject to tax under Code Section 280G or Section 4999; nor will Seller be required to "gross up" or otherwise compensate any such person because of the imposition of any excise tax on a payment to such person; and (vii) Except as disclosed on SCHEDULE 4.12(c), the consummation of the Contemplated Transactions will not result in the payment, vesting, or acceleration of any benefit. (d) Except as set forth on SCHEDULE 4.12(d), Seller is not, with respect to the Business, (i) a party to any collective bargaining agreement, (ii) no such agreement determines the terms and conditions of employment of any employees, (iii) no collective bargaining agent has been certified as a representative of any employees, (iv) no representation campaign or election is now in progress with respect to any leased employee, if any, (v) to Seller's and Principals' Knowledge, there is no labor trouble, dispute, grievance, strike, unfair labor practices or request for union representation pending, or Threatened, relating to or affecting the Business, and (vi) to Seller's and Principals' Knowledge, there is no occurrence or any event which is likely to give rise to any such trouble, dispute, strike or request for representation (including, but not limited to, any unfair labor practice charge). 4.13 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS. (a) (i) Seller is in material compliance with each Legal Requirement that is applicable to it or to the conduct or operation of the Business or the ownership or use of any of the Assets; (ii) To Seller's and Principals' Knowledge, no event has occurred or circumstance exists that (with or without notice or lapse of time) (A) may constitute or result in a material violation by Seller of, or a failure on the part of Seller to comply with, any Legal Requirement, 21 or (B) may give rise to any obligation on the part of Seller to undertake, or to bear all or any portion of the cost of, any remedial action of any nature; and (iii) Except as set forth on SCHEDULE 4.13(a)(iii), neither Seller nor the Principals have received since January 1, 1994 any notice or other communication (whether oral or written) from any Governmental Body or any other Person regarding (A) any actual, alleged, possible, or potential violation of, or failure to comply with, any Legal Requirement, or (B) any actual, alleged, possible, or potential obligation on the part of Seller to undertake, or to bear all or any portion of the cost of, any remedial action of any nature. (b) SCHEDULE 4.13(b) contains a complete and accurate list of each Governmental Authorization that is held by Seller and relates to the Business or to any of the Assets. To Seller's and Principals' Knowledge, each Governmental Authorization listed in SCHEDULE 4.13(b) is valid and in full force and effect. (i) Seller is in material compliance with all of the terms and requirements of each Governmental Authorization identified or required to be identified in SCHEDULE 4.13(b); (ii) To Seller's and Principals' Knowledge, no event has occurred or circumstance exists that may (with or without notice or lapse of time) (A) constitute or result directly or indirectly in a violation of any term or requirement of any Governmental Authorization listed or required to be listed in SCHEDULE 4.13(b), or (B) result directly or indirectly in the revocation, withdrawal, suspension, cancellation, or termination of, or any modification to, any Governmental Authorization listed or required to be listed in SCHEDULE 4.13(b); and (iii) Except as set forth on SCHEDULE 4.13(b)(iii), neither Seller nor the Principals have received any notice or other communication (whether oral or written) from any Governmental Body or any other Person regarding (A) any actual, alleged, possible, or potential violation of or failure to comply with any term or requirement of any Governmental Authorization, or (B) any actual, proposed, possible, or potential revocation, withdrawal, suspension, cancellation, termination of, or modification to any Governmental Authorization. The Governmental Authorizations listed in SCHEDULE 4.13(b) collectively constitute all of the Governmental Authorizations necessary to permit Seller to lawfully conduct and operate the Business in the manner it currently conducts and operates the Business and to permit Seller to own and use the Assets in the manner in which it currently owns and uses such Assets. 4.14 LEGAL PROCEEDINGS; ORDERS. (a) There is no pending Proceeding: (i) that has been commenced by or against Seller or that otherwise relates to or may adversely affect the Business or any of the Assets; or (ii) that challenges, or that may have the effect of preventing, delaying, making illegal, or otherwise interfering with, any of the Contemplated Transactions. 22 (b) Except as set forth on SCHEDULE 4.14(b), to the Knowledge of Seller and the Principals, (i) no Proceeding has been Threatened; and (ii) no event has occurred or circumstance exists that may give rise to or serve as a basis for the commencement of any Proceeding described in Section 4.14(a). (c) (i) There is no Order to which Seller or any of the Assets is subject; (ii) neither Seller nor any of the Principals is subject to any Order that relates to the Business or any of the Assets; and (d) Neither Seller nor any of its officers, directors, shareholders, employees or constituent partners, on behalf of, or for the benefit of, Seller, directly or indirectly, have done any of the following: (i) offered, paid or received any remuneration to or from, or made any arrangement with, any of the past or present customers or potential customers in order to obtain business, other than standard pricing or discount arrangements or other arrangements consistent with proper business practices and applicable law; (ii) given or received, or agreed to give or receive, or is aware that there has been made, or that there is an agreement to make or receive, any gift or gratuitous payment of any kind, nature or description (whether in money, property or services) to any past or present customer, supplier, source of financing, landlord, subtenant, licensee or anyone else at any time, other than gifts and gratuitous payments that are consistent with proper business practices and applicable law; (iii) made, or has agreed to make, or is aware that there is any agreement to make, any political contribution or any contributions, payments or gifts of their respective funds or property to or for the private use of any governmental official, employee or agent, where either the payment or the purpose of such contribution, payment or gift relates to the Business and is illegal under the laws of the United States, any state thereof or any other jurisdiction (foreign or domestic); or (iv) except as set forth on SCHEDULE 4.14(d)(iv), made, or has agreed to make, or is aware that there have been made or that there is any agreement to make, any payments to any persons with the intention or understanding that any part of such payment was to be used, directly or indirectly, for the benefit of any past or present customer, employee, supplier or landlord of Seller for any purpose other than that reflected in the documents supporting the payments. 4.15 BROKERS. Neither this Agreement nor the Contemplated Transactions was induced by or procured through any person, firm, corporation or other entity acting on behalf of, or representing, Seller as a broker, finder, investment banker, financial advisor or in any similar capacity. 4.16 ABSENCE OF CERTAIN CHANGES AND EVENTS. Since the date of the December Balance Sheet, Seller has conducted the Business only in the Ordinary Course of Business and, except as set forth on SCHEDULE 4.16 attached hereto, outside of the Ordinary Course of Business, there has not been any: 23 (a) damage to or destruction or loss of any Asset or property of Seller, whether or not covered by insurance, materially and adversely affecting the properties, Assets, Business, financial condition, or prospects of Seller, taken as a whole; (b) entry into, amendment of, termination of, or receipt of notice of termination of (i) any material license, distributorship, dealer, joint venture, or similar agreement, or (ii) any Contract or transaction involving a total remaining commitment by or to Seller of at least Fifty Thousand and No/100 Dollars ($50,000.00); (c) sale (other than sales of Inventory in the Ordinary Course of Business), lease, assignment, transfer, Encumbrance or other disposition of any Asset of Seller, including the sale, lease, or other disposition of any of the Intellectual Property; (d) material change in the accounting methods by Seller relating to the Business, Assets or the revaluation by Seller of any of the Assets; (e) incurrence of any obligation or liability (absolute or contingent), except for current liabilities incurred, and obligations under contracts entered into, in the Ordinary Course of Business; (f) except for the loan from LaSalle National Bank, discharge or satisfaction of any Encumbrance, or payment of any obligation or liability, absolute or contingent, by Seller relating to the Business or the Assets, other than current liabilities shown on the December Balance Sheet and current liabilities incurred since that date in the Ordinary Course of Business; (g) release, compromise, waiver or cancellation of any debts to or claims by Seller relating to the Business or the Assets, except in each case in the Ordinary Course of Business, or waiver of any rights of substantial value; (h) other event or condition of any character that has or might reasonably have a material adverse effect on the Business or the Assets (excluding events or conditions, if any, of public knowledge or of a general economic, market or similar nature); (i) failure by Seller to satisfy any of its debts, obligations or liabilities as the same become due and owing; or (j) agreement or commitment, whether oral or written, by Seller to do any of the foregoing. 4.17 CONTRACTS. (a) SCHEDULE 4.17(a) contains a true, correct and complete list, and Seller has delivered to Purchaser true, correct and complete copies, of: (i) all Contracts other than purchase orders that are reasonably likely to be in existence after the Closing Date; 24 (ii) each Contract that was not entered into in the Ordinary Course of Business and that involves expenditures or receipts of Seller in excess of Ten Thousand and No/100 Dollars ($10,000.00); (iii) each lease, rental or occupancy agreement, license, installment and conditional sale agreement, and other Contract affecting the ownership of the Assets and the Assumed Liabilities; (iv) each licensing agreement or other Contract with respect to patents, trademarks, copyrights, or other intellectual property, including agreements with current or former employees, consultants, or contractors regarding the appropriation or the non-disclosure of any of the Intellectual Property; (v) each collective bargaining agreement and other Contract to or with any labor union or other employee representative of a group of employees; (vi) each joint venture, partnership, and other Contracts (however named) involving a sharing of profits, losses, costs, or liabilities by Seller with any other Person; (vii) each Contract providing for payments to or by any Person based on sales, purchases, or profits, other than direct payments for goods; (viii) each power of attorney relating to Seller or the Business that is currently effective and outstanding; (ix) each Contract entered into other than in the Ordinary Course of Business that contains or provides for an express undertaking by Seller to be responsible for consequential damages; (x) each Contract for capital expenditures; and (xi) each amendment, supplement, and modification (whether oral or written) in respect of any of the foregoing. (b) Each Contract is in full force and effect and is valid and enforceable in accordance with its terms with respect to Seller, and to Seller's and Principals' Knowledge, each Contract (other than purchase orders) is in full force and effect and is valid and enforceable in accordance with its terms with respect to other parties thereto. (c) (i) Seller is in material compliance with all applicable terms and requirements of each Contract; (ii) to Seller's and Principals' Knowledge, each other Person that has or had any obligation or liability under any Contract under which Seller has or had any rights is in substantial compliance with all applicable terms and requirements of such Contract; 25 (iii) except as set forth on SCHEDULE 4.17(c), no event has occurred or circumstance exists that (with or without notice or lapse of time) may contravene, conflict with, or result in a violation or breach of any Contract; and (iv) neither Seller nor the Principals have given to or received from any other Person any notice or other communication (whether oral or written) regarding any actual, alleged, possible, or potential violation or breach of, or default under, any Contract. (d) There are no current renegotiations of, or outstanding rights to renegotiate any material amounts paid or payable to Seller under current or completed Contracts with any Person and, to the Knowledge of Seller and the Principals, no such Person has made written demand for such renegotiation. (e) The Contracts relating to the sale, manufacture, or provision of products or services by Seller in connection with the Business have been entered into in the Ordinary Course of Business. (f) Neither Seller nor the Principals have received notice (whether written or oral) that any party to any Contract intends to cancel, suspend or terminate any of the Contracts or to exercise any options under any of the Contracts. 4.18 INSURANCE. (a) SCHEDULE 4.18 is a true and complete list of all Insurance Policies, together with a list of all outstanding claims under each Insurance Policy. (b) (i) To Seller's and Principals' Knowledge, the Insurance Policies are in full force and effect in accordance with their terms, (ii) no notice of cancellation has been received, and, to Seller's and Principals' Knowledge, there is no existing default or event which, with the giving of notice or lapse of time or both, would constitute a default thereunder, (iii) such policies are in amounts which are deemed adequate by Seller in relation to the Business and the Assets, (iv) all premiums to date have been paid in full, and (v) Seller has not been refused any insurance, or had its coverage limited by any insurance carrier to which it has applied for insurance or with which it has carried insurance. 4.19 ENVIRONMENTAL MATTERS. (a) Seller is, and at all times has been, in substantial compliance with, and has not been and is not in violation of or liable under, any Environmental Law. Neither Seller nor any of the Principals have a basis to expect, nor have the Principals or Seller received, any actual or Threatened Order, notice, or other communication from (i) any Governmental Body or private citizen acting in the public interest, or (ii) the current or prior owner or operator of the Facility, of any actual or potential violation or failure to comply with any Environmental Law, or of any actual or Threatened obligation to undertake or bear the cost of any Environmental, Health, and Safety Liabilities with respect to the Facility. (b) There are no pending or, to the Knowledge of Seller and the Principals, Threatened claims, Encumbrances, or other restrictions of any nature, resulting from any Environmental, 26 Health, and Safety Liabilities or arising under or pursuant to any Environmental Law, with respect to or affecting the Facility. (c) To Seller's and Principals' Knowledge, Seller has no Environmental, Health, and Safety Liabilities with respect to the Facility. (d) To Seller's and Principals' Knowledge, there are no Hazardous Materials (excluding Seller's use of ethyl alcohol, ethyl acetate and laboratory chemicals in the Ordinary Course of Business in accordance with Environmental Laws) present on or in the Environment at the Facility, including any Hazardous Materials contained in barrels, above or underground storage tanks, landfills, land deposits, dumps, equipment (whether moveable or fixed) or other containers, either temporary or permanent, and deposited or located in land, water, sumps, or any other part of the Facility. Seller has not permitted or conducted, or is aware of, any Hazardous Activity conducted with respect to the Facility. (e) To Seller's and Principals' Knowledge, there has been no Release or, to the Knowledge of Seller and the Principals, Threat of Release, of any Hazardous Materials at or from the Facility. (f) Seller has delivered to Purchaser true and complete copies and results of any reports, studies, analyses, tests, or monitoring possessed or initiated by Seller pertaining to Hazardous Materials or Hazardous Activities in, on, or under the Facility, or concerning compliance by Seller or in the possession of Seller with respect to any other Person for whose conduct Seller is or may be held responsible, with Environmental Laws. 4.20 EMPLOYEES. (a) SCHEDULE 4.20(a) contains a true, correct and complete list of the following information for each employee of Seller, including each employee on leave of absence or layoff status: employee; name; job title; current compensation paid or payable and any change in compensation since December 31, 1998; vacation accrued; and service credited for purposes of vesting and eligibility to participate under Seller's pension, retirement, profit-sharing, thrift-savings, deferred compensation, stock bonus, stock option, cash bonus, employee stock ownership (including investment credit or payroll stock ownership), severance pay, insurance, medical, welfare, vacation plan or other Company Plan. (b) To Seller's and Principals' Knowledge, no employee of Seller is a party to, or is otherwise bound by, any agreement or arrangement, including any confidentiality, noncompetition, or proprietary rights agreement, between such employee and any other Person that in any way adversely affects or will affect the performance of his duties as an employee of Seller, or if applicable, Purchaser. (c) SCHEDULE 4.20(c) also contains a complete and accurate list of the following information for each retired employee of Seller, or their dependents, receiving benefits or scheduled to receive benefits in the future: name, pension benefit, pension option election, retiree medical insurance coverage, retiree life insurance coverage, and other benefits. 27 4.21 INTELLECTUAL PROPERTY. (a) SCHEDULE 4.21(a) contains a true, correct and complete list and summary description, including any royalties paid or received by Seller, of all Contracts relating to the Intellectual Property to which Seller is a party or by which Seller is bound, except for any license implied by the sale of a product and perpetual, paid-up licenses for commonly available software programs with a value of less than $1,000 under which Seller is the licensee. There are no outstanding and, to Seller's and Principals' Knowledge, no Threatened disputes or disagreements with respect to any such agreement. (b) The Assets that are Intellectual Property are all those deemed necessary by Seller for the operation of the Business as it is currently conducted. Except as disclosed on SCHEDULE 4.21(b), Seller is the owner of all right, title, and interest in and to the formulas and customer lists, free and clear of all Encumbrances, and has the right to use without payment to a third party all of the Intellectual Property. (c) Seller owns no Patents. (d) (i) SCHEDULE 4.21(d) contains a true, correct and complete list and summary description of all Marks owned by Seller. Seller is the owner of all right, title, and interest in and to each of the Marks, free and clear of all Encumbrances; (ii) to Seller's and Principals' Knowledge, all Marks that have been registered with the United States Patent and Trademark Office, if any, are currently in compliance with all formal Legal Requirements (including the timely post-registration filing of affidavits of use and incontestability and renewal applications), are valid and enforceable, and are not subject to any maintenance fees or taxes or actions falling due within ninety days after the Closing Date; (iii) to Seller's and Principals' Knowledge, no Mark has been or is now involved in any opposition, invalidation, or cancellation and, to Seller's and Principals' Knowledge, no such action is Threatened with the respect to any of the Marks; (iv) to Seller's and Principals' Knowledge, other than PYA Monarch, there is no potentially interfering trademark or trademark application of any third party; (v) no Mark is infringed or, to Seller's and Principals' Knowledge, has been challenged or Threatened in any way. To Seller's and Principals' Knowledge, none of the Marks used by Seller infringes or is alleged to infringe any trade name, trademark, or service mark of any third party; and (vi) all products and materials containing a Mark bear the proper federal registration notice where permitted by law. (e) Seller owns no copyrights. (f) (i) With respect to the formulas, customer lists and sales information specific to each of Seller's customers, the documentation relating to such formulas, customer lists and sales information specific to each of Seller's customers is current, accurate, and sufficient in detail and 28 content to identify and explain it and to allow its full and proper use without reliance on the knowledge or memory of any individual; (ii) Seller has taken all reasonable precautions to protect the secrecy, confidentiality, and value of its Trade Secrets; and (iii) Seller has good title and an absolute (but not necessarily exclusive) right to use the formulas, customer lists and sales information specific to each of Seller's customers. The formulas, customer lists and sales information specific to each of Seller's customers are not part of the public knowledge or literature, and, to Seller's and Principals' Knowledge, have not been used, divulged, or appropriated either for the benefit of any Person or to the detriment of Seller. The formulas, customer lists and sales information specific to each of Seller's customers are not subject to any adverse claim or have been challenged or Threatened in any way. (g) To Seller's and Principals' Knowledge, (i) All Systems are Year 2000 Compliant; are designed to be used prior to, during, and after the calendar Year 2000; will operate consistently, predictably and accurately, without interruption or manual intervention, and in accordance with all requirements of this Agreement, in relation to dates they encounter or process; (ii) All date recognition and processing by the Systems will include the Four Digit Year Format and will correctly recognize and process the date of February 29, and any related data, during Leap Years; and that all date sorting by the Systems that includes a "year category" shall be done based on the Four Digit Year Format; (iii) To the extent that the Systems will accept data from other systems and sources that are not Year 2000 Compliant, the Systems will properly recognize, calculate, sort, store, output and otherwise process such data in a manner that eliminates any and all century ambiguity so that the Systems remain Year 2000 Compliant; and (iv) The Systems of all suppliers, vendors, agents, services or other third parties whose activities and/or services affect the operations of the Business are Year 2000 Compliant. 4.22 RELATIONSHIPS WITH RELATED PERSONS. Neither Seller, nor the Principals nor any Related Person of Seller has had any interest in any of the Assets (whether real, personal, or mixed and whether tangible or intangible). Neither Seller, nor the Principals, nor any Related Person of Seller or the Principals owns or has owned during the periods covered by the financial statements referred to in Section 4.4 hereof, (of record or as a beneficial owner), an equity interest or any other financial or profit interest in, a Person (other than publicly traded companies) that has (a) had business dealings or a financial interest in any transaction with Seller, or (b) engaged in competition with Seller with respect to any line of the products or services of Seller. Neither Seller, nor the Principals, nor any Related Person of Seller or the Principals is a party to any Contract with, or has any claim or right against, Seller. 4.23 CONDITIONS AFFECTING SELLER. Seller has no reason to believe that any material loss or resignation of any agents, independent contractors or suppliers will result because of the consummation of the Contemplated Transactions. Seller has not received notice (written or oral) of the potential loss of 29 any of its customers as a result of the pendency of the Contemplated Transactions, has no reason to believe such a loss will occur, but makes no representation that Purchaser will retain all of the Business' customers after the Closing Date. Notwithstanding anything to the contrary in this Agreement, nothing in this Section 4.23 shall be deemed a waiver by Purchaser of its rights under Sections 4.11, 4.16, 6.1, 6.2, 6.3, 8.1 and 8.6. 4.24 NO SUBSIDIARIES. Seller does not own, either of record, beneficially or equitably, any capital stock or other securities or any other direct or indirect interest in any firm, corporation or other entity (including any joint venture or partnership). ARTICLE V REPRESENTATIONS AND WARRANTIES OF PURCHASER Purchaser hereby represents and warrants to Seller and the Principals as of the date of this Agreement (which warranties and representations shall survive the Closing, to the extent set forth in Section 12.1 hereof, regardless of what examinations, inspections, audits and other investigations Seller has made or may hereafter make, with respect to such warranties and representations) and as of the Closing Date, as follows: 5.1 ORGANIZATION AND GOOD STANDING. Purchaser is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware. 5.2 AUTHORITY; NO CONFLICT. (a) Upon the execution and delivery by Purchaser of this Agreement and any other document required to be delivered by Purchaser herein (collectively, the "Purchaser's Closing Documents"), the Purchaser's Closing Documents will constitute the legal, valid, and binding obligations of Purchaser, enforceable against Purchaser in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws from time to time in effect that affect creditors' rights generally and by legal and equitable limitations on the availability of specific remedies. Purchaser has the absolute and unrestricted right, power and authority to execute and deliver this Agreement and Purchaser's Closing Documents and to perform its obligations under this Agreement and Purchaser's Closing Documents. No other acts or proceedings on the part of Purchaser will be necessary to authorize the performance of this Agreement, or the Purchaser's Closing Documents by Purchaser. (b) Neither the execution and delivery of this Agreement and the Purchaser's Closing Documents nor the consummation or performance of any of the Contemplated Transactions by Purchaser will directly or indirectly (with or without notice or lapse of time): (i) contravene, conflict with or result in a violation of any provision of Purchaser's Certificate of Organization, Bylaws or other organizational documents; or (ii) to Purchaser's Knowledge, conflict with, or result in a violation of any Legal Requirement or any Order to which Purchaser is subject. 30 5.3 CONSENTS. Except for an HSR Act filing, if applicable, and any Consents previously obtained, Purchaser is not and will not be required to obtain any Consent from any Person in connection with the execution and delivery of this Agreement or the consummation or performance of any of the Contemplated Transactions. 5.4 BROKERS. Neither this Agreement nor the Contemplated Transactions was induced by or procured through any person, firm, corporation or other entity acting on behalf of, or representing, Purchaser as a broker, finder, investment banker, financial advisor or in any similar capacity. 5.5 FINANCIAL ABILITY. Purchaser has the financial ability to consummate the asset purchase contemplated hereunder, subject to receiving financing. 5.6 BUSINESS OPERATION. Purchaser has the knowledge and experience to operate the Business. 5.7 YEAR 2000. To Purchaser's Knowledge: (a) all Purchaser's Systems are Year 2000 Compliant; are designed to be used prior to, during, and after the calendar Year 2000; will operate consistently, predictably and accurately, without interruption or manual intervention, and in accordance with all requirements of this Agreement, in relation to dates they encounter or process; (b) all date recognition and processing by the Purchaser's Systems will include the Four Digit Year Format and will correctly recognize and process the date of February 29, and any related data, during Leap Years; and that all date sorting by the Purchaser's Systems that includes a "year category" shall be done based on the Four Digit Year Format; (c) to the extent that the Purchaser's Systems will accept data from other systems and sources that are not Year 2000 Compliant, the Purchaser's Systems will properly recognize, calculate, sort, store, output and otherwise process such data in a manner that eliminates any and all century ambiguity so that the Purchaser's Systems remain Year 2000 Compliant; and (d) the Purchaser's Systems of all suppliers, vendors, agents, services or other third parties whose activities and/or services affect the operations of Purchaser are Year 2000 Compliant. ARTICLE VI COVENANTS OF SELLER 6.1 OPERATION OF THE BUSINESS. Unless Purchaser shall otherwise agree in writing, from and after the date of this Agreement and until the Closing Date, which agreement shall not be unreasonably withheld, Seller shall: (a) carry on the Business in the Ordinary Course of Business; 31 (b) refrain from doing, or causing to be done, anything which would cause the representations and warranties set forth in Article IV of this Agreement from not being true, complete and correct on the Closing Date as if made on such date; (c) continue to insure itself and the Assets and all property owned or leased by Seller in accordance with the manner disclosed in Section 4.18, and to use, operate, maintain and repair the Assets consistent with past practices; (d) not enter into any Contract or agreement for the purchase of goods, equipment or services without Purchaser's prior written consent, except in the Ordinary Course of Business; (e) not enter into any agreement to sell Assets or supply services to others without Purchaser's prior written consent, except in the Ordinary Course of Business; (f) use commercially reasonable efforts (without making any commitments on behalf of Purchaser) to preserve the Business intact, and to preserve for Purchaser the present relationships with customers, suppliers, agents, independent contractors, franchisors, lenders, agents and others having business relationships with Seller; (g) refrain from doing any act or omitting to do any act, or permitting any act or omission to act, which will cause a breach of any contract, commitment or obligation of Seller related to the Business, the Assets or the Assumed Liabilities; (h) promptly notify Purchaser in writing of any written or Threatened investigation or Proceeding by or relating to Seller, the Assets, the Business or this Agreement before any court or governmental department, commission, board, bureau, agency or instrumentality; (i) refrain from doing any act or omitting to do any act, or permitting any act or omission to act, which will cause any of the Assets to be depleted or any of the Receivables or trade payables to be collected on an accelerated basis, other than in the Ordinary Course of Business; (j) use its best efforts to cause all of the conditions to the obligations of Seller under this Agreement to be satisfied on or prior to the Closing Date; (k) not amend its Certificate of Incorporation, Bylaws, Shareholders' Agreement or any of its other organizational documents; (l) promptly disclose in writing to Purchaser any information contained in Seller's representations and warranties contained in this Agreement which is incomplete or incorrect as of all times after the date of this Agreement until the Closing Date; PROVIDED, HOWEVER, that none of such inaccurate or incomplete disclosures shall be deemed to modify, amend or supplement the representations and warranties of Seller in this Agreement for the purposes of Article IV of this Agreement; PROVIDED, FURTHER that if, and only if, Seller notifies Purchaser in writing of any such incomplete or inaccurate representation or warranty herein prior to the Closing and Purchaser consummates the Contemplated Transactions after receipt of such written notice, then Purchaser shall not be entitled to pursue any remedies under Section 12.2(b) with respect to only such matter, but shall be entitled to pursue any remedies thereunder as to other matters. 32 (m) not terminate any of its employees without the prior written consent of Purchaser, other than in the Ordinary Course of Business; (n) not dispose of or modify or alter the Assets, other than in the Ordinary Course of Business, or incur, create or assume any Encumbrance on any Asset; (o) take any action which could reasonably be expected to prevent or materially delay the consummation of the Contemplated Transactions; (p) terminate all of its employees immediately prior to Closing; (q) without limiting the generality of any of the foregoing, if, at any time prior to the Closing, Seller receives notice (written or oral) that any of Seller's customers do not desire to do business with Purchaser subsequent to the Closing, Seller shall promptly notify Purchaser in writing of the same; and (r) agree to do any of the foregoing. 6.2 ACCESS AND INVESTIGATION; HSR FILING BY PURCHASER AND SELLER. (a) Purchaser and its representatives, agents and financing sources will have reasonable and appropriate access to the Facility and the records (financial and otherwise) of Seller at any time during normal business hours during a period commencing on the date hereof and ending forty-five (45) days thereafter (the "Inspection Period"), at Purchaser's sole cost and expense, to perform its due diligence review and to perform any tests, borings, inspections, surveys, studies, preliminary environmental site assessments and measurements which Purchaser reasonably deems necessary or appropriate; PROVIDED, HOWEVER, that if, after receipt of the preliminary site assessment reports, Purchaser deems it reasonably necessary to perform additional environmental tests, the Inspection Period may, at Purchaser's option, be extended for an additional forty-five (45) days. In conducting its inspection and due diligence review pursuant to this Section 6.2, however, neither Purchaser nor its representatives, agents, or financial sources may directly or indirectly contact any of Seller's employees, customers, distributors or suppliers without Seller's prior written consent, which consent shall not be unreasonably withheld. (b) Within fifteen (15) days following its execution of this Agreement, Seller will furnish to Purchaser true, correct and complete copies of all records, documentation and other information in its possession (or in the possession of Seller's attorneys or other representatives) as Purchaser may reasonably request concerning the ownership, use, operation and condition of the Business and the Assets. (c) Within thirty (30) days following its execution of this Agreement, Purchaser and Seller shall prepare and file all notifications and documents required to be filed for the Contemplated Transaction to comply with the HSR Act, if necessary. Purchaser and Seller shall each be responsible for all its costs, filing fees and expenses (including reasonable attorneys' fees) associated with the preparation and filing of all documents required under the HSR Act; PROVIDED, HOWEVER, that all notifications and documents in connection with the HSR Act must be submitted to the other party for its approval (which shall not be unreasonably withheld or delayed) prior to filing. 33 (d) After the Closing, Purchaser and its representatives and agents shall have access to those business records, computer records, billing and accounting records required to be kept by the BATF until the final BATF audit of Seller is completed. Promptly following the completion of the BATF audit, Seller shall deliver all such records to Purchaser. 6.3 TERMINATION. Purchaser will have the right, in its sole and absolute discretion, to terminate this Agreement at any time during the Inspection Period (as it may be extended pursuant to Section 6.2) for any reason whatsoever. Purchaser will notify Seller and the Principals in writing of its intention to terminate this Agreement pursuant to this Section 6.3 prior to 5:00 p.m. E.S.T. on the last day of the Inspection Period (or, if the last day of the Inspection Period is not a business day, prior to 5:00 p.m. E.S.T. on the first business day following the end of the Inspection Period). If Purchaser fails to so notify Seller within such time period, then all rights of Purchaser to terminate this Agreement pursuant to this Section 6.3 will be null and void and of no further force or effect. If the sale shall not have been consummated within fifteen (15) days of the end of the Inspection Period (including any extension thereof), and if Seller and Principals shall not be or have been in violation of any of Seller's and Principals' covenants, representations or warranties, Seller may terminate this Agreement. 6.4 NEGATIVE COVENANT. Except as otherwise expressly permitted by this Agreement, between the date hereof and the Closing Date, Seller will not, without prior consent of Purchaser (which consent shall not be unreasonably withheld or delayed), take any affirmative action, or fail to take any reasonable action within its control, as a result of which any of the changes or events listed in Section 4.16 is likely to occur. 6.5 REQUIRED CONSENTS. As promptly as practicable after the date of this Agreement, Seller will make all filings required by Legal Requirements to be made by it in order to consummate the Contemplated Transactions (including all filings under the HSR Act, if applicable). Between the date of this Agreement and the Closing Date, Seller will (a) cooperate with Purchaser with respect to all filings that Purchaser elects to make or is required by Legal Requirements to make in connection with the Contemplated Transactions, and (b) obtain all Consents identified in SCHEDULE 4.3 (including taking all actions requested by Purchaser to cause early termination of any applicable waiting period under the HSR Act, if applicable). Prior to Closing, Seller and Principals shall use their best efforts to obtain a consent from the landlord regarding the Facility Lease. 6.6 NO SHOP. From the date of this Agreement until the earlier of the Closing Date or the termination of this Agreement pursuant to its terms, Seller agrees that it will not and will not permit any of its officers, directors, employees, representatives, agents, or Affiliates to, directly or indirectly, (a) initiate, solicit or encourage (including by way of furnishing information), any inquiries or the making of any proposal or offer that constitutes, or may reasonably be expected to lead to, an Acquisition Proposal, or (b) enter into or maintain or continue discussions or negotiate with any Person in furtherance of such inquiries or to obtain an Acquisition Proposal, or (c) agree to, approve, recommend, or endorse any Acquisition Proposal, or authorize or permit any of its officers, directors, employees, representatives, agents, or affiliates to take any such action, and Seller shall promptly notify Purchaser of any such inquiries and proposals received by Seller or any of its officers, directors, employees, representatives, agents, or affiliates, relating to any of such matters. Seller agrees that it will immediately cease and cause to be terminated any existing activities, discussions, or negotiations with any parties regarding any Acquisition Proposal. Seller agrees to keep Purchaser fully and timely informed of the status of any 34 discussions, negotiations, furnishing of non-public information, or other activities relating to an Acquisition Proposal. 6.7 CONSULTING ARRANGEMENT. During the six (6) months immediately following the Closing Date, David Paszamant agrees to consult with Purchaser at the request of Purchaser, from time to time (but not to exceed ten (10) hours per month). David Paszamant may not, as a consultant to Purchaser, enlist the services of any Person in connection with any consulting services performed under this Section 6.7 without the prior written consent of Purchaser. David Paszamant shall not, as a consultant to Purchaser, be deemed in any way to be Purchaser's agent or employee or have any authority to bind Purchaser to any obligation, agreement or otherwise. 6.8 TAX COVENANTS. (a) No new elections with respect to Taxes or any changes in current elections with respect to Taxes affecting the Assets shall be made before the Closing Dated without the prior written consent of Purchaser. (b) At or prior to Closing, Seller shall furnish Purchaser an affidavit, stating under penalty of perjury, the transferor's United States taxpayer identification number and that the transferor is not a foreign person, pursuant to Section 1445(b)(2) of the Code. (c) Purchaser and Seller will each pay one-half of any sales, use, transfer, and documentary taxes and recording and filing fees applicable to the transfer of the Assets to Purchaser at Closing. ARTICLE VII COVENANTS OF PURCHASER 7.1 REQUIRED COVENANTS. As promptly as practicable after the date of this Agreement, Purchaser will make all filings required by Legal Requirements to be made by it to consummate the Contemplated Transactions (including all filings under the HSR Act, if applicable). Between the date of this Agreement and the Closing Date, Purchaser will (a) cooperate with Seller with respect to all filings that Seller is required by Legal Requirements to make in connection with the Contemplated Transactions; and (b) cooperate with Seller in obtaining all Consents identified in SCHEDULE 4.3; PROVIDED, HOWEVER, that this Agreement will not require Purchaser to dispose of or make any change in any portion of the Business or to incur any other burden to obtain a Governmental Authorization. 7.2 BULK TRANSFER COMPLIANCE. Purchaser hereby agrees to waive compliance with applicable Uniform Commercial Code bulk transfer requirements, and Seller and Principals hereby agree, jointly and severally, to indemnify and hold harmless Purchaser against liability, cost and expense (including reasonable attorneys' fees) arising out of noncompliance with applicable bulk transfer laws. 35 ARTICLE VIII CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS The obligation of Purchaser to consummate the transactions contemplated by this Agreement is subject to the satisfaction, at or before the Closing, of the following conditions, any or all of which (other than Section 8.1) may be waived, in whole or in part, by Purchaser: 8.1 TRUE AND CORRECT REPRESENTATIONS. Each of Seller's and Principals' representations and warranties must have been true and correct in all respects as of the date of this Agreement, and must be true and correct in all respects as of the Closing Date as if made on the Closing Date; PROVIDED, HOWEVER, that for purposes of this sentence only, those representations and warranties in Section 4.9, Section 4.13, Section 4.19 and Section 4.21 (other than Section 4.21(g)(iv)) which are qualified by references of to the "Knowledge" of any Person shall be deemed not to include such qualifications. Notwithstanding anything herein to the contrary, however, if, prior to the Closing, Purchaser discovers any inaccuracy of, or non-compliance with, any representation, warranty, covenant or obligation of Seller or the Principals herein, Purchaser shall promptly give Seller and the Principals written notice thereof ("Notice"), which Notice shall describe such inaccuracy or non-compliance. Seller shall have a period of fifteen (15) days following delivery of the Notice to Seller and the Principals within which to attempt to cure such inaccuracy or non-compliance; provided, however, that such fifteen (15) day period shall in no event extend the Closing Date unless such extension is mutually agreed upon by Purchaser, Seller and the Principals. If such inaccuracy or non-compliance is not cured to the satisfaction of Purchaser, in its sole and absolute discretion, or Purchaser has not waived such inaccuracy or non-compliance within such fifteen (15) day period, Purchaser will have the right, in its sole and absolute discretion, to terminate this Agreement without any liability or obligation to Seller and the Principals whatsoever. Notwithstanding anything herein to the contrary, if, and only if, Seller notifies Purchaser in writing of any incomplete or inaccurate representations or warranties made by Seller herein prior to the Closing and Purchaser consummates the Contemplated Transactions after receipt of such written notice, then Purchaser shall not be entitled to pursue any remedies under Section 12.2(b) with respect to only such matter, but shall be entitled to pursue any remedies thereunder as to other matters. 8.2 COMPLIANCE WITH COVENANTS. Each of the covenants and obligations that Seller and the Principals are required to perform or to comply with pursuant to this Agreement at or prior to the Closing must have been duly performed and complied with prior to the Closing. 8.3 DELIVERY OF DOCUMENTS. Each document required to be delivered by Seller and the Principals pursuant to Section 10.1 must have been delivered. 8.4 CONSENTS. Each of the Consents listed in SCHEDULE 4.3 (including the landlord's consent to an assignment of the Facility Lease whether or not the landlord has released Seller) must have been obtained and must be in full force and effect; PROVIDED, HOWEVER, that if the landlord's consent under the Facility Lease is not obtained and the condition precedent in this Section 8.4 has not been satisfied, then it shall be a condition precedent to Purchaser's and Seller's obligation to consummate the Contemplated Transactions that Purchaser and Seller negotiate in good faith to reach an understanding with respect to the Facility Lease that is reasonably acceptable to both parties (including, without limitation, the indemnification described in Section 10.2(g) herein). 36 8.5 ENVIRONMENTAL AUDIT(S). Purchaser shall have obtained environmental site assessment reports conducted in accordance with Sections 6.2 and 6.3 herein regarding the Facility acceptable to Purchaser, in its sole discretion, issued by an environmental engineer acceptable to Purchaser and confirming, among other things, that the Facility has not in the past been used, and is not presently being used, for the handling, storage, transportation, disposal or release of hazardous or toxic substances, materials, pollutants or waste (or similar items under applicable Environmental Law) in a manner in violation of Environmental Laws. 8.6 DUE DILIGENCE. Purchaser shall not have exercised its right to terminate this Agreement pursuant to Section 6.3. 8.7 HSR ACT. All filings required under the HSR Act, if any, shall have been made and any required waiting period under the laws applicable to the Contemplated Transactions shall have expired or been earlier terminated. ARTICLE IX CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS The obligation of Seller to consummate the transactions contemplated by this Agreement is subject to the satisfaction, at or before the Closing, of the following conditions, any or all of which may be waived, in whole or in part, by Seller: 9.1 TRUE AND CORRECT REPRESENTATIONS. Each of Purchaser's representations and warranties must have been true and correct in all respects as of the date of this Agreement and must be true and correct as of the Closing Date as if made on the Closing Date. 9.2 COMPLIANCE WITH COVENANTS. Each of the covenants and obligations that Purchaser is required to perform or to comply with pursuant to this Agreement at or prior to the Closing must have been performed and complied with. 9.3 DELIVERY OF DOCUMENTS. Each document required to be delivered by Purchaser pursuant to Section 10.2 must have been delivered. 9.4 HSR ACT. All filings required under the HSR Act, if any, shall have been made and any required waiting period under the laws applicable to the Contemplated Transactions shall have expired or been earlier terminated. ARTICLE X DELIVERIES AT CLOSING 10.1 DELIVERIES BY SELLER AND PRINCIPALS. In addition to and without limiting any other provision of this Agreement, Seller and the Principals shall deliver, or cause to be delivered, to Purchaser, at or prior to the Closing, the following in form and substance as reasonably satisfactory to Purchaser and Purchaser's counsel: 37 (a) Seller Legal Opinion; (b) a Secretary's Certificate setting forth the resolutions adopted by the Board of Directors and shareholders of Seller authorizing and directing the President or any Vice President of Seller to execute and deliver the documents required to be executed and delivered by Seller under this Agreement, which certificate will show the name, office and signature of each officer of Seller authorized to execute and deliver such documents; (c) a Bill of Sale, Assignment and Assumption in the form of EXHIBIT C attached to this Agreement and such other deeds, certificates of title, assignments, assurances and other instruments and documents as Purchaser may reasonably request in order to effect the sale, conveyance, transfer and assignment of the Assets to Purchaser free and clear of all Encumbrances; (d) unless waived by Purchaser, all Consents (including the consent to assignment by the landlord of the Facility Lease, if the landlord has consented); (e) possession of all the Contracts and copies of all documents, contracts, instruments, books, specifications, records and data relating to the Assets and the Assumed Liabilities, which possession shall be accomplished by delivering control to Purchaser of the offices in which same are maintained; (f) a certificate dated as of a date not earlier than ten (10) days prior to the Closing Date, of the Secretary of State of the State of Georgia as to the good standing of Seller in the State of Georgia; (g) an executed copy of each Principal's Non-Competition Agreement substantially in the form of EXHIBIT D; (h) certificates of title to motor vehicles, if applicable; (i) an executed copy of an employment agreement between Howard J. Weinstein and Purchaser (the "Employment Agreement") in the form attached hereto as EXHIBIT E; (j) a list of Seller's Receivables as of 5:00 p.m. on the day immediately preceding the Closing Date; (k) a list of Seller's Inventory as of 5:00 p.m. on the day immediately preceding the Closing Date; (l) a list of Seller's Trade Payables as of 5:00 p.m. on the day immediately preceding the Closing Date; (m) a certificate from Seller certifying that Seller has committed to pay, or, concurrent with the closing of the Contemplated Transactions will pay, no less than Six Hundred Thousand and No/100 Dollars ($600,000) in severance payments to Seller's employees (other than the Principals) being terminated by Seller as a result of the Contemplated Transactions; 38 (n) copies of all BATF Documents as of the Closing Date; (o) copies of all Contracts, including without limitation, purchase orders; and (p) a UCC-3 termination statement executed by La Salle National Bank, and any other termination documents reasonably requested by Purchaser as to any and all liens on the Assets; and (q) such other documents, instruments or certificates as shall be reasonably requested by Purchaser or its counsel to consummate the Contemplated Transactions. 10.2 DELIVERIES BY PURCHASER. In addition to and without limiting any other provision of this Agreement, Purchaser shall deliver, or cause to be delivered, to Seller and the Principals, at or prior to the Closing, the following in form and substance approved in this Agreement or reasonably satisfactory to Seller, the Principals and their counsel: (a) the Purchase Price; (b) the Purchaser Legal Opinion; (c) a Secretary's Certificate setting forth the resolutions adopted by the Board of Directors of Purchaser authorizing and directing the Chairman of the Board/Chief Executive Officer and President of Purchaser to execute and deliver the documents required to be executed and delivered by Purchaser under this Agreement, which certificate will show the name, office and signature of each officer of Purchaser authorized to execute and deliver such documents; (d) an executed copy of the Bill of Sale, Assignment and Assumption; (e) a certificate dated as of a date not earlier than ten (10) days prior to the Closing Date of the Secretary of State of Delaware as to the good standing of Purchaser in Delaware; (f) an executed copy of each Non-Competition Agreement; and (g) if the Landlord shall not have consented to the assignment of the Facility Lease to Purchaser and if Seller and Purchaser shall have reached an understanding with respect to the Facility Lease pursuant to Section 8.4 herein, an indemnification and hold harmless by Purchaser of obligations imposed on the tenant under the Facility Lease for the period after the Closing Date in a form mutually and reasonably acceptable to each of the parties hereto after good faith negotiations; PROVIDED, HOWEVER, that such indemnification shall be no more extensive than the indemnification required under Section 12.2(a)(vi), nor shall such indemnification be such that it would reduce the indemnification afforded to Purchaser under Section 12.2(b)(xii) herein; PROVIDED, FURTHER, that Seller and each of the Principals shall cooperate with Purchaser in performing any such obligations under the Facility Lease; (h) an executed copy of the Employment Agreement; (i) Six Hundred Thousand and No/100 Dollars ($600,000) to be used by Seller solely to pay severance benefits to Seller's employees (other than the Principals) whose employment by Seller is terminated as a result of the Closing; and 39 (j) such other documents, instruments or certificates as shall be reasonably requested by Seller or Seller's counsel. 10.3 POSSESSION BY PURCHASER. Simultaneously with the consummation of the transfer of the Assets, Seller, through its respective directors, officers, representatives and agents will put Purchaser into full possession and enjoyment of all the Assets and Assumed Liabilities to be conveyed and transferred by this Agreement. 10.4 FAILURE TO OBTAIN CONSENTS, LICENSES, PERMITS AND APPROVALS. Without restricting Purchaser's right not to proceed to the Closing if the conditions in Article VIII are not satisfied, to the extent that the rights of Seller under any contract, license, permit or approval or other Asset or Assumed Liability to be assigned to Purchaser under this Agreement may not be assigned without the consent of another person or entity which, notwithstanding Seller's use of its best efforts to obtain any such required consent(s) as promptly as possible, have not been obtained by the Closing Date, Purchaser may elect that this Agreement not constitute an agreement to assign the same if an attempted assignment would constitute a breach thereof or be unlawful and, instead, proceed with Closing, provided Purchaser indemnifies for same pursuant to Article XII. ARTICLE XI POST-CLOSING COVENANTS 11.1 AFTER THE CLOSING DATE. After the Closing Date, unless Purchaser shall otherwise agree in writing, Seller shall: (a) accurately prepare and file in the time periods prescribed therefor all Tax Returns with respect to income attributable to the Business in the period prior to the Closing Date, and pay when due all Taxes due and owing with respect thereto to the extent they may create any Encumbrance on any Asset; (b) discharge all Retained Liabilities in the Ordinary Course of Business; and (c) not use the Intellectual Property (including, the name "Monarch Wine Company of Georgia" or any variation thereof). 11.2 PAYMENTS RECEIVED BY SELLER SUBSEQUENT TO THE CLOSING DATE. From and after the Closing, Purchaser shall have the right and authority to endorse without recourse the name of Seller on any check or any other evidences of indebtedness received by Purchaser on account of the Business, the Assets or the Assumed Liabilities. After the Closing, Seller will hold and promptly transfer and deliver to Purchaser (in no event later than five (5) days after receipt), from time to time, as and when received, any cash, checks with appropriate endorsements or other property that Seller may receive on or after the Closing which properly belongs to Purchaser and will account to Purchaser for all such receipts. 11.3 ACCESS TO RECORDS. At all reasonable times after the Closing Date, upon reasonable prior notice of Purchaser and at Purchaser's expense, Seller shall make available to Purchaser any records, documents and data retained with respect to the Business, the Assets or the Assumed Liabilities not transferred to Purchaser under this Agreement to the extent reasonably required by Purchaser in 40 connection with the Business or this Agreement. Seller shall preserve until the seventh (7th) anniversary of the Closing Date all records possessed or to be possessed by Seller relating to the Business, the Assets or the Assumed Liabilities. At all reasonable times after the Closing Date, upon the prior written request of Seller, Purchaser shall make available to Seller and Seller shall have the right to make copies of any records, documents and data with respect to the Business, the Assets or the Assumed Liabilities transferred to or assumed by Purchaser under this Agreement to the extent reasonably required by Seller in connection with this Agreement at Seller's expense. Seller and Purchaser shall (i) each provide the other with such assistance as may reasonably be requested by any of them in connection with the preparation of any Tax Return, audit, or other examination by any taxing authority or judicial or administrative proceedings relating to liability for Taxes, (ii) each retain and provide the other, and Purchaser shall retain and provide Seller with, any records or other information that may be relevant to such Tax Return, audit or examination, proceeding or determination, and (iii) each provide the other with any final determination of any such audit or examination, proceeding or determination that affects any amount required to be shown on any Tax Return of the other for any period. Without limiting the generality of the foregoing, Purchaser and Seller shall retain, until the applicable statutes of limitations (including any extensions) have expired, copies of all Tax Returns, supporting work schedules, and other records or information that may be relevant to such returns for all tax periods or portions thereof ending before or including the Closing Date and shall not destroy or otherwise dispose of any such records without first providing the other party with a reasonable opportunity to review and copy the same. 11.4 PENDING DISPUTES. Except as listed on SCHEDULE 11.4, from and after the Closing Date, Purchaser shall have complete control over the payment, settlement or other disposition of, or any dispute involving, any customer of the Business and any Asset, obligation or liability of Seller acquired or assumed by Purchaser pursuant hereto, and Purchaser shall have the right to conduct and control all negotiations and proceedings with respect thereto upon disclosing to and consulting with Seller. Seller shall notify Purchaser immediately of any claim made with respect to any such customer, asset, obligation or liability and shall not, except with the prior written consent of Purchaser, make any payment of, or settle or offer to settle, or consent to any compromise with respect to, any such obligation or liability. Seller shall cooperate with Purchaser in any reasonable manner requested by Purchaser in connection with any negotiations or proceedings involving any such obligation or liability. ARTICLE XII SURVIVAL; INDEMNIFICATION 12.1 SURVIVAL. All representations, warranties, covenants and obligations in this Agreement and in any other certificate or document delivered pursuant to this Agreement will survive for a period of two (2) years from the date of the Closing; PROVIDED, HOWEVER, that the representations and warranties set forth in Sections 4.6, 4.12 and 4.19 shall survive indefinitely after the Closing and the representations and warranties set forth in Section 4.10 shall survive for the applicable statute of limitations period. The right to indemnification, payment of Damages or other remedy based on such representations, warranties, covenants and obligations will not be affected by any investigation conducted with respect to, or any Knowledge acquired (or capable of being acquired) at any time, whether before or after the execution and delivery of this Agreement or the Closing Date, with respect to the accuracy or inaccuracy of or compliance with, any such representation, warranty, covenant or obligation and with respect to the representations and warranties set forth in Section 4.9, Section 4.13, Section 4.19 and Section 4.21 (other than Section 4.21(g)(iv)), such representations and warranties which are qualified by references of to the 41 "Knowledge" of any Person shall be deemed not to include qualifications for purposes of Section 12.2 herein. Subject to Section 6.1(l) herein, the waiver of any condition based on the accuracy of any representation or warranty, or on the performance of or compliance with any covenant or obligation, will not affect the right to indemnification, payment of Damages, or other remedy based on such representations, warranties, covenants and obligations. 12.2 INDEMNIFICATION OBLIGATION. (a) INDEMNIFICATION OBLIGATION OF PURCHASER. Purchaser shall indemnify, save, defend and hold harmless Seller and its successors, assigns, officers, directors, shareholders, partners, Affiliates and attorneys and the Principals (collectively, the "Seller Indemnified Parties"), against and in respect of any and all actual Damages suffered by any of the Seller Indemnified Parties which arise out of or are in respect of (i) any Breach or violation of this Agreement by Purchaser, (ii) any falsity, inaccuracy or misrepresentation in or Breach of any of the representations, warranties, covenants or obligations made in the Purchaser's Closing Documents or in any certificate, instrument or document delivered at or prior to the Closing Date by or on behalf of Purchaser, (iii) with respect to Third Party Claims (as defined in Section 12.3(b) herein), any action, event, condition, omission or failure to act of or by Purchaser's Indemnified Parties or any other Person for whose conduct Purchaser may be responsible after the Closing (other than the Principals), (iv) the operations of the Business after the Closing (excluding claims with respect to products manufactured by Seller but shipped by Purchaser), (v) any brokerage commission, finder's fee, commissions or similar payments alleged to be payable directly related to the Contemplated Transactions because of any act, omission or other statement of Purchaser or its representatives, (vi) if, and only if, the landlord under the Facility Lease consents to the assignment of the Facility Lease to the Purchaser, costs of Clean-up, containment, or other remediation arising, directly or indirectly, from or in connection with any Environmental, Health, and Safety Liabilities arising out of or relating to: (A) the leasing or operation at any time after the Closing Date of the Facility; or (B) (x) any Hazardous Materials or other contaminants, wherever located, that were, or were allegedly, generated, transported, stored, treated, Released, or otherwise handled at any time after the Closing Date by Purchaser or by any other Person for whose conduct it is or may be held responsible, or (y) any Hazardous Activities after the Closing Date that were, or were allegedly, conducted by Purchaser or by any other Person for whose conduct it is or may be held responsible; or (C) any bodily injury (including illness, disability and death, and regardless of when any such bodily injury occurred, was incurred, or manifested itself), personal injury, property damage (including trespass, nuisance, wrongful eviction and deprivation of the use of real property), or other damage of or to any Person for whose conduct it is or may be held responsible, in any way arising from or allegedly arising from any Hazardous Activity conducted or allegedly conducted with respect to the Facility or the operation of the Business after the Closing Date, or from Hazardous Material that was Released or allegedly Released by Purchaser or any other Person for whose conduct it is or may be responsible, at any time after the Closing Date, (vii) all obligations associated with any of the Assets pertaining or related to acts or omissions arising subsequent to the Closing Date, including all obligations imposed on tenant under the Facility Lease for the period after the Closing Date if, and only if, the landlord under the Facility Lease consents to the assignment of the Facility Lease to the Purchaser, and (viii) any violations by Seller of the requirements of the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) and the Internal Revenue Service final and proposed regulations on health care continuation coverage for employees, 64 Fed. Reg. 5160. This indemnity covers contracts with customers to be performed after the Closing Date even though the contract was made prior to the Closing Date, but only to the extent of obligations accruing after the Closing Date under those contracts. 42 (b) INDEMNIFICATION OBLIGATION OF SELLER AND THE PRINCIPALS. Seller and the Principals, jointly and severally, shall save, indemnify, defend and hold harmless Purchaser and its respective successors, assigns, officers, directors, shareholders, Affiliates and attorneys (collectively, the "Purchaser's Indemnified Parties") against and in respect of any and all actual Damages suffered by any of the Purchaser's Indemnified Parties which may arise out of or be in respect of (i) any Breach or violation of this Agreement by Seller and/or the Principals, (ii) any falsity, inaccuracy or misrepresentation in or Breach of any of the representations, warranties, covenants or obligations made in the Seller's Closing Documents or in any certificate, instrument or document delivered at or prior to Closing by or on behalf of Seller or the Principals pursuant to this Agreement, (iii) with respect to Third Party Claims, any action, event, condition, omission or failure to act of or by Seller Indemnified Parties or any other Person for whose conduct Seller may be responsible prior to the Closing, (iv) except to the extent same is an Assumed Liability, the operations of the Business prior to the Closing (including, but not limited to, any liabilities of whatever nature arising out of or relating to any materials, products or services manufactured or supplied by Seller, including any recalls of Seller's products), (v) any Taxes imposed on Purchaser attributable to the revenue or income Seller earned prior to the Closing Date, the revenue or income the Business earned prior to the Closing Date, or any Taxes imposed on the Assets or the Business with respect to the period on or prior to the Closing Date, (vi) any and all of the Retained Liabilities, (vii) any brokerage commission, finder's fee, commissions or similar payments alleged to be payable directly related to the transactions contemplated by this Agreement because of any act, omission or other statement of any of the Seller Indemnified Parties, (viii) violations of the National Labor Relations Act ("NLRA") (including, but not limited to, Section 8(a)(5) and Section 301 thereof) up to the Closing Date and findings, if any, of the National Labor Relations Board and/or the courts of any violation of the NLRA, (ix) the Collective Bargaining Agreement, (x) waiver of compliance with applicable Uniform Commercial Code bulk transfer requirements, (xi) the benefit plans listed on SCHEDULES 4.12(a)(i) AND /OR 4.12(a)(iv), and (xii) costs of Clean-up, containment, or other remediation arising, directly or indirectly, from or in connection with any Environmental, Health, and Safety Liabilities arising out of or relating to: (A) (x) the ownership, leasing, operation, or condition at any time on or prior to the Closing Date of the Facility or any other properties and Assets (whether real, personal, or mixed and whether tangible or intangible) in which Seller has or had an interest, or (y) any Hazardous Materials or other contaminants that were present on the Facility or such other properties and assets in which Seller has or had an interest at any time on or prior to the Closing Date; or (B) (x) any Hazardous Materials or other contaminants, wherever located, that were, or were allegedly, generated, transported, stored, treated, Released, or otherwise handled by Seller or by any other Person for whose conduct it is or may be held responsible at any time on or prior to the Closing Date, or (y) any Hazardous Activities that were, or were allegedly, conducted by Seller or by any other Person for whose conduct it is or may be held responsible; or (C) any bodily injury (including illness, disability and death, and regardless of when any such bodily injury occurred, was incurred, or manifested itself), personal injury, property damage (including trespass, nuisance, wrongful eviction and deprivation of the use of real property), or other damage of or to any Person, including any employee or former employee of Seller or any other Person for whose conduct it is or may be held responsible, in any way arising from or allegedly arising from any Hazardous Activity conducted or allegedly conducted with respect to the Facility or the operation of the Business prior to the Closing Date, or from Hazardous Material that was (x) present or suspected to be present on or before the Closing Date on or at the Facility (or present or suspected to be present on any other property, if such Hazardous Material emanated or allegedly emanated from the Facility and was present or suspected to be present on the Facility on or prior to the Closing Date); or (y) Released or allegedly Released by Seller or any other Person for whose conduct it is or may be responsible, at any time on or prior to the Closing Date. 43 12.3 INDEMNIFICATION NOTICE. (a) The indemnified party shall notify the indemnifying party, in writing, of any facts or circumstances which may give rise to a right of indemnification under Article XII of this Agreement ("Notice of Claim"). The Notice of Claim shall specify the nature and details of such facts and circumstances (including any amount claimed, if known) which may give rise to such right of indemnification. The failure of the indemnified party to promptly provide a Notice of Claim shall not relieve the indemnifying party of its obligations hereunder, except to the extent that the indemnifying party is actually prejudiced by such failure to give notice. (b) If the claim or demand set forth in the Notice of Claim relates to a claim or demand asserted by a third party (a "Third Party Claim"), the indemnifying party shall have the right to employ counsel reasonably acceptable to the indemnified party to defend any such claim or demand and the indemnified party, at its sole cost and expense, shall have the right to participate in the defense of any such Third Party Claim. The indemnifying party shall notify the indemnified party, in writing, within fifteen (15) days after the date of the Notice of Claim, of its decision to defend in good faith any Third Party Claim. So long as the indemnifying party is defending in good faith any such Third Party Claim, the indemnified party shall not settle or compromise such Third Party Claim. If the indemnifying party does not so elect to defend any such Third Party Claim, the indemnified party shall have the right, but not the obligation, to undertake the defense, compromise or final determination thereof. (c) If the indemnifying party has undertaken defense of a Third Party Claim and if there is a reasonable probability that the Third Party Claim may materially and adversely affect the indemnified party or the Business other than as a result of money damages or other money payments, then the indemnified party, at the reasonable expense of the indemnifying party, shall have the right to joint control of the defense, compromise or settlement of such Third Party Claim; PROVIDED, HOWEVER, that if the Third Party Claim may be settled in full without any acknowledgment of liability solely by the payment of money and the indemnifying party is willing to pay the money to settle the claim but the indemnified party is not, then the indemnifying party may elect to pay that amount of money to the indemnified party and thereafter have no further obligation with respect to such Third Party Claim or any fees or expenses related thereto and the indemnified party shall indemnify the indemnifying party with respect to same. Notwithstanding the foregoing, the indemnifying party shall not be liable for any compromise or settlement of any action, suit or other proceeding effected without its written consent, which shall not be unreasonably withheld or delayed. (d) The indemnified party shall make available to the indemnifying party or its representatives all records and other materials reasonably required by them for their use in contesting any Third Party Claim and shall cooperate with the indemnifying party in connection therewith. (e) Neither the indemnified party or the indemnifying party shall, without the written consent of the other, settle or compromise any Third Party Claim or consent to the entry of any judgment which does not include as an unconditional term thereof the giving by the claimant or the plaintiff to the indemnified party and the indemnifying party and their respective affiliates a release from all liability in respect of such Third Party Claim. 44 (f) As soon as is reasonably practicable after Notice of Claim is deemed delivered to the receiving party, the indemnified party and the indemnifying party shall endeavor to agree upon the amount, if any, to which the indemnified party is entitled under this Article XII. 12.4 INDEMNIFICATION PAYMENT AND LIMITATIONS. Within thirty (30) days after the indemnifying party and the indemnified party reach agreement on the amount of any indemnification obligation of the indemnifying party (the "Indemnification Amount"), the indemnifying party shall pay the Indemnification Amount to the indemnified party. Notwithstanding the indemnification obligation of any indemnifying party under this Article XII, the indemnification obligation of any indemnifying party shall: (a) be reduced by the amount that an indemnified party recovers from any third party (other than by way of contribution from another indemnifying party) with respect to the matter for which indemnification is being paid, including, without limitation, any insurance company. An indemnified party receiving any such amount shall promptly reimburse any amount so received from a third party to the indemnifying party; (b) be tolled and unenforceable until the aggregate Damages incurred by the party claiming a right to indemnification under this Article XII exceed $150,000, at which time the indemnification obligation of the indemnifying party shall commence with respect to all Damages, including the initial $150,000 of Damages; and (c) not exceed an amount equal to the Purchase Price. Notwithstanding anything to the contrary herein, this Section 12.4 shall not apply to any claims of fraud or claims arising out of or relating to Uniform Commercial Code bulk transfer laws applicable to the Contemplated Transactions, Section 4.7, 4.8, Section 12.2(b)(v) and Section 12.2(b)(x). ARTICLE XIII MISCELLANEOUS 13.1 EXPENSES. Except as otherwise expressly provided in this Agreement, each party to this Agreement will bear its respective expenses incurred in connection with the preparation, execution and performance of this Agreement and the Contemplated Transactions, including all fees and expenses of agents, representatives, counsel and accountants. 13.2 GOVERNING LAW. This Agreement and all transactions contemplated by this Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Florida. 13.3 NOTICES. All notices, requests, consents and other communications required or permitted under this Agreement shall be in writing (including electronic transmission) and shall be (as elected by the person giving such notice) hand delivered by messenger or courier service, electronically transmitted, or mailed (airmail if international) by registered or certified mail (postage prepaid), return receipt requested, addressed to: 45 If to Purchaser: With a copy to: Todhunter International, Inc. Gunster, Yoakley, Valdes-Fauli & 222 Lakeview Avenue Stewart, P.A. Suite 1500 777 South Flagler Drive West Palm Beach, Florida 33401 Suite 500, East Tower (561) 655-8977 West Palm Beach, Florida 33401 Fax: (561) 655-9718 (561) 650-0533 Attn: A. Kenneth Pincourt, Jr. Fax: (561) 655-5677 Attn: Michael V. Mitrione, Esq. If to Seller or the Principals: Adams Wine Company Smith Helms Mulliss & Moore, L.L.P. d/b/a Monarch Wine Company of Georgia 1355 Peachtree Street, N.E. 451 Sawtell Avenue, S.E. Suite 750 Atlanta, Georgia 30315 Atlanta, Georgia 30309 (404) 622-4661 (404) 962-1000 Fax: (404) 622-5421 Fax: (404) 962-1200 Attn: Howard Weinstein Attn: Howell Hollis, III, Esq. If to the Principals: With a copy to: Howard J. Weinstein 5234 Powers Ferry Road Atlanta, Georgia 30327 (404) 256-4131 Fax: (404) 255-7625 David Paszamant 320 North 5th Avenue Highland Park, NJ 08904 Jay Paszamant 56 Westbury Court Skillman, NJ 08558 Matthew Paszamant 266 Kingsberry Drive Somerset, NJ 08873
or to such other address as any party may designate by notice complying with the terms of this Section 13.3. Each such notice shall be deemed delivered (a) on the date delivered if by personal delivery; (b) on the date of transmission with confirmed answer back if by electronic transmission; and (c) on the date upon which the return receipt is signed or delivery is refused or the notice is designated by the postal authorities as not deliverable, as the case may be, if mailed. 46 13.4 BINDING EFFECT. All of the terms and provisions of this Agreement shall be binding upon, inure to the benefit of, and be enforceable by the parties and their respective legal representatives, heirs, successors and permitted assigns, whether so expressed or not. 13.5 HEADINGS. The headings contained in this Agreement are for convenience of reference only, are not to be considered a part of the Agreement and shall not limit or otherwise affect in any way the meaning or interpretation of this Agreement. 13.6 PRONOUNS. In this Agreement, the use of any gender shall be deemed to include all genders, and the use of the singular shall include the plural and vice versa, wherever it appears appropriate from the context. For all purposes of this Agreement, unless otherwise expressly stated to the contrary, the terms "hereby," "hereto," "hereof," "hereunder" and "herein" shall refer to this entire Agreement. 13.7 THIRD PARTIES. Unless expressly stated herein to the contrary, nothing in this Agreement, whether express or implied, is intended to confer any rights or remedies under or by reason of this Agreement on any persons other than the parties hereto and their respective legal representatives, successors and permitted assigns. Nothing in this Agreement is intended to relieve or discharge the obligation or liability of any third persons to any party to this Agreement, nor shall any provision give any third persons any right of subrogation or action over or against any party to this Agreement. 13.8 FURTHER ASSURANCES. The parties hereby agree from time to time to execute and deliver such further and other transfers, assignments and documents and do all matters and things which may be convenient or necessary to more effectively and completely carry out the intentions of this Agreement. 13.9 SCHEDULES INCLUDED IN EXHIBITS; INCORPORATION BY REFERENCE. Any reference to an Exhibit to this Agreement contained herein shall be deemed to include any Schedules to such Exhibit. Each of the Exhibits referred to in this Agreement (including Schedules thereto), and each Schedule to this Agreement is hereby incorporated by reference in this Agreement as if such Exhibits and Schedules were set out in full in the text of this Agreement. 13.10 AMENDMENTS. The provisions of this Agreement may not be amended, supplemented, waived or changed orally, but only by a writing signed by the party as to whom enforcement of any such amendment, supplement, waiver or modification is sought and making specific reference to this Agreement. 13.11 WAIVERS. The failure or delay of any party at any time to require performance by another party of any provision of this Agreement, even if known, shall not affect the right of such party to require performance of that provision or to exercise any right, power or remedy hereunder. Any waiver by any party of any breach of any provision of this Agreement should not be construed as a waiver of any continuing or succeeding breach of such provision, a waiver of the provision itself, or a waiver of any right, power or remedy under this Agreement. No notice to or demand on any party in any circumstance shall, of itself, entitle such party to any other or further notice or demand in similar or other circumstances. 13.12 JURISDICTION AND VENUE. The parties acknowledge that a substantial portion of the negotiations, anticipated performance and execution of this Agreement occurred or shall occur in Palm 47 Beach County, Florida. Any civil action or legal proceeding arising out of or relating to this Agreement shall be brought in the courts of record of the State of Florida in Palm Beach County or the United States District Court, Southern District of Florida. Each party consents to the jurisdiction of such court in any such civil action or legal proceeding and waives any objection to the laying of venue of any such civil action or legal proceeding in such court. Service of any court paper may be effected on such party by mail, as provided in this Agreement, or in such other manner as may be provided under applicable laws, rules of procedure or local rules. 13.13 SEVERABILITY. If any provision of this Agreement or any other agreement entered into pursuant hereto is contrary to, prohibited by or deemed invalid under applicable law or regulation, such provision shall be inapplicable and deemed omitted to the extent so contrary, prohibited or invalid, but the remainder hereof shall not be invalidated thereby and shall be given full force and effect so far as possible. If any provision of this Agreement may be construed in two or more ways, one of which would render the provision invalid or otherwise voidable or unenforceable and another of which would render the provision valid and enforceable, such provision shall have the meaning which renders it valid and enforceable. 13.14 COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument. Confirmation of execution by electronic transmission of a facsimile signature page shall be binding upon any party so confirming. 13.15 NO CONSTRUCTION AGAINST DRAFTSMEN. The parties acknowledge that this is a negotiated agreement, and that in no event shall the terms hereof be construed against either party on the basis that such party, or its counsel, drafted this Agreement. 13.16 ENFORCEMENT COSTS. If any civil action, arbitration or other legal proceeding is brought for the enforcement of this Agreement, or because of an alleged dispute, breach, default or misrepresentation in connection with any provision of this Agreement, the successful or prevailing party or parties shall be entitled to recover reasonable attorneys' fees, sales and use taxes, court costs and all expenses even if not taxable as court costs (including, without limitation, all such fees, taxes, costs and expenses incident to arbitration, appellate, bankruptcy and post-judgment proceedings), incurred in that civil action, arbitration or legal proceeding, in addition to any other relief to which such party or parties may be entitled. Attorneys' fees shall include, without limitation, paralegal fees, investigative fees, administrative costs, sales and use taxes and all other charges billed by the attorney to the prevailing party. 13.17 EQUITABLE REMEDIES. Each of the parties acknowledges that the parties will be irreparably damaged (and damages at law would be an inadequate remedy) if this Agreement is not specifically enforced. Therefore, in the event of a breach or threatened breach by any party of any provision of this Agreement, then the other parties shall be entitled, in addition to all other rights or remedies, to an injunction restraining such breach, without being required to show any actual damage or to post an injunction bond, and/or to a decree for specific performance of the provisions of this Agreement 48 13.18 ENTIRE AGREEMENT. This Agreement represents the entire understanding and agreement between the parties with respect to the subject matter hereof, and supersedes all other negotiations, writings, understandings and representations, if any, made by and between such parties. 13.19 PUBLIC ANNOUNCEMENTS. Any public announcement or similar publicity with respect to this Agreement or the Contemplated Transactions will be issued, if at all, at such time and in such manner as Purchaser and Seller mutually agree, unless required by Legal Requirements. Unless consented to by Purchaser in advance or required by Legal Requirements, prior to the Closing, Seller and the Principals shall keep this Agreement strictly confidential and may not make any disclosure of this Agreement to any Person. Seller, the Principals and Purchaser will consult with each other concerning the means by which Seller's employees, customers and suppliers and others having dealings with Seller will be informed of the Contemplated Transactions, and Purchaser will have the right to be present for any such communication. 13.20 CONFIDENTIALITY. Between the date of this Agreement and the Closing Date, Purchaser, Seller and the Principals will maintain in confidence, and will cause the directors, officers, employees, agents and advisors of Purchaser and the Seller to maintain in confidence, any written, oral or other information obtained in confidence from the other party in connection with this Agreement or the Contemplated Transactions, unless (a) such information is already known to such party or to others not bound by a duty of confidentiality or such information becomes publicly available through no fault of such party, (b) the use of such information is necessary or appropriate in making any filing or obtaining any Consent required for the consummation of the Contemplated Transactions, or (c) the furnishing or use of such information is required by a Proceeding or Legal Requirements. If the Contemplated Transactions are not consummated, each party will return or destroy as much of such written information as the other party may reasonably request. 13.21 WAIVER OF JURY TRIAL. IN ANY CIVIL ACTION, COUNTERCLAIM, OR PROCEEDING, WHETHER AT LAW OR IN EQUITY, WHICH ARISES OUT OF, CONCERNS, OR RELATES TO THIS AGREEMENT, ANY AND ALL TRANSACTIONS CONTEMPLATED HEREUNDER, THE PERFORMANCE HEREOF, OR THE RELATIONSHIP CREATED HEREBY, WHETHER SOUNDING IN CONTRACT, TORT, STRICT LIABILITY, OR OTHERWISE, TRIAL SHALL BE TO A COURT OF COMPETENT JURISDICTION AND NOT TO A JURY. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY. ANY PARTY MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT WITH ANY COURT, AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO OF THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. NEITHER PARTY HAS MADE OR RELIED UPON ANY ORAL REPRESENTATIONS TO OR BY ANY OTHER PARTY REGARDING THE ENFORCEABILITY OF THIS PROVISION. EACH PARTY HAS READ AND UNDERSTANDS THE EFFECT OF THIS JURY WAIVER PROVISION. EACH PARTY ACKNOWLEDGES THAT IT HAS BEEN ADVISED BY ITS OWN COUNSEL WITH RESPECT TO THE TRANSACTION GOVERNED BY THIS AGREEMENT, ANY SPECIFICALLY WITH RESPECT TO THE TERMS OF THIS SECTION 13.21, WHICH CONCERNS THE WAIVER OF EACH PARTY'S RIGHT TO TRIAL BY JURY. 49 IN WITNESS WHEREOF, the parties to this Agreement have executed this Agreement as of the day and year first above written. "PURCHASER" TODHUNTER INTERNATIONAL, INC. By: /s/ A. Kenneth Pincourt, Jr. --------------------------------- Name: A. Kenneth Pincourt, Jr. Title: Chairman and Chief Executive Officer "SELLER" ADAMS WINE COMPANY d/b/a MONARCH WINE COMPANY OF GEORGIA By: /s/ Howard J. Weinstein --------------------------------- Name: Howard J. Weinstein Title: President "PRINCIPALS" /s/ Howard J. Weinstein ----------------------------------- Howard J. Weinstein /s/ David Paszamant ----------------------------------- David Paszamant /s/ Jay Paszamant ----------------------------------- Jay Paszamant /s/ Matthew Paszamant ----------------------------------- Matthew Paszamant 50 EX-99.1 3 EXHIBIT 99.1 CREDIT AGREEMENT DATED AS OF NOVEMBER 17, 1999 BY AND AMONG TODHUNTER INTERNATIONAL, INC. (THE "BORROWER"), AS BORROWER AND EACH OF THE FINANCIAL INSTITUTIONS INITIALLY A SIGNATORY HERETO, TOGETHER WITH THOSE ASSIGNEES PURSUANT TO SECTION 13.06 HEREOF, AS LENDERS AND SOUTHTRUST BANK, NATIONAL ASSOCIATION, AS ADMINISTRATIVE AGENT AND FUNDING AGENT TABLE OF CONTENTS
SECTION PAGE ARTICLE I DEFINITIONS SECTION 1.01 DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . .1 SECTION 1.02. GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 ARTICLE II REVOLVING CREDIT FACILITY SECTION 2.01. REVOLVING CREDIT FACILITY . . . . . . . . . . . . . . . . . . 16 SECTION 2.02. BORROWINGS UNDER REVOLVING CREDIT FACILITY. . . . . . . . . . 17 SECTION 2.03. DISBURSEMENTS UNDER REVOLVING CREDIT FACILITY.. . . . . . . . 17 SECTION 2.04. SEVERAL OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . 18 SECTION 2.05. REPAYMENT OF REVOLVING LOANS. . . . . . . . . . . . . . . . . 18 SECTION 2.06. REVOLVING NOTES . . . . . . . . . . . . . . . . . . . . . . . 18 SECTION 2.07. TERM LOAN FACILITY. . . . . . . . . . . . . . . . . . . . . . 19 SECTION 2.08. TERM NOTES. . . . . . . . . . . . . . . . . . . . . . . . . . 19 SECTION 2.09. TERM LOAN AMORTIZATION AND MATURITY . . . . . . . . . . . . . 19 SECTION 2.10. INTEREST ON LOANS . . . . . . . . . . . . . . . . . . . . . . 20 SECTION 2.11. NOTICE OF CONTINUATION AND NOTICE OF CONVERSION/ UNAVAILABILITY OF CERTAIN LOANS/FUNDING LOSSES . . . . . . . . . . . . 21 SECTION 2.12. VOLUNTARY REDUCTION OF REVOLVING COMMITMENT; VOLUNTARY PREPAYMENTS; FUNDING LOSSES. . . . . . . . . . . . . . . . . . . . . . 22 SECTION 2.13. UNUSED REVOLVING CREDIT FACILITY FEES . . . . . . . . . . . . 23 ARTICLE III LETTER OF CREDIT FACILITY SECTION 3.01. LETTERS OF CREDIT/LENDERS' PARTICIPATION. . . . . . . . . . . 23 SECTION 3.02. METHOD OF ISSUANCE OF LETTERS OF CREDIT . . . . . . . . . . . 24 SECTION 3.03. LETTER OF CREDIT FEES.. . . . . . . . . . . . . . . . . . . . 25 SECTION 3.04. LETTER OF CREDIT REIMBURSEMENT. . . . . . . . . . . . . . . . 25 SECTION 3.05. NATURE OF LETTER OF CREDIT ISSUER'S DUTIES. . . . . . . . . . 26 SECTION 3.06. OBLIGATIONS ABSOLUTE. . . . . . . . . . . . . . . . . . . . . 27 SECTION 3.07. EXPIRATION DATE OF LETTERS OF CREDIT. . . . . . . . . . . . . 27 SECTION 3.08. VOLUNTARY REDUCTION OF L/C COMMITMENT . . . . . . . . . . . . 28 ARTICLE IV OTHER LOAN AND PAYMENT PROVISIONS SECTION 4.01. INTEREST ON OVERDUE PAYMENTS. . . . . . . . . . . . . . . . . 28 SECTION 4.02. COMPUTATIONS. . . . . . . . . . . . . . . . . . . . . . . . . 28 SECTION 4.03. USURY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 SECTION 4.04. PAYMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 29 SECTION 4.05. PRO RATA TREATMENT. . . . . . . . . . . . . . . . . . . . . . 29 SECTION 4.06. SHARING OF PAYMENTS, ETC. . . . . . . . . . . . . . . . . . . 29 i SECTION 4.07. INSUFFICIENT FUNDS. . . . . . . . . . . . . . . . . . . . . . 30 SECTION 4.08. FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 SECTION 4.09. [INTENTIONALLY OMITTED] . . . . . . . . . . . . . . . . . . . 30 SECTION 4.10. INCREASED COSTS . . . . . . . . . . . . . . . . . . . . . . . 30 SECTION 4.11. STATEMENTS OF ACCOUNT . . . . . . . . . . . . . . . . . . . . 31 SECTION 4.12. DEFAULTING LENDER'S STATUS. . . . . . . . . . . . . . . . . . 31 SECTION 4.13. AGENT'S RELIANCE. . . . . . . . . . . . . . . . . . . . . . . 31 ARTICLE V CONDITIONS PRECEDENT SECTION 5.01. CONDITIONS PRECEDENT TO EFFECTIVENESS . . . . . . . . . . . . 32 SECTION 5.02. CONDITIONS PRECEDENT TO ALL CREDIT EVENTS . . . . . . . . . . 33 SECTION 5.03. CONDITIONS AS COVENANTS . . . . . . . . . . . . . . . . . . . 33 ARTICLE VI REPRESENTATIONS AND WARRANTIES SECTION 6.01. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . 33 SECTION 6.02. SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC.. . . . . . . 37 ARTICLE VII AFFIRMATIVE COVENANTS SECTION 7.01. PRESERVATION OF EXISTENCE AND SIMILAR MATTERS . . . . . . . . 37 SECTION 7.02. COMPLIANCE WITH APPLICABLE LAW. . . . . . . . . . . . . . . . 37 SECTION 7.03. MAINTENANCE OF PROPERTY . . . . . . . . . . . . . . . . . . . 38 SECTION 7.04. CONDUCT OF BUSINESS . . . . . . . . . . . . . . . . . . . . . 38 SECTION 7.05. INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . 38 SECTION 7.06. PAYMENT OF TAXES AND CLAIMS . . . . . . . . . . . . . . . . . 38 SECTION 7.07. VISITS AND INSPECTIONS. . . . . . . . . . . . . . . . . . . . 38 SECTION 7.08. USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . 39 SECTION 7.09. INTEREST RATE PROTECTION. . . . . . . . . . . . . . . . . . . 39 SECTION 7.10. SUBSIDIARY SECURITIES REGISTRATION. . . . . . . . . . . . . . 39 ARTICLE VIII INFORMATION SECTION 8.01. QUARTERLY REPORTS . . . . . . . . . . . . . . . . . . . . . . 39 SECTION 8.02. YEAR-END STATEMENTS. . . . . . . . . . . . . . . . . . . . . . 39 SECTION 8.03. BORROWING BASE CERTIFICATE. . . . . . . . . . . . . . . . . . 40 SECTION 8.04. COPIES OF OTHER REPORTS . . . . . . . . . . . . . . . . . . . 40 SECTION 8.05. NOTICE OF LITIGATION AND OTHER MATTERS. . . . . . . . . . . . 40 SECTION 8.06. ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 ARTICLE IX NEGATIVE COVENANTS SECTION 9.01. INDEBTEDNESS FOR BORROWED MONEY . . . . . . . . . . . . . . . 41 SECTION 9.02. GUARANTIES. . . . . . . . . . . . . . . . . . . . . . . . . . 42 SECTION 9.03. INVESTMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 42 SECTION 9.04. LIENS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 ii SECTION 9.05. RESTRICTED DISTRIBUTIONS AND PURCHASES. . . . . . . . . . . . 42 SECTION 9.06. MERGER, CONSOLIDATION AND OTHER ARRANGEMENTS. . . . . . . . . 42 SECTION 9.07. PLANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 SECTION 9.08. LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 SECTION 9.09. SUBSIDIARIES. . . . . . . . . . . . . . . . . . . . . . . . . 42 SECTION 9.10. TRANSACTIONS WITH AFFILIATES. . . . . . . . . . . . . . . . . 42 SECTION 9.11. NO SALE OF ASSETS . . . . . . . . . . . . . . . . . . . . . . 43 SECTION 9.12. CHANGE IN ACCOUNTING METHOD OR FISCAL YEAR END. . . . . . . . 43 SECTION 9.13. CHANGE OF SENIOR MANAGEMENT OR CONTROL. . . . . . . . . . . . 43 SECTION 9.14. CHANGE IN ORGANIZATIONAL DOCUMENTS. . . . . . . . . . . . . . 43 SECTION 9.15. ADDITIONAL SUBSIDIARIES EQUITIES. . . . . . . . . . . . . . . 43 ARTICLE X FINANCIAL COVENANTS SECTION 10.01. MINIMUM TANGIBLE NET WORTH . . . . . . . . . . . . . . . . . 43 SECTION 10.02. INTEREST COVERAGE RATIO. . . . . . . . . . . . . . . . . . . 44 SECTION 10.03. FIXED CHARGE COVERAGE. . . . . . . . . . . . . . . . . . . . 44 SECTION 10.04. FUNDED DEBT RATIO. . . . . . . . . . . . . . . . . . . . . . 44 SECTION 10.05. FUNDED DEBT TO EBITDA. . . . . . . . . . . . . . . . . . . . 44 ARTICLE XI DEFAULT SECTION 11.01. EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . 44 SECTION 11.02. REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . 46 SECTION 11.03. RIGHTS CUMULATIVE . . . . . . . . . . . . . . . . . . . . . . 47 ARTICLE XII THE AGENT SECTION 12.01. AUTHORIZATION AND ACTION . . . . . . . . . . . . . . . . . . 47 SECTION 12.02. AGENT'S RELIANCE, ETC. . . . . . . . . . . . . . . . . . . . 47 SECTION 12.03. AGENT AS LENDER. . . . . . . . . . . . . . . . . . . . . . . 48 SECTION 12.04. LENDER CREDIT DECISION, ETC. . . . . . . . . . . . . . . . . 48 SECTION 12.05. INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . 48 SECTION 12.06. COLLATERAL MATTERS . . . . . . . . . . . . . . . . . . . . . 49 SECTION 12.07. SUCCESSOR AGENT. . . . . . . . . . . . . . . . . . . . . . . 50 ARTICLE XIII MISCELLANEOUS SECTION 13.01. NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . 50 SECTION 13.02. EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . 51 SECTION 13.03. STAMP, INTANGIBLE AND RECORDING TAXES. . . . . . . . . . . . 52 SECTION 13.04. SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 SECTION 13.05. LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . 52 SECTION 13.06. ASSIGNABILITY. . . . . . . . . . . . . . . . . . . . . . . . 53 SECTION 13.07. AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 55 SECTION 13.08. NONLIABILITY OF AGENT AND LENDERS. . . . . . . . . . . . . . 56 SECTION 13.09. INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . 56 SECTION 13.10. INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . 56 iii SECTION 13.11. SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . 56 SECTION 13.12. TITLES AND CAPTIONS. . . . . . . . . . . . . . . . . . . . . 56 SECTION 13.13. SEVERABILITY OF PROVISIONS . . . . . . . . . . . . . . . . . 56 SECTION 13.14. GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . 57 SECTION 13.15. COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . 57 SECTION 13.16. OBLIGATIONS WITH RESPECT TO BORROWER . . . . . . . . . . . . 57 SECTION 13.17. BINDING EFFECT . . . . . . . . . . . . . . . . . . . . . . . 57
iv CREDIT AGREEMENT THIS CREDIT AGREEMENT dated as of November 17, 1999 by and among TODHUNTER INTERNATIONAL, INC. (the "BORROWER"), SOUTHTRUST BANK, NATIONAL ASSOCIATION, as Administrative Agent and Funding Agent (collectively "AGENT"), and each of the financial institutions initially a signatory hereto, together with those Assignees pursuant to Section 13.06 hereof (individually, a "LENDER" and, collectively, the "LENDERS"). WHEREAS, the Borrower, SouthTrust, as Agent, and the Lenders, have agreed to make Term and Revolving Loans to the Borrower from time to time, the Letter of Credit Issuers agreed to issue Letters of Credit from time to time for the account of the Borrower, and the Lenders agreed to purchase participating interests in such Letters of Credit, provided that the aggregate outstanding principal amount of all such Revolving Loans and Term Loans PLUS the aggregate Stated Amounts of all outstanding Letters of Credit, would not exceed $71,000,000 (the "LOAN COMMITMENT"); WHEREAS, the Borrower, the Lenders and the Agent wish to set forth their agreements as to the Revolving Loans, the Term Loans and the Letters of Credit on the terms and conditions contained herein. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties hereto, the parties hereto agree as follows: ARTICLE I DEFINITIONS SECTION 1.01 DEFINITIONS. In addition to terms defined elsewhere herein, the following terms shall have the following meanings for the purposes of this Agreement: "ACCOUNTS" means all accounts and any and all rights to the payment of money or other forms of consideration of any kind (whether classified under the Uniform Commercial Code as accounts, chattel paper, general intangibles, or otherwise) for goods sold or leased or for services rendered including, but not limited to, accounts receivable, proceeds of any letters of credit naming the Borrower or any of its Subsidiaries as beneficiary, chattel paper, tax refunds, insurance proceeds, contract rights, notes, drafts, instruments, documents, acceptances, all contract rights and agreements to purchase or sell Inventory, and all other debts, obligations and liabilities in whatever form from any Person. "ACCOUNT DEBTOR" means a Person obligated under an Account. "ADJUSTED BASE RATE" means a rate equal to the Base Rate plus the Applicable Margin. "ADJUSTED EURODOLLAR RATE" means the interest rate per annum equal to the Eurodollar Rate plus the Applicable Margin. "AFFILIATE" means, with respect to any Person, any entity which directly or indirectly controls, is controlled by, or is under common control with, such Person or any Subsidiary of such Person or any Person who is a director, officer or partner of such Person or any Subsidiary of such Person. For 1 purposes of this definition, "control" shall mean the possession, directly or indirectly, of the power to (a) vote ten percent (10%) or more of the securities having ordinary voting power for the election of directors of such Person or (b) direct or cause the direction of management and policies of a business, whether through the ownership of voting securities, by contract or otherwise and either alone or in conjunction with others or any group. "AGENT" means SouthTrust Bank, National Association and its successors. "AGREEMENT" means this Credit Agreement as it may be amended, restated, modified or supplemented from time to time in accordance with its terms. "AGREEMENT DATE" means the date as of which this Agreement is dated. "APPLICABLE LAW" means all applicable provisions of constitutions, statutes, rules, regulations and orders of all Governmental Authorities and all orders and decrees of all courts, tribunals and arbitrators. "APPLICABLE MARGIN" shall mean: The percentage per annum designated below based on the Borrower's Funded Debt to EBITDA ratio for the four (4) fiscal quarter periods most recently ended:
Funded Applicable Margin Applicable Margin Level Debt/EBIT Revolving Loans Term Loans DA - ----------------------------------------------------------------------------------- Eurodollar Base Unused Eurodollar Base Rate Rate Revolver Fee Rates Rate - ----------------------------------------------------------------------------------- I GREATER THAN OR EQUAL TO 4.00 2.75% 2.00% 0.625% 3.00% 1.25% - ----------------------------------------------------------------------------------- II GREATER THAN OR EQUAL TO 3.50 and 2.50% 1.75% 0.50% 2.75% 1.00% LESS THAN 4.0 - ----------------------------------------------------------------------------------- III GREATER THAN OR EQUAL TO 2.50 and 2.25% 1.50% 0.375% 2.50% 0.75% LESS THAN 3.50 - ----------------------------------------------------------------------------------- IV GREATER THAN OR EQUAL TO 2.00 and 2.0% 1.25% 0.25% 2.25% 0.50% LESS THAN 2.50 - ----------------------------------------------------------------------------------- V LESS THAN 2.0 1.75% 1.00% 0.25% 2.00% 0.25% - -----------------------------------------------------------------------------------
Notwithstanding the foregoing, for the first six months after the Effective Date, the Applicable Margin shall be set as if Borrower's Funded Debt to EBITDA ratio were at Level II, and thereafter adjustments to the Applicable Margin shall be based on changes in the Funded Debt to EBITDA Ratio as set forth above calculated quarterly, and shall be determined based on the computations set forth in the Compliance Certificate ("Certificate") furnished to the Agent pursuant to Section 8.01 and shall be effective commencing on the date following the date such Certificate is received (or if earlier, the date such Certificate was required to be delivered), and in each case, until the date following the date on which a new Certificate is delivered or is required to be delivered, whichever shall first occur, PROVIDED however, if the Borrower shall fail to deliver any such Certificate within the time period required by Section 8.01, 2 then the Applicable Margin with respect to the Revolving Loans and the Term Loan shall be at Level I until the appropriate Certificate is so delivered. "ASSIGNMENT AND ASSUMPTION AGREEMENT" has the meaning set forth in Section 13.06. "AUTHENTICATING PERSON" has the meaning set forth in Section 5.01(e). "AUTHORIZED REPRESENTATIVE" means any of the Chief Executive Officer, President or any Vice President of the Borrower or, with respect to financial matters, the Chief Financial Officer, Treasurer or Controller of the Borrower, or any other Person expressly designated by the Board of Directors of the Borrower (or appropriate committee thereof) as an Authorized Representative of the Borrower, as set forth from time to time in a certificate in the form of Exhibit "A". "AVAILABLE REVOLVING COMMITMENT" means, on any date of determination, the lesser of (a) and (b), with (a) being equal to the Revolving Commitment in effect on such date and (b) being equal to the then current Borrowing Base less the aggregate principal balance of the Term Loans on such date. "BASE RATE" means the lending rate as announced by the Agent from time to time as its base rate, which may change as often as daily, provided, however, that at no time shall the rate of interest exceed the highest rate allowed by law. In the event that the Agent does not, for any reason, announce a Base Rate or discontinues the use of the term "Base Rate" as a benchmark for interest rate on its loans, the Base Rate shall .be the rate quoted as the "Prime Rate" as reported in the "Money Rates" section of the Wall Street Journal (or the arithmetic average of the rates so quoted, if more than one rate is quoted) or in the event of discontinuance of such publication or such section thereof, the Base Rate shall mean the monthly average Prime Rate as reported and published in the FEDERAL RESERVE BULLETIN published monthly by the Board of Governors of the Federal Reserve System under the table styled "Prime Rate Charged by Banks on Short Term Business Loans". In the event of the discontinuance of both such publications or such section or table thereof, the Base Rate shall mean the Prime Rate as from time to time announced or published by Citibank, N.A. at its principal office in New York, New York. The terms "Base Rate" and "Prime Rate" are intended by the parties to be benchmarks only and are not to be construed as indicating that such rates are the best or lowest rates offered by the Agent to any of its customers regardless of their creditworthiness. "BASE RATE LOAN" means a Loan that bears interest based upon the Adjusted Base Rate. "BENEFICIARY" means any third Person designated by the Borrower to whom the Agent is to make payment or on whose order payment is to be made under a Letter of Credit. "BORROWER" shall have the meaning set forth in the introductory paragraph hereof and shall include Borrower's successors and permitted assigns. In each instance where the term Borrower is used herein it shall be deemed to refer to each of the parties comprising Borrower individually as well as collectively. 3 "BORROWING" means a borrowing of Revolving Loans pursuant to Section 2.01 hereof, the Borrowing of Term Loans on the Effective Date pursuant to Section 2.07 hereof, or a deemed Borrowing pursuant to Section 2.11 hereof. "BORROWING BASE" means, at any date of determination, an amount equal to the sum of (i) eighty percent (80%) of the Eligible Accounts, PLUS (ii) fifty percent (50%) of Eligible Inventory, (iii) PLUS sixty percent (60%) of Borrower's Fixed Assets. "BORROWING BASE CERTIFICATE" means a certificate of the Borrower in substantially the form of Exhibit "B" hereto and delivered to the Agent pursuant to Section 8.03 hereof. "BUSINESS DAY" means any day other than a Saturday, Sunday or other day on which commercial banks in Birmingham, Alabama are authorized or required to close by law, and, if the applicable Business Day relates to determination of the Eurodollar Rate, a day on which commercial bank are open for domestic and international business (including dealings in U.S. Dollar deposits) in London, England. "BUSINESS UNIT" means the assets constituting the business or a division or operating unit of any Person. "CAPITALIZED LEASE OBLIGATION" means Indebtedness represented by obligations under a lease that is required to be capitalized for financial reporting purposes in accordance with GAAP, and the amount of such Indebtedness shall be the capitalized amount of such obligations determined in accordance with such principles. "CASH COLLATERAL ACCOUNT" means a special non-interest bearing deposit account maintained at the Principal Office of the Agent and under the sole dominion and control of the Agent. The monies deposited into the Cash Collateral Account pursuant to this Agreement shall be applied to the Reimbursement Obligations. "COLLATERAL" means the collateral described in the Pledge Agreement and any property owned by Borrower or its Subsidiaries hereafter made subject to a security interest to secure the obligations of the Borrower hereunder. "COMMITMENT" means, as to each Lender, such Lender's obligation to make Loans hereunder and to purchase participation interests in Letters of Credit to the extent of such Lender's Credit Percentage. "CONSOLIDATED INTEREST EXPENSE" shall mean, for any fiscal period of Borrower, total interest expense (including without limitation, interest expense attributable to capitalized leases) of Borrower and its Subsidiaries on a consolidated basis but shall not include interest on the Tank Loan. "CONSOLIDATED INTEREST EXPENSE COVERAGE RATIO" means , as of any date of determination for the Borrower and its Subsidiaries on a consolidated basis, the ratio of (a) EBITDA to (b) the Consolidated Interest Expense for such period, in each case determined in accordance with GAAP. "CONTINUATION" has the meaning given in Section 2.11 hereof. "CONTROL" means that any one Person or group of related Persons acquire more than fifty percent (50%) of the outstanding shares of voting stock of the Borrower or any Subsidiary thereof. 4 "CONVERT", "CONVERSION" and "CONVERTED" each refers to a conversion of Loans of one Type into Loans of another Type pursuant to Section 2.11(b) hereof. "CREDIT EVENT" means any of the following: (a) the making (or deemed making) or Continuation of any Loan; (b) the Conversion of a Borrowing of Loans from one Type to another Type; and (c) the issuance of a Letter of Credit. "CREDIT PERCENTAGE" means, as to each Lender, the percentage set forth on Annex I. "CURRENT SUBSIDIARIES" means Virgin Islands Rum Industries Ltd. and Todhunter Bahamas Limited which are Subsidiaries of Borrower. "DATE OF ISSUANCE" means the date of issuance by a Letter of Credit Issuer of a Letter of Credit under this Agreement. "DEFAULT" means any of the events specified in Section 11.01, whether or not there has been satisfied any requirement for giving of notice, lapse of time or the happening of any other condition. "DOLLARS" or "$" means the lawful currency of the United States of America. "DRAWING" means a drawing by a Beneficiary under any Letter of Credit. "EBITDA" means, for any period, the sum of (i) net income (or loss) of the Borrower and its Subsidiaries on a consolidated basis for such period, plus (ii) to the extent deducted in determining such net income (loss) (A) provisions for income taxes for such period, (B) interest expense for such period, (C) depreciation and amortization of intangible assets during such period, (D) less extraordinary income and expense items realized in such period, and (E) less the gains or losses on the sale or disposition of assets outside the ordinary course of Borrower's business, in each case determined in accordance with GAAP. For the purposes of this Agreement, EBITDA will be determined based on the most recent four (4) fiscal quarters of Borrower. If the acquisition of Adams Wine Company d/b/a Monarch Wine Company of Georgia ("Monarch") is consummated in Borrower's first fiscal quarter for 1999-00, then, for that quarter and each of the three (3) fiscal quarters of Borrower following the Effective Date, the calculation of EBITDA for each four (4) quarter period shall include the historical proforma financial performances (computed in accordance with the requirements of Regulation S-X of the SEC or other requirements reasonably satisfactory to the Agent) of Monarch for that four (4) quarter period occurring prior to the acquisition of Monarch, to the extent that the acquisition of Monarch has not otherwise been reflected in Borrower's financial results. "EFFECTIVE DATE" means the date on which all of the conditions set forth in Section 5.01 hereof shall have been fulfilled or waived in writing by the Lenders. "ELIGIBLE ACCOUNT" shall mean an Account of the Borrower or any Subsidiary arising from a sale made to a customer by the Borrower or any Subsidiary in the ordinary course of business with respect to which the Borrower has furnished to the Agent information as set forth in Section 8.03 or otherwise qualified under subsection (h) below, provided that no Account of the Borrower or such Subsidiary shall be deemed to be an Eligible Account if, as determined by Agent in its sole and absolute discretion: 5 (a) such Account arises out of a sale made by the Borrower or such Subsidiary to an Affiliate of the Borrower which is not an arms length transaction on substantially the same terms as Borrower or the Subsidiary would have concluded the sale with an unrelated third party; or (b) such Account arises out of a sale having terms for final payment in excess of ninety (90) days from the date of purchase; or (c) such Account remains unpaid for more than 90 days after the due date of the invoice for such Account; or (d) twenty percent (20%) or more of the amount of the Accounts of the Account Debtor and its Affiliates remain unpaid for more than 90 days after the date of the invoice for such Account; or (e) (i) the Account Debtor is also a creditor of the Borrower or such Subsidiary, to the extent of the amount owed by the Borrower or such Subsidiary to the Account Debtor (unless the Agent receives from such Account Debtor an agreement or other writing satisfactory to the Agent pursuant to which such Account Debtor agrees to waive any right of offset it may have with respect to any amounts owing by the Borrower or such Subsidiary to such Account Debtor); (ii) the Account Debtor has disputed its liability on, or the Account Debtor has made any claim with respect to, such Account or any other Account due from such Account Debtor to the Borrower or such Subsidiary which has not been resolved, to the extent of the amount of such dispute or claim; or (iii) the Account otherwise is contractually or by operation of law subject to any right of setoff by the Account Debtor, to the extent of the amount of such setoff; or (f) the Account Debtor has commenced a voluntary case under the federal bankruptcy laws, as now constituted or hereafter amended, or made an assignment for the benefit of creditors, or if a decree or order for relief has been entered by a court having jurisdiction over the Account Debtor in an involuntary case under the federal bankruptcy laws, as now constituted or hereafter amended which has not been dismissed with forty-five (45) days after filing, or if any other petition or other application for relief under the federal bankruptcy laws has been filed by or against the Account Debtor, or if the Account Debtor has failed, suspended business, declared itself to be insolvent, or consented to or suffered a receiver, trustee, liquidator or custodian to be appointed for it or for all or a significant portion of its assets or affairs; or (g) Agent determines, in its discretion that collection of such Account is insecure or that such Account may not be paid by reason of the Account Debtor's financial inability to pay; or (h) the Account Debtor is the United States of America or any department, agency or instrumentality thereof and the aggregate principal amount owed is in excess of Fifty Thousand and no/100s Dollars ($50,000.00), unless the Borrower duly assigns its rights to payment of such Account to the Agent pursuant to the Assignment of Claims Act of 1940, as amended (31 U.S.C. Section 3727 ET SEQ.), or the Account Debtor is Canada or any department, agency or instrumentality thereof, unless the Borrower or such Subsidiary duly assigns its rights to payment of such Account to the Agent pursuant to any equivalent to the Assignment of Claims Act of 1940, as amended (31 U.S.C. Section 3727 ET SEQ.) in Canada, provided, however, that subsidies or promotional allowances received by Borrower or a Subsidiary which have historically been received by Borrower or a Subsidiary from the United States of America or the Government of the United States Virgin Islands shall not be excluded from Eligible Accounts; or 6 (i) such Account is evidenced by an "instrument" or "chattel paper" (within the meaning of the UCC) of any kind unless such instrument or chattel paper is delivered to the Agent with all appropriate endorsements in favor of the Agent thereon; or (j) such Account does not represent a complete BONA FIDE transaction which requires no further act under any circumstances on the part of the Borrower or such Subsidiary to make such Account payable by the Account Debtor; or (k) such Account is not a valid, legally enforceable obligation of the Account Debtor with respect thereto or is subject to a present or contingent (or there exist facts which are the basis for any future) offset, deduction, counterclaim, dispute or other defense on the part of such Account Debtor; or (l) the Inventory giving rise to such Account was at the time of sale thereof subject to a Lien other than Permitted Liens; or (m) such Account has otherwise been determined by the Agent in good faith to be ineligible for any other reason. "ELIGIBLE INVENTORY" means the Inventory Value of Inventory of the Borrower or any Subsidiaries which the Agent, in its sole and absolute discretion, determines meets all of the following requirements: (a) such Inventory is (i) owned by and in the possession and under the control of the Borrower or such Subsidiary or located in a bonded warehouse convenient to the Borrower or such Subsidiary monitored by a third party not affiliated with the Borrower or such Subsidiary and acceptable to the Agent in its sole discretion, and (ii) as to which the Borrower has furnished to the Agent the information required by Section 8.03; (b) such Inventory has not been sold; (c) such Inventory (i) is owned by the Borrower or such Subsidiary, and (ii) is subject to no Lien whatsoever other than Permitted Liens; (d) such Inventory is in good condition and meets all standards imposed by any governmental agency, or department or division thereof, having regulatory authority over such goods, their use or sale; (e) such Inventory is currently either usable or salable in the normal course of the business of the Borrower or such Subsidiary; (f) such Inventory is located within the United States or one of its territories; and (g) such Inventory is not determined by the Agent in good faith to be ineligible for any other reason. "ENVIRONMENTAL LAWS" means any Applicable Law relating to environmental protection including, without limitation, the following: Clean Air Act, 42 U.S.C. Section 7401 ET SEQ; Federal Water Pollution Control Act, 33 U.S.C. Section 1251 ET SEQ.; Solid Waste Disposal Act, 42 U.S.C. Section 6901 ET SEQ.; 7 Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601 ET SEQ.; National Environmental Policy Act, 42 U.S.C. Section 4321 ET SEQ.; regulations of the Environmental Protection Agency and any applicable rule of common law and any judicial interpretation thereof relating primarily to the environment or Hazardous Materials. "ERISA" means the Employee Retirement Income Security Act of 1974, as in effect from time to time, and any successor statute and all rules and regulations promulgated thereunder. "EURODOLLAR RATE" means the interest rate per annum calculated according to the following formula: Eurodollar = Interbank Offered Rate Rate --------------------------------------- 1-Eurodollar Reserve Percentage "EURODOLLAR RATE LOAN" means a Loan that bears interest based upon the Adjusted Eurodollar Rate. "EURODOLLAR RESERVE PERCENTAGE" means, for any day, that percentage (expressed as a decimal) which is in effect from time to time under Regulation D or any successor regulation, as the reserve requirement (including any basic, supplemental, emergency, special, or marginal reserves) applicable with respect to Eurocurrency liabilities as that term is defined in Regulation D (or against any other category of liabilities that includes deposits by reference to which the interest rate of Eurodollar Rate Loans is determined), whether or not the Agent or any Lender has any Eurocurrency liabilities subject to such requirements, without benefits of credits or proration, exceptions or offsets that may be available from time to time to the Agent or any Lender. The Eurodollar Rate shall be adjusted automatically on and as of the effective date of any change in the Eurodollar Reserve Percentage. "EVENT OF DEFAULT" means any of the events specified in Section 11.01, provided that any requirement for notice or lapse of time or any other condition has been satisfied. "FACILITY TERMINATION DATE" has the meaning set forth in Section 3.07. "FEDERAL FUNDS RATE" means, for any period, a fluctuating interest rate per annum (rounded upward to the nearest 1/100th of 1%) 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 that is a Business Day, the average of the quotations for such day on such transactions received by the Agent from three Federal Funds brokers of recognized standing selected by it. "FEES" means the fees and commissions provided for or referred to in Sections 3.03 and 4.08 and any other fees payable by the Borrower hereunder or under any other Loan Document. "FIXED ASSETS" means the gross fixed assets of Borrower without deduction for depreciation or amortization. 8 "FIXED CHARGES" means the scheduled principal and interest payments on Funded Debt due in the period in question. "FIXED CHARGE COVERAGE RATIO" means the ratio of EBITDA to Fixed Charges which shall be measured on the basis of the preceding four (4) fiscal quarters of Borrower. "FUNDING AGENT" means SouthTrust Bank, National Association, as Agent for the Lenders under the terms of this Agreement, and any successor Agent. "FUNDED DEBT" means without duplication, the principal balance of all indebtedness, other than the Tank Loan, for money borrowed, purchase money mortgages, capitalized leases, conditional sales contracts and similar title retention debt instruments under which Borrower or any of its Subsidiaries is an obligor, including any current maturities of such indebtedness, plus all debt of other entities or Persons, other than Subsidiaries, which has been guaranteed by the Borrower or any Subsidiary (other than the current balance of the indebtedness of Premier Wines & Spirts, Ltd. as of the Effective Date guaranteed by Borrower), or which is supported by a letter of credit issued for the account of the Borrower or any Subsidiary which by its terms matures more than one year from the date of any calculation thereof and/or which is renewable or extendible at the option of the obligor to a date beyond one year from such date. "GAAP" or "GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" means generally accepted accounting principles, being those principles of accounting set forth in pronouncements of the Financial Accounting Standards Board, the American Institute of Certified Public Accountants or which have other substantial authoritative support and are applicable in the circumstances as of the date of a report. "GOVERNMENTAL APPROVALS" means all authorizations, consents, approvals, licenses and exemptions of, registrations and filings with, and reports to, all Governmental Authorities. "GOVERNMENTAL AUTHORITY" means any national, state or local government (whether domestic or foreign), any political subdivision thereof or any other governmental, quasi-governmental, judicial, public or statutory instrumentality, authority, body, agency, bureau or entity (including, without limitation, the FDIC, the Comptroller of the Currency or the Federal Reserve Board, any central bank or any comparable authority) or any arbitrator with authority to bind a party at law. "GUARANTY", "GUARANTEED" or to "GUARANTEE" as applied to any obligation means and includes: (a) a guaranty (other than by endorsement of negotiable instruments or items for collection in the ordinary course of business or delivery to the Agent on account of the Obligations), directly or indirectly, in any manner, of any part or all of such obligation; or (b) an agreement, direct or indirect, contingent or otherwise, and whether or not constituting a guaranty, the practical effect of which is to assure the payment or performance (or payment of damages in the event of nonperformance) of any part or all of such obligation whether by: (i) the purchase of securities or obligations, (ii) the purchase, sale or lease (as lessee or lessor) of property or the purchase or sale of services primarily for the purpose of enabling the obligor with respect to such obligation to make any 9 payment or performance (or payment of damages in the event of nonperformance) of or on account of any part or all of such obligation, or to assure the owner of such obligation against loss, (iii) the supplying of funds to or in any other manner investing in the obligor with respect to such obligation, (iv) repayment of amounts drawn down by beneficiaries of letters of credit, or (v) the supplying of funds to or investing in a Person on account of all or any part of such Person's obligation under a Guaranty of any obligation or indemnifying or holding harmless, in any way, such Person against any part or all of such obligation. "HAZARDOUS MATERIALS" means all hazardous or toxic materials as defined by any Applicable Law and includes, without limitation, (a) hazardous waste as defined in the Resource Conservation and Recovery Act of 1976, or in any other applicable Environmental Laws, (b) hazardous substances, as defined in the Comprehensive Environmental Response, Compensation and Liability Act, or in any other applicable Environmental Laws, (c) gasoline, or any other petroleum product or by-product, (d) toxic substances, as defined in the Toxic Substances Control Act of 1976, or in any other applicable Environmental Laws, (e) insecticides, fungicides, or rodenticides, as defined in the Federal Insecticide, Fungicide, and Rodenticide Act of 1975, or in any other applicable Environmental Laws, or (f) any hazardous waste, hazardous substances, hazardous materials, toxic substances or toxic pollutants, as those terms are used or defined in the Hazardous Materials Transportation Act, the Clean Air Act or the Clean Water Act, as each such Act, statute or regulation may be amended from time to time. "INDEBTEDNESS" as applied to a Person means, without duplication, (a) all items which in accordance with GAAP would be included in determining total liabilities as shown on the liability side of a balance sheet of such Person as at the date as of which Indebtedness is to be determined including, without limitation, all Capitalized Lease Obligations of such Person and all reimbursement obligations due or that may become due of such Person under letters of credit and acceptances issued for its account, and (b) all obligations of other Persons which such Person has Guaranteed. "INTERBANK OFFERED RATE" means, for any Eurodollar Rate Loan for any Interest Period therefor, the rate per annum (rounded upwards, if necessary, to the nearest 1/100th of 1%) appearing on Telerate Page 3750 (or any successor page) as the London Interbank Offered Rate for deposits in Dollars at approximately 11:00 A.M. (London time) two (2) Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period. If, for any reason, such rate is not available, the term "Interbank Offered Rate" shall mean, with respect to any Eurodollar Rate Loan for any Interest Period therefor, the rate per annum (rounded upwards, if necessary, to the nearest 1/100th of 1%) appearing on Reuters Screen LIBOR Page as the London interbank offered rate of deposits in Dollars at approximately 11:00 a.m. (London time) two (2) Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period; provided, however, if more than one rate is specified on Reuters Screen LIBOR Page, the applicable rate shall be the arithmetic means of all such rates. "INTEREST PERIOD" means for any Base Rate Loan one (1) day and for any Eurodollar Loan, the period commencing on the date of the Borrowing, Conversion or Continuation of such Eurodollar Loan and ending on the last day of the period pursuant to the provisions below. The duration of each Interest Period for Eurodollar Rate Loans shall be one (1), two (2) or three (3) months, as designated by 10 Borrower. Borrower shall, in an appropriate Notice of Borrowing, Notice of Continuation or Notice of Conversion, designate the beginning of each such Interest Period. In no event shall an Interest Period on a Revolving Loan extend beyond the Revolving Termination Date. Whenever the last day of any Interest Period would otherwise occur on a day other than a Business Day, the last day of such Interest Period shall be extended to occur on the next succeeding Business Day; PROVIDED, HOWEVER, that if such extension would cause the last day of such Interest Period to occur in the next following calendar month, the last day of such Interest Period shall occur on the next preceding Business Day. Any Interest Period which begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of a calendar month. There shall not be more than eight (8) Interest Periods in effect for the Revolving Loans and one (1) Interest Period in effect for the Terms Loans on any day. "INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as amended. "INVENTORY" means (a) all inventory of the Borrower or any Subsidiaries and all goods intended for sale or lease by the Borrower or any Subsidiaries, or for display or demonstration; (b) all work-in-process; (c) all raw materials and other materials and supplies of every nature and description used or which might be used in connection with the manufacture, packing, shipping, advertising, selling, leasing or furnishing of such goods or otherwise used or consumed in the Borrower's or such Subsidiary's business; and (d) all warehouse receipts and other documents relating to any of the foregoing. "INVENTORY VALUE" means the lesser of (i) the contract amount for the sale of any Inventory or (ii) the market value of such Inventory. "L/C COMMITMENT AMOUNT" equals $2,000,000, as the same may be reduced permanently from time to time pursuant to Section 3.08 hereof. "L/C TERMINATION DATE" means the Revolving Termination Date or the Facility Termination Date, whichever occurs first. "LENDER" shall have the meaning set forth in the introductory paragraph hereof and shall include each Lender's successors and permitted assigns. "LENDING OFFICE" means, for each Lender, the "Lending Office" specified for such Lender on the signature pages attached hereto. "LETTER OF CREDIT" has the meaning set forth in Section 3.01(a). "LETTER OF CREDIT FACILITY" means the credit facility described in Article III pursuant to which the Letters of Credit are to be issued. "LETTER OF CREDIT ISSUER" means the Agent or, with the written consent of the Agent and the Borrower, any other Lender that issues Letters of Credit for the account of the Borrower pursuant to Section 3.01. 11 "LIEN" as applied to the property of any Person means: (a) any mortgage, deed to secure debt, deed of trust, lien, pledge, charge, lease constituting a Capitalized Lease Obligation, conditional sale or other title retention agreement, or other security interest, security title or encumbrance of any kind in respect of any property of such Person, or upon the income or profits therefrom; (b) any arrangement, express or implied, under which any property of such Person is transferred, sequestered or otherwise identified for the purpose of subjecting the same to the payment of Indebtedness or performance of any other obligation in priority to the payment of the general, unsecured creditors of such Person; and (c) the filing of, or any agreement to give, any financing statement under the UCC or its equivalent in any jurisdiction. "LOAN" or "LOANS" means any Revolving Loan or Term Loan or collectively all of the Revolving Loans and Term Loans. "LOAN COMMITMENT" means the aggregate commitments of $71,000,000 from the Lenders for Term Loans, Revolving Loans and Letters of Credit. "LOAN DOCUMENT" means this Agreement, each of the Notes, the Pledge Agreement and each other document or instrument executed and delivered by a party comprising Borrower in connection with this Agreement, the Revolving Credit Facility, the Term Loan Facility, the Letter of Credit Facility or any of the foregoing agreements. "MATERIAL ADVERSE EFFECT" means, with respect to any Person, a material adverse effect upon such Person's business, assets, liabilities, financial condition, results of operations or business prospects, as determined by the Required Lenders in their sole discretion exercised in good faith. "MONARCH ACQUISITION AGREEMENT" means, collectively, (a) the Asset Purchase Agreement dated as of September 27, 1999, by and among Monarch as the Seller, the shareholders of the Seller signatory thereto, and Borrower, as the Purchaser, pursuant to which said Seller has agreed to sell and the Borrower has agreed to purchase from the Seller substantially all of the assets comprising the business known as "Monarch Wine Company" under various trade names described therein for a purchase price equal to $22,496,000 as adjusted pursuant to the Agreement. "MONEY BORROWED" means, as applied to the Indebtedness of a Person, (a) Indebtedness for money borrowed, or (b) Indebtedness, whether or not in any such case the same was for money borrowed, but other than trade debt of such Person incurred in the ordinary course of business: (i) represented by notes payable, and drafts accepted, that represent extensions of credit, (ii) constituting obligations evidenced by bonds, debentures, notes or similar instruments, or (iii) upon which interest charges are customarily paid or that was issued or assumed as full or partial payment for property, or 12 (c) Indebtedness that constitutes a Capitalized Lease Obligation, or (d) Guaranty of Indebtedness that is such by virtue of clause (b) of the definition of Indebtedness, but only to the extent that the obligations Guaranteed are obligations that would constitute Indebtedness for Money Borrowed. "MULTIEMPLOYER PLAN" has the meaning set forth in Section 4001(a)(3) of ERISA, as amended or revised from time to time. "NOTE" means a Revolving Note or a Term Note, and "NOTES" means each and every Note. "NOTICE OF BORROWING" means a notice in the form of Exhibit "C" hereto to be delivered to the Agent pursuant to Section 2.02 and 2.07 indicating the intention of the Borrower to borrow Revolving Loans and the Term Loan. "NOTICE OF CONTINUATION/CONVERSION" means a notice in the form of Exhibits "D" and "E", respectively, hereto to be delivered to the Agent pursuant to Section 2.02 in connection with the election of a subsequent Interest Period for any Eurodollar Rate Loan, the continuation or conversion of a Eurodollar Rate Loan into a Base Rate Loan or the continuation or conversion of any Base Rate Loan into a Eurodollar Rate Loan. "OBLIGATIONS" means, individually and collectively: (a) the Revolving Loans; (b) the Term Loans, (c) all Reimbursement Obligations; and (d) all other indebtedness, liabilities, obligations, covenants and duties of the Borrower and any Subsidiary owing to the Agent or Lenders of every kind, nature and description, under or in respect of this Agreement, any Note or any of the other Loan Documents including, without limitation, any renewals or extensions thereof, the Fees, and whether direct or indirect, absolute or contingent, due or not due, contractual or tortious, liquidated or unliquidated, and whether or not evidenced by any note. "PAYMENT DATE" shall have the meaning set forth in Section 3.04(a). "PBGC" means the Pension Benefit Guaranty Corporation and any successor agency. "PERMITTED INVESTMENTS" means (i) prime commercial paper of a domestic issuer rated at least "A-1" or "P-1", (ii) certificates of deposit with maturities of one year or less from the date of acquisition issued by any commercial bank organized under the laws of the United States or Canada having capital resources in excess of $500,000,000 and a short-term debt rating of "A-1" or "P-1" and a long term debt rating of "A" or higher and denominated in U.S. Dollars, (iii) direct obligations of the United States government or any agency thereof, and obligations guaranteed by the United States government, with maturities or one year or less from the date of acquisition, or (iv) money market deposit accounts with a commercial bank organized under the laws of the United States or Canada having capital resources in excess of $500,000,000 and a short term debt rating of "A-1" or "P-1" and a long term debt rating of "A" or higher and denominated in U.S. Dollars. "PERMITTED LIENS" means, as to any Person: (a) inchoate Liens securing taxes, assessments and other governmental charges or levies (excluding any Lien imposed pursuant to any of the provisions of ERISA) or the claims of materialmen, 13 mechanics, carriers, warehousemen or landlords for labor, materials, supplies or rentals incurred in the ordinary course of business payment of which is not yet due; (b) Liens consisting of deposits or pledges made, in the ordinary course of business, in connection with, or to secure payment of, obligations under workmen's compensation, unemployment insurance or similar legislation; (c) Liens consisting of encumbrances in the nature of zoning restrictions, easements, and rights or restrictions of record on the use of real property, which do not materially detract from the value of such property or materially impair the use thereof in the business of such Person; (d) Liens in existence as of the date hereof and specified on Schedule 6.01(g); (e) Liens in favor of the Agent on behalf of the Lenders; (f) Liens which have been approved by the Required Lenders; (g) Liens upon property leased under a capital lease and placed upon such property to secure the lease payments under such capital lease, provided, (i) any such Lien shall not encumber any other property of the Borrower or such Subsidiary, (ii) any such lien shall not exceed the total of such lease payments, and (iii) the Agent has approved such capital lease transaction; (h) Purchase money liens on capital assets acquired after the date hereof securing the purchase price, or a portion thereof, of such capital asset, provided (i) any such Liens shall not encumber any other property of the Borrower or any Subsidiary, (ii) any such Lien shall not exceed the purchase price of such capital asset, and (iii) the aggregate amount of the debt secured by such liens does not exceed $250,000.00; and (i) The lien on the Tank Project securing the Tank Loan. "PERSON" means an individual, corporation, partnership, limited liability corporation or partnership, association, trust or unincorporated organization, or a government or any agency or political subdivision thereof. "PLAN" means an employee benefit plan maintained for employees of the Borrower or any of its Subsidiaries that is covered by Title IV of ERISA, including such plans as may be established after the Agreement Date. "PLEDGE AGREEMENT" means the pledge in the form attached hereto as Exhibit "F" pursuant to which the stock in the Current Subsidiaries is pledged to the Agent for the benefit of the Lenders to secure the Loans. "POST-DEFAULT RATE" means a rate equal to two percent (2%) per annum above the Base Rate as in effect from time to time. "PRINCIPAL OFFICE" means with respect to the Agent, the office of the Agent located at 420 North 20th Street, Birmingham, AL 35203, Attn: Florida Corporate Banking (West Palm Beach). 14 "QUARTERLY PAYMENT DATE" means the last Business Day of each March, June, September and December to and including the Term Loan Maturity Date, commencing March 31, 2000. "REIMBURSEMENT OBLIGATION" means the absolute and unconditional obligation of the Borrower to reimburse the Letter of Credit Issuer for any Drawing pursuant to Section 3.04(b). "REPORTABLE EVENT" has the meaning set forth in Section 4043(b) of ERISA, but shall not include a Reportable Event as to which the provision for 30 days' notice to the PBGC is waived under applicable regulations. "REQUIRED LENDERS" means Lenders holding 75% of the Commitments provided that, if the Commitments shall have been terminated for any reason, "Required Lenders" shall mean Lenders holding 75% of the outstanding principal amount of the Loans and participation interests in Letters of Credit. "RESTRICTED DISTRIBUTION" means any payment, dividend or other distribution of income, cash or other assets of the Borrower by the Borrower to any of the Borrower's shareholders, partners or other Persons holding an equity interest in the Borrower. "RESTRICTED PURCHASE" means any payment by the Borrower to any of the Borrower's shareholders, partners or other Persons holding an equity interest in the Borrower on account of the purchase, redemption or other acquisition or retirement of such equity interest in the Borrower. "REVOLVING COMMITMENT" means $15,000,000, as the same may be reduced permanently from time to time pursuant to Section 2.12 hereof. "REVOLVING CREDIT FACILITY" means the revolving credit facility described in Section 2.01 hereof. "REVOLVING LOAN" has the meaning set forth in Section 2.01 hereof. "REVOLVING NOTE" has the meaning set forth in Section 2.06 hereof. "REVOLVING TERMINATION DATE" means the date that is three (3) years after the date of this Agreement, provided that if such date is not a Business Day, "Revolving Termination Date" shall mean the immediately preceding Business Day. "SEC" means the Securities & Exchange Commission of the United States of America. "SECURED OBLIGATIONS" means, individually and collectively: (a) the Revolving Loans; (b) the Term Loans, (c) all Reimbursement Obligations; and (d) all other indebtedness, liabilities, obligations, covenants and duties of the Borrower owing to the Agent or Lenders of every kind, nature and description, under or in respect of this Agreement, any Note or any of the other Loan Documents including, without limitation, any renewals or extensions thereof, the Fees, and whether direct or indirect, absolute or contingent, due or not due, contractual or tortious, liquidated or unliquidated, and whether or not evidenced by any note. "SECURITY INTEREST" means the Lien of the Agent for the benefit of the Lenders upon, and the collateral assignment to the Agent for the benefit of the Lenders of, the Collateral pursuant to the Pledge Agreement and any other Loan Document. 15 "SENIOR MANAGEMENT" includes, but is not limited to, Messrs. Pincourt, Maltby, Valdes, Mitchell and Edwards. "SENIOR NOTES" means the existing notes in the original principal amount of $34,000,000 granted pursuant to the Note Purchase Agreement dated October 30, 1994, as further amended on February 1, 1996, by and between Borrower, Principal Mutual Life Insurance Company, Connecticut Mutual Life Insurance Company n/k/a Massachusetts Mutual Life Insurance Company and TMG Life Insurance Company by The Mutual Group (U.S.), Inc., as Agent. "STATED AMOUNT" means the amount available to be drawn by a Beneficiary under a Letter of Credit from time to time, as the Stated Amount of any such Letter of Credit may be increased or reduced from time to time in accordance with the terms of such Letter of Credit. "SUBSIDIARY" means any corporation or other entity in which more than 50% of its outstanding voting stock or more than 50% of all equity interests are owned directly or indirectly by the Borrower and/or by one or more of the Borrower's Subsidiaries. "TANGIBLE NET WORTH" means, with respect to any date of determination and any Person, the consolidated shareholders' equity of such Person less (i) all goodwill, non-compete agreements, and other assets which are classified as intangible assets in accordance with GAAP except the trademarks listed on Schedule 6.01(q), and (ii) all Indebtedness owing to such Person by any of its Affiliates other than Indebtedness owing to Borrower on the date hereof from Premier Wines & Spirits, Ltd. and Antillean Liquors, N.V. disclosed on Schedule 6.01(g), the aggregate principal balance of which does not exceed $2,000,000. "TANK PROJECT" means the new molasses storage tank to be constructed at the St. Croix facility owned by Virgin Islands Rum Industries, Ltd. "TANK LOAN" means the loan from Westway Trading Corporation which is to be used to finance the construction of the Tank Project. "TERM LOAN COMMITMENT" means $56,000,000. "TERM LOAN FACILITY" means the Term Loan facility described in Section 2.07 hereof. "TERM LOAN" means a loan made to the Borrower pursuant to Section 2.07 hereof. "TERM LOAN MATURITY DATE" means December 31, 2004, provided that if such date is not a Business Day, "TERM LOAN MATURITY DATE" shall mean the immediately preceding Business Day. "TERM NOTE" has the meaning set forth in Section 2.08 hereof. "TERMINATION EVENT" means (a) a Reportable Event; (b) the filing of a notice of intent to terminate a Plan or the treatment of a Plan amendment as a termination under Section 4041 of ERISA or (c) the institution of proceedings to terminate a Plan by the PBGC under Section 4042 of ERISA, or the appointment of a trustee to administer any Plan. 16 "TYPE" with respect to any Loan, refers to whether such Loan is a Eurodollar Rate Loan or a Base Rate Loan. "UNFUNDED VESTED ACCRUED BENEFITS" means with respect to any Plan at any time, the amount (if any) by which (a) the present value of all vested nonforfeitable benefits under such Plan EXCEEDS (b) the fair market value of all Plan assets allocable to such benefits, all determined as of the then most recent valuation date for such Plan. "UNIFORM COMMERCIAL CODE" or "UCC" means the Uniform Commercial Code as in effect from time to time in the State of Florida. SECTION 1.02. GENERAL. All terms of an accounting nature not specifically defined herein shall have the meaning ascribed thereto by GAAP. References in this Agreement to "Sections", "Articles", "Exhibits" and "Schedules" are to sections, articles, exhibits and schedules herein and hereto unless otherwise indicated. References in this Agreement to any document, instrument or agreement (a) shall include all exhibits, schedules and other attachments thereto, (b) shall include all documents, instruments or agreements issued or executed in replacement thereof, and (c) shall mean such document, instrument or agreement, or replacement or predecessor thereto, as amended, modified or supplemented from time to time in accordance with its terms and in effect at any given time. Wherever from the context it appears appropriate, each term stated in either the singular or plural shall include the singular and plural, and pronouns stated in the masculine, feminine or neuter gender shall include the masculine, the feminine and the neuter. Unless explicitly set forth to the contrary, a reference to "Subsidiary" shall mean a Subsidiary of the Borrower or a Subsidiary of such Subsidiary. Unless otherwise indicated, all references to time are references to prevailing Eastern time. Unless otherwise indicated, all accounting terms, ratios and measurements shall be interpreted or determined in accordance with generally accepted accounting principles. References in this Agreement to "including" shall mean "including without limiting the generality of any description preceding such term." ARTICLE II REVOLVING CREDIT FACILITY SECTION 2.01. REVOLVING CREDIT FACILITY. Subject to the terms and conditions hereof, during the period from the Effective Date to the Revolving Termination Date, each Lender severally agrees to make revolving loans (the "REVOLVING LOANS") to the Borrower in an aggregate principal amount at any time outstanding up to, but not exceeding the product of (a) and (b), with (a) being equal to (i) the Available Revolving Commitment at such time LESS (ii) the aggregate Stated Amounts of Letters of Credit outstanding at such time, and (b) being equal to such Lender's Credit Percentage; PROVIDED, however, that the Lenders will not be required and shall have no obligation to make any such loan (i) so long as a Default or an Event of Default has occurred and is continuing, or (ii) if the Agent has accelerated the maturity of any of the Notes as a result of an Event of Default. Subject to the terms and conditions of this Agreement, during the period from the Effective Date until but not including the Revolving Termination Date, the Borrower may borrow, repay and reborrow Revolving Loans; PROVIDED, however, that (y) no Revolving Loan that is an Eurodollar Rate Loan shall be made which has an Interest Period that extends beyond the Revolving Termination Date, and (z) each Revolving Loan that is an Eurodollar Rate Loan may, subject to the provisions of Section 2.12, be repaid only on the last day of the Interest Period with respect thereto unless such payment is accompanied by the additional payment, if any, required by Section 2.12. All Borrowings of Revolving Loans which are Eurodollar Rate Loans shall be 17 in an aggregate minimum amount of $1,000,000 and integral multiples of $100,000 thereof in excess of that amount and if such Loans are Base Rate Loans, shall be in the aggregate minimum amount of $250,000 and integral multiples of $100,000 thereof in excess of that amount. At no one time will there be outstanding more than eight (8) Eurodollar Rate Loans. SECTION 2.02. BORROWINGS UNDER REVOLVING CREDIT FACILITY. An Authorized Representative shall give the Agent (1) at least three (3) Business Days' irrevocable written notice by telefacsimile transmission of a Notice of Borrowing with appropriate insertions, effective upon receipt, of each Revolving Loan that is an Eurodollar Rate Loan (whether representing an additional borrowing hereunder or the conversion of a borrowing hereunder from Base Rate Loans to Eurodollar Rate Loans) prior to 11:00 a.m. Eastern Standard Time ("EST"), and (2) irrevocable written notice by telefacsimile transmission of a Notice of Borrowing with appropriate insertions, effective upon receipt, of each Revolving Loan that is a Base Rate Loan (whether representing an additional borrowing hereunder or the conversion of borrowing hereunder from Eurodollar Rate Loans to Base Rate Loans) prior to 11:00 a.m. EST on the day of such proposed Revolving Loan which shall be a Business Day. Each such notice shall specify the amount of the borrowing, the Type of Revolving Loan, and the date of the borrowing. Notice of receipt of such Borrowing Notice together with the amount of each Lender's portion of the Loan requested thereunder, shall be provided by the Agent to each Lender by telefacsimile transmission with reasonable promptness, but (provided the Agent shall have received such notice by 11:00 a.m. EST) not later than 2:00 p.m. EST on the same date as the Agent's receipt of such notice. SECTION 2.03. DISBURSEMENTS UNDER REVOLVING CREDIT FACILITY. (a) No later than 3:00 p.m. EST on the date specified in a Notice of Borrowing on which Revolving Loans are to be borrowed, each Lender will make available for the account of its applicable Lending Office to the Agent at the address of the Agent set forth on the signature pages hereof, the Revolving Loan to be made by it, by wire transfer of immediately available funds pursuant to wiring instructions set forth on Annex I attached hereto or as otherwise directed by the Agent in writing. Unless the Agent shall have been notified in writing by any Lender prior to the requested date of any Borrowing that such Lender does not intend to make available to the Agent its portion of the Borrowing requested to be made on such date, the Agent may assume that such Lender will make such amount available to the Agent on the date of the requested Borrowing as set forth in the Notice of Borrowing and the Agent may, in reliance upon such assumption, make available to the Borrower the amount of the Borrowing to be provided by such Lender. (b) Provided that the applicable conditions set forth in Article V hereof for such Borrowing are fulfilled, all funds received by the Agent from the Lenders pursuant to Section 2.03(a) will be made available to the Borrower by credit to the account of the Borrower maintained with the Agent and specified in the Notice of Borrowing. (c) If the amount described in Section 2.03(a) is not in fact made available to the Agent by a Lender (such Lender being herein referred to as a "DEFAULTING LENDER") and the Agent has nevertheless made available to the Borrower the amount of the Borrowing to be provided by such Lender, the Agent shall be entitled to recover such corresponding amount on demand from such Defaulting Lender. If such Defaulting Lender does not pay such corresponding amount forthwith upon the Agent's demand therefor, the Agent shall promptly notify the Borrower, and the Borrower shall immediately pay such corresponding amount to the Agent. The Agent shall also be entitled to recover from such Defaulting Lender interest on such corresponding amount in respect of each day from the date such amount was 18 made available to the Borrower to the date such corresponding amount is recovered by the Agent, at a rate per annum equal to the overnight Federal Funds Rate. Nothing herein shall be deemed to relieve any Lender of its obligation to fulfill its commitments hereunder or to prejudice any rights which the Borrower may have against any Lender as a result of any default by such Lender hereunder. SECTION 2.04. SEVERAL OBLIGATIONS. No Lender shall be responsible for the failure of any other Lender to make a Revolving Loan to be made by such other Lender pursuant to a Notice of Borrowing; PROVIDED, HOWEVER, that the failure of any Lender to make a Revolving Loan to be made by it under a Notice of Borrowing shall not relieve the obligation of each other Lender to make the Revolving Loan to be made by such other Lender under such Notice of Borrowing. SECTION 2.05. REPAYMENT OF REVOLVING LOANS. (a) Pursuant to the terms of the Revolving Notes, the Borrower shall repay the entire outstanding principal amount of, and all accrued interest on, the Revolving Loans on the Revolving Termination Date. (b) If at any time the aggregate principal amount of the Revolving Loans PLUS the aggregate Stated Amounts of all Letters of Credit outstanding at such time exceeds the Available Revolving Commitment in effect at such time, the Borrower shall immediately pay to the Agent for the respective accounts of the Lenders the amount of such excess. Such payment shall be applied to pay all amounts of principal outstanding on the Revolving Loans PRO RATA in accordance with the first sentence of Section 4.05 hereof and the remainder, if any, shall be deposited by the Agent into the Cash Collateral Account for application to any Reimbursement Obligation that may become due with respect to any Letters of Credit then outstanding. In the event the Borrower is required to pay any outstanding Eurodollar Rate Loans by reason of this Section 2.05(b) prior to the end of the applicable Interest Period therefor, the Borrower shall indemnify each Lender against the losses, costs and expenses described in Section 2.12 hereof incurred by such Lender. SECTION 2.06. REVOLVING NOTES. The obligation of the Borrower to repay the Revolving Loans shall be evidenced by promissory notes (each a "REVOLVING NOTE" and collectively, the "REVOLVING NOTES"). Each Revolving Note delivered to each Lender shall be payable to such Lender, shall be in the face amount equal to the product of: (a) such Lender's Credit Percentage TIMES (b) the Revolving Commitment, and shall be in substantially the form of Exhibit "G" hereto. Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower resulting from each Revolving Loan made by such Lender from time to time and the amounts of principal and interest payable and paid from time to time in respect of each such Revolving Loan. In any legal action or proceeding in respect of this Agreement, the entries made in such account or accounts shall be presumptive evidence of the existence and amounts of the obligations of the Borrower therein recorded absent manifest error. SECTION 2.07. TERM LOAN FACILITY. Subject to the terms and conditions hereof, each Lender severally agrees to make a Term Loan to the Borrower on the Effective Date in a principal amount equal to its Credit Percentage of the Term Loan Commitment. An Authorized Representative shall give the Agent (1) at least three (3) Business Days' irrevocable written notice by telefacsimile transmission of a Notice of Borrowing with appropriate 19 insertions, effective upon receipt, if a Eurodollar Rate Loan (including conversion from a Base Rate Loan to a Eurodollar Rate Loan) prior to 11:00 a.m. EST, and (2) irrevocable written notice by telefacsimile transmission of a Notice of Borrowing with appropriate insertions, effective upon receipt, if a Base Rate Loan (including conversion from a Eurodollar Rate Loan to a Base Rate Loan) prior to 11:00 a.m. EST on the Effective Date. Notice of receipt of such Borrowing Notice together with the amount of each Lender's portion of the Loan requested thereunder shall be provided by the Agent to each Lender by telefacsimile transmission with reasonable promptness, but (provided the Agent shall have received such notice by 11:00 a.m. EST) not later than 1:00 p.m. EST on the same date as the Agent's receipt of such notice. No later than 2:00 p.m. EST on the Effective Date each Lender will make available for the account of its applicable Lending Office to the Agent, at the address of the Agent set forth on the signature pages hereof, the Term Loan to be made by it by wire transfer of immediately available funds pursuant to the wiring instructions set forth on Annex I attached hereto or as otherwise directed by the Agent in writing. No later than 5:00 p.m. EST on the Effective Date the Agent shall make available to or for the account of the Borrower, and in accordance with the written instructions of the Borrower, the proceeds of the Term Loans made available to the Agent by the Lenders. No Lender shall be responsible for the failure of any other Lender to make the Term Loan to be made by such other Lender pursuant to this Section 2.07; PROVIDED, HOWEVER, that the failure of any Lender to make the Term Loan to be made by it under this Section 2.07 shall not relieve the obligation of each other Lender to make the Term Loan to be made by such other Lender under this Section 2.07. SECTION 2.08. TERM NOTES. The obligation of the Borrower to repay the Term Loans shall be evidenced by promissory notes (each a "TERM NOTE" and, collectively, the "TERM NOTES"). Each Term Note delivered to a Lender shall be payable to such Lender, shall be in the face amount equal to the principal amount of such Lender's Term Loan made on the Effective Date, and shall be substantially in the form of Exhibit "H" hereto. Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower resulting from the Term Loan made by such Lender and the amounts of principal and interest payable and paid from time to time in respect of such Term Loan. In any legal action or proceeding in respect of this Agreement, the entries made in such account or accounts shall be presumptive evidence of the existence and amounts of the obligations of the Borrower therein recorded absent manifest error. SECTION 2.09. TERM LOAN AMORTIZATION AND MATURITY. On each Quarterly Payment Date commencing with the Quarterly Payment Date occurring on March 31, 2000 and on the Term Loan Maturity Date, the Borrower shall, pursuant to the terms of the Term Notes, make a scheduled payment of the outstanding principal amount of the Term Loan in an aggregate amount equal to the lesser of (i) the then outstanding principal balance of all Term Notes and (ii) the amount set forth below opposite such Quarterly Payment Date or Term Loan Maturity Date, as the case may be:
Term Loan Maturity Date Quarterly Payment Date Occurring Aggregate Principal in: Payment --- ------- March 31, 2000 $2,000,000 June 30, 2000 $2,000,000 September 30, 2000 $2,000,000 December 31, 2000 $2,000,000 March 31, 2001 $2,000,000 June 30, 2001 $2,000,000 September 30, 2001 $2,000,000 December 31, 2001 $2,000,000 March 31, 2002 $2,000,000 20 June 30, 2002 $2,000,000 September 30, 2002 $2,000,000 December 31, 2002 $2,000,000 March 31, 2003 $2,000,000 June 30, 2003 $2,000,000 September 30, 2003 $2,000,000 December 31, 2003 $2,000,000 March 31, 2004 $2,000,000 June 30, 2004 $2,000,000 September 30, 2004 Remaining unpaid principal December 31, 2004 balance
SECTION 2.10. INTEREST ON LOANS. (a) INTEREST ON EURODOLLAR RATE LOANS. Subject to the provisions of Section 4.01 hereof, (i) in the case of each Revolving Loan or portion thereof that is a Eurodollar Rate Loan, interest shall be payable on the day after the expiration of each Interest Period commencing with the end of the first such Interest Period (and after maturity of such Loan (whether by acceleration or otherwise) upon demand) at an interest rate per annum equal to the Adjusted Eurodollar Rate for the Interest Period in effect for such Eurodollar Rate Loan, and (ii) in the case of the Term Loan if a Eurodollar Rate Loan, interest shall be payable at the expiration of each Interest Period commencing with the end of the first such Interest Period (and after maturity of such Loan (whether by acceleration or otherwise) upon demand) at an interest rate per annum equal to the Adjusted Eurodollar Rate for the Interest Period in effect for such Eurodollar Rate Loan. The Agent upon determining the Adjusted Eurodollar Rate for any Interest Period shall promptly notify the Borrower and the Lenders. Each determination by the Agent of an interest rate hereunder shall be conclusive and binding for all purposes, absent manifest error. (b) INTEREST ON BASE RATE LOANS. Subject to the provisions of Section 4.01 hereof, (i) in the case of each Revolving Loan or portion thereof that is a Base Rate Loan, interest shall be payable quarterly on each Quarterly Payment Date commencing March 31, 2000 (and after maturity (whether by acceleration or otherwise) upon demand) at an interest rate per annum equal to the Adjusted Base Rate, and (ii) in the case of the Term Loan if a Base Rate Loan, interest shall be payable quarterly on each Quarterly Payment Date (and after maturity of such Loan (whether by acceleration or otherwise) upon demand) at an interest rate per annum equal to the Adjusted Base Rate. In the event of any change in the Base Rate, the rate hereunder shall change, effective as of the day the Base Rate changes. (c) INTEREST ON TERM LOANS. Notwithstanding any provision to the contrary in this Agreement or any other Loan Document the interest rate on all Term Loans shall be either at one Adjusted Eurodollar Rate or at one Base Rate as selected by Borrower as provided herein. SECTION 2.11. NOTICE OF CONTINUATION AND NOTICE OF CONVERSION/UNAVAILABILITY OF CERTAIN LOANS/FUNDING LOSSES. (a) With respect to any Borrowing consisting of Eurodollar Rate Loans, the Borrower may, subject to the provisions of Section 2.11(c) and Section 5.02, elect to maintain such Borrowing or any portion thereof consisting of Eurodollar Rate Loans by selecting a new Interest Period for such Borrowing, which new Interest Period shall commence on the day immediately following the last day of 21 the immediately preceding Interest Period. If such election pertains to Term Loans the election shall be effective for all of the Term Loans then outstanding. Each selection of a new Interest Period (a "CONTINUATION") shall constitute a Borrowing and shall be made by written notice given not later than 11:00 a.m. three (3) Business Days prior to the date of any such Continuation relating to Eurodollar Rate Loans by the Borrower to the Agent. Such Notice of Continuation shall be by telefacsimile, in substantially the form of Exhibit "D" hereto, specifying (i) the date of such Continuation which shall be a Business Day, (ii) the aggregate amount of Loans subject to such Continuation and (iii) the selected Interest Period, all of which shall be specified in such manner as is necessary to comply with all limitations on Loans outstanding under this Agreement. Upon receipt of a Notice of Continuation and two (2) days prior to the beginning of the new Interest Period, the Agent shall determine the Adjusted Eurodollar Rate and promptly notify the Borrower and the Lenders in writing thereof by facsimile transmission. The Borrower may elect to maintain more than one Borrowing which consists of Revolving Loans but not Term Loans as Eurodollar Rate Loans by combining such Borrowings into one Borrowing and selecting a new Interest Period pursuant to this Section 2.11(a); PROVIDED, HOWEVER, that each of the Borrowings so combined shall consist of Eurodollar Rate Loans having Interest Periods commencing and ending on the same date. Borrowings of Revolving Loans may not be combined with Borrowings of Term Loans and vice versa. If the Borrower shall fail to select a new Interest Period for any Borrowing consisting of Eurodollar Rate Loans in accordance with this Section 2.11(a), the Agent will continue such Loans as Base Rate Loans. (b) The Borrower may on any Business Day, upon a Notice of Conversion given to the Agent, and subject to the provisions of Section 2.11(c) and Section 5.02, convert the entire amount of the outstanding Term Loans or a portion of all Revolving Loans of one Type into Loans of another Type; PROVIDED, HOWEVER, that any conversion of any Eurodollar Rate Loans into Loans of another Type shall be made on, and only on, the last day of an Interest Period for such Loans. Each such Notice of Conversion shall be given not later than 11:00 a.m. EST on the same Business Day of any proposed conversion into Base Rate Loans and three (3) Business Days prior to the date of any proposed Conversion into Eurodollar Rate Loans. Subject to the restrictions specified above, each Notice of Conversion shall be made in writing by telefacsimile in substantially the form of Exhibit "E" hereto specifying (i) the requested date of such Conversion which shall be a Business Day, (ii) the Type of Loans to be converted, (iii) the portion of such Type of Loan to be converted, (iv) the Type of Loan into which such Loans are to be converted and (v) if such Conversion is into Eurodollar Rate Loans, the requested Interest Period of such Loan. Each Conversion shall be in an aggregate amount for the Loans of all Lenders of not less than $1,000,000 or an integral multiple of $100,000 in excess thereof for Eurodollar Rate Loans and not less than $250,000 or an integral multiple of $100,000 in excess thereof for Base Rate Loans. Upon receipt of a Notice of Conversion to a Eurodollar Rate Loan, and two (2) days prior to the beginning of a new Interest Period the Agent shall determine the Adjusted Eurodollar Rate and shall promptly notify the Borrower and the Lenders in writing thereof via facsimile transmission. The Borrower may elect to Convert the entire amount of the outstanding Term Loans or the entire amount of or a portion of all Revolving Loans into Loans of another Type. Borrower may convert Revolving Loans into another Type by combining such Borrowings into one Borrowing consisting of Loans of another Type; PROVIDED, HOWEVER, that such Loans shall have Interest Periods ending on the same date. (c) Notwithstanding paragraphs (a) and (b) above or any other provision of this Article II to the contrary: 22 (i) if the Agent is unable to determine the Eurodollar Rate for Eurodollar Rate Loans comprising any requested Borrowing, Continuation or Conversion, the right of the Borrower to select or maintain Eurodollar Rate Loans for such Borrowing or any subsequent Borrowing shall be suspended until the Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exists, and each Loan comprising such Borrowing shall be a Base Rate Loan; and (ii) if the Lenders shall, at least two (2) Business Days before the date of any requested Borrowing, Continuation or Conversion, notify the Agent that the Adjusted Eurodollar Rate for any such Borrowing, Continuation or Conversion will not adequately reflect the cost to such Lenders of making, funding or maintaining their respective Loans for such Borrowing, Continuation or Conversion, the right of the Borrower to select Eurodollar Rate Loans for such Borrowing shall be suspended until such Lenders notify the Agent and the Borrower that such rates in fact reflect the cost to such Lenders of making, funding or maintaining their respective Loans, and each Loan comprising such Borrowing, Continuation or Conversion shall be a Base Rate Loan. (d) Each Notice of Borrowing, Notice of Continuation and Notice of Conversion shall be irrevocable by and binding on the Borrower. In the case of any Borrowing, Continuation or Conversion that the related Notice of Borrowing, Notice of Continuation or Notice of Conversion specifies is to be comprised of Eurodollar Rate Loans, the Borrower shall indemnify each Lender against any loss, cost or expense incurred by such Lender as a result of any failure of the Borrower to fulfill for any reason whatsoever including the exercise of any remedies under Section 11.02, on or before the date for such Borrowing, Continuation or Conversion specified in such Notice of Borrowing, Notice of Continuation or Notice of Conversion, the applicable conditions set forth in Section 5.02 hereof or as a result of the failure of the Borrower to borrow any such requested Eurodollar Rate Loan, including, without limitation, any loss (including loss of anticipated profits), cost or expense incurred by reason of the liquidation or re-employment of deposits or other funds acquired by such Lender to fund the Loan to be made by such Lender as part of such Borrowing, Continuation or Conversion, such amount to be determined by each Lender and such determination by such Lender shall be binding upon the Borrower, absent manifest error. SECTION 2.12. VOLUNTARY REDUCTION OF REVOLVING COMMITMENT; VOLUNTARY PREPAYMENTS; FUNDING LOSSES. (a) The Borrower shall have the right to reduce permanently the amount of the Revolving Commitment at any time and from time to time without penalty or premium but in no event more frequently than one time during any calendar month upon not less than three (3) Business Days prior written notice which may be by telefacsimile to the Agent of each such reduction, which notice shall specify the effective date thereof and the amount of any such reduction (which in the case of any partial reduction shall not be less than $1,000,000 and integral multiples of $500,000 in excess of that amount) and shall be irrevocable once given and effective only upon receipt by the Agent. The Agent will promptly transmit such notice to each Lender. Notwithstanding the foregoing, in no event shall the Borrower be permitted to reduce the Revolving Commitment below an aggregate amount equal to the sum of the aggregate principal amount of Revolving Loans outstanding at such time plus the aggregate Stated Amounts of all outstanding Letters of Credit at such time. The Revolving Commitment once reduced pursuant to this Section shall not be increased. (b) The Borrower may prepay any Loan at any time; PROVIDED, HOWEVER, that in the event the Borrower prepays a Eurodollar Rate Loan prior to the end of the applicable Interest Period therefor for any reason whatsoever including the exercise of any remedies under Section 11.02, the Borrower shall indemnify each Lender against any loss, cost or expense incurred by such Lender as a result of any such 23 prepayment including, without limitation, any loss (including loss of anticipated profits after taking into account any reinvestment of funds), cost or expense incurred by reason of the liquidation or re-employment of deposits or other funds acquired by such Lender to fund the Loan made by such Lender, such amount to be determined by each Lender and such determination by such Lender shall be binding upon the Borrower absent manifest error. The Borrower may prepay any Base Rate Loan at any time without penalty or premium. Any prepayment of the Term Loans shall be applied to scheduled payments in inverse order of maturity. SECTION 2.13. UNUSED REVOLVING CREDIT FACILITY FEES. Borrower shall pay to the Agent for the account of and distribution to the Lenders, a commitment fee, computed at an annual rate equal to that shown as the Unused Revolver Fee on the grid incorporated into the definition of Applicable Margin, on the daily unused portions of the Revolving Commitment of each Lender, such fee being payable quarterly in arrears on the last Business Day of each fiscal quarter of Borrower and on the Revolving Termination Date. ARTICLE III LETTER OF CREDIT FACILITY SECTION 3.01. LETTERS OF CREDIT/LENDERS' PARTICIPATION. (a) Subject to the terms and conditions of this Agreement, the Letter of Credit Issuer, on behalf of the Lenders, agrees to issue for the account of the Borrower one or more documentary or standby letters of credit (individually, a "LETTER OF CREDIT" and collectively, the "LETTERS OF CREDIT") in such form as may be requested from time to time by the Borrower and agreed to by the Letter of Credit Issuer, from and including the Effective Date to the L/C Termination Date, up to a maximum aggregate Stated Amount at any one time outstanding equal to the lesser of (x) the L/C Commitment Amount and (y) the Available Revolving Commitment LESS the aggregate outstanding principal amount of Revolving Loans. Each Letter of Credit shall have an expiration date on or prior to 360 days after the Date of Issuance of such Letter of Credit. (b) The Letters of Credit shall be in a form customarily used by the Letter of Credit Issuer or in such other form as has been approved by the Letter of Credit Issuer. At the time of issuance, the amount and the terms and conditions of each Letter of Credit shall be subject to approval by the Letter of Credit Issuer and the Borrower. Any Letter of Credit containing an automatic renewal provision shall also contain a provision pursuant to which, notwithstanding any other provisions thereof, it shall have a final Expiration Date no later than the L/C Termination Date. (c) Immediately upon the issuance by the Letter of Credit Issuer of any Letter of Credit in accordance with the procedures set forth in this Article III, each Lender shall be deemed to have irrevocably and unconditionally purchased and received from the Letter of Credit Issuer, without recourse or warranty, an undivided interest and participation to the extent of such Lender's Credit Percentage of the liability of the Letter of Credit Issuer with respect to such Letter of Credit (including, without limitation, all obligations of the Borrower with respect thereto, other than amounts owing to the Letter of Credit Issuer under Section 3.03(b) hereof) and any security therefor or guaranty pertaining thereto. Accordingly, each Lender severally agrees that it shall be unconditionally and irrevocably liable, without regard to the occurrence of any Default or Event of Default or any condition precedent whatsoever, to the extent of such Lender's Credit Percentage, to reimburse the Letter of Credit Issuer on 24 demand in immediately available funds in Dollars for the amount of each Drawing paid by the Letter of Credit Issuer under each Letter of Credit issued by the Letter of Credit Issuer to the extent such amount is not reimbursed by the Borrower pursuant to Section 3.04; PROVIDED, HOWEVER, that the Lenders shall not be obligated to reimburse the Letter of Credit Issuer pursuant to this Section 3.01(c) with respect to a Letter of Credit if the Letter of Credit Issuer issues such Letter of Credit after an Event of Default has occurred and the Obligations shall have been accelerated and become due and payable pursuant to Section 11.02(a)(i) or (ii). The failure of any Lender to honor its obligations hereunder shall not relieve any other Lender of its duty to honor its obligations hereunder. Upon the written request of a Lender, the Letter of Credit Issuer shall deliver to such Lender a copy of any Letter of Credit and copies of all material documents delivered to the Letter of Credit Issuer in connection with any Drawing with respect to such Letter of Credit. (d) Each payment made by a Lender to the Letter of Credit Issuer pursuant to Section 3.01(c) above shall be treated as the purchase by such Lender of a participating interest in the Borrower's Reimbursement Obligation under Section 3.04 in an amount equal to such payment. Each Lender, so long as it has made the payment required to be made by it pursuant to Section 3.01(c), shall share in accordance with its Credit Percentage in any interest which accrues pursuant to Section 3.04(b). All amounts recovered by the Letter of Credit Issuer hereunder or under any other Loan Document and which are applied by the Letter of Credit Issuer to the Reimbursement Obligations of the Borrower shall be distributed by the Letter of Credit Issuer to the Lenders who have made the payments required to be made by them pursuant to Section 3.01(c) PRO RATA in accordance with their respective Credit Percentages. (e) In addition to other remedies the Letter of Credit Issuer may have under Applicable Law and under this Agreement, if and to the extent that any Lender shall fail to make available to the Letter of Credit Issuer the amount required to be paid by such Lender pursuant to Section 3.01(c), the Letter of Credit Issuer shall be subrogated to the rights of such Lender under this Agreement to the extent of such failure. If any Lender fails to reimburse the Letter of Credit Issuer as provided in Section 3.01(c), such unreimbursed amount shall bear interest from the date of the Letter of Credit Issuer's demand therefor thereof until the date three (3) Business Days after such demand, at the Federal Funds Rate, and thereafter, until paid, at the Base Rate, such interest to be payable by such Lender upon demand therefor by the Letter of Credit Issuer. SECTION 3.02. METHOD OF ISSUANCE OF LETTERS OF CREDIT. (a) NOTICE OF ISSUANCE. The Borrower shall give the Letter of Credit Issuer written notice (or telephonic notice confirmed in writing) at least three (3) Business Days prior to the requested Date of Issuance of a Letter of Credit, such notice to be in substantially the form of Exhibit "I" hereto (a "LETTER OF CREDIT REQUEST"). The Borrower shall also execute and deliver such customary letter of credit application forms as requested from time to time by the Letter of Credit Issuer. (b) ISSUANCE. Provided the Borrower has given the notice prescribed by Section 3.02(a) and subject to the other terms and conditions of this Agreement, including, but not limited to, the satisfaction of any applicable conditions precedent set forth in Article V, the Letter of Credit Issuer shall issue the requested Letter of Credit on the requested Date of Issuance as set forth in the applicable Letter of Credit Request on behalf of the Lenders for the benefit of the stipulated Beneficiary and shall deliver the original of such Letter of Credit to the Beneficiary at the address specified in the notice. At the request of the Borrower, the Letter of Credit Issuer shall deliver a copy of each Letter of Credit to the Borrower 25 within a reasonable time after the Date of Issuance thereof. Upon the written request of the Borrower, the Letter of Credit Issuer shall deliver to the Borrower a copy of any Letter of Credit proposed to be issued hereunder prior to the issuance thereof. (c) REPORTING TO LENDERS. Upon the request of a Lender, the Letter of Credit Issuer shall report, from time to time but not more frequently than monthly, to the Lenders the aggregate Stated Amount of all Letters of Credit then outstanding and such other information concerning the Letters of Credit as a Lender shall reasonably request. The Letter of Credit Issuer shall, at the request of a Lender, deliver copies of any Letter of Credit issued hereunder. Other than as set forth in this Section 3.02 (c), the Letter of Credit Issuer shall have no duty to notify the Lenders regarding the issuance or other matters regarding Letters of Credit issued hereunder. The failure of the Letter of Credit Issuer to perform its requirements under this Section 3.02(c) shall not relieve the Lenders' reimbursement obligations under Section 3.01(c). SECTION 3.03. LETTER OF CREDIT FEES. In consideration for the issuance of each Letter of Credit hereunder, the Borrower hereby agrees to pay (a) to the Agent, for the ratable account of the Lenders in accordance with their respective Credit Percentages, a letter of credit fee of one percent (1%) of the Stated Amount, and (b) to the Letter of Credit Issuer for such Letter of Credit, for the account of such Letter of Credit Issuer, a fronting fee accruing at a rate per annum equal to .25% on the Stated Amount from time to time of such Letter of Credit. The fee provided in (b) above shall be payable quarterly in arrears on the last Business Day of each calendar quarter and on the L/C Termination Date. SECTION 3.04. LETTER OF CREDIT REIMBURSEMENT. (a) NOTICE OF DRAWING. The Letter of Credit Issuer shall promptly notify the Borrower and each Lender by telephone, telecopy, telex or other telecommunication of any Drawing under a Letter of Credit and of the anticipated date for payment (the "PAYMENT DATE"). On the Payment Date, the Letter of Credit Issuer shall confirm to the Borrower and each Lender by telephone or telecopy that payment of the Drawing is to be made by the Letter of Credit Issuer on such date. (b) PAYMENTS. The Borrower hereby agrees to pay to the Letter of Credit Issuer, in the manner provided in Section 3.04(c): (i) on each Payment Date, an amount equal to the amount paid by the Letter of Credit Issuer under a Letter of Credit; and (ii) if any Drawing shall be reimbursed to the Letter of Credit Issuer after 2:00 p.m. on the Payment Date, interest on any and all amounts required to be paid pursuant to clause (i) of this Section 3.04(b) from and after the due date thereof until payment in full, payable on demand, at an annual rate of interest equal to the Post-Default Rate. (c) METHOD OF REIMBURSEMENT. The Borrower shall reimburse the Letter of Credit Issuer for each Drawing under any Letter of Credit in the following manner: (i) the Borrower shall immediately reimburse the Letter of Credit Issuer in accordance with Section 4.04; or 26 (ii) (A) if the Borrower has not reimbursed the Letter of Credit Issuer pursuant to subparagraph (i) above and (B) the applicable conditions set forth in Article V have been fulfilled and (C) the Available Revolving Commitment in effect at such time LESS the aggregate Stated Amounts of all outstanding Letters of Credit at such time equals or exceeds the amount of the Drawing to be reimbursed, the Borrower shall request a Borrowing of Revolving Loans as provided in Section 3.04(d), and the proceeds of such Borrowing shall be made available to the Letter of Credit Issuer, by wire transfer of immediately available funds at the address of the Letter of Credit Issuer set forth on the signature pages hereof and pursuant to the wiring instructions specified on Exhibit "J" for the Letter of Credit Issuer in satisfaction of the obligations of the Borrower set forth in subparagraph (i) above; or (iii) Pursuant to Section 4.04 but subject to Section 4.06, the Agent may debit any deposit account of the Borrower maintained with it in an amount equal to the amount of such Drawing and make available such amount to the Letter of Credit Issuer, by wire transfer of immediately available funds at the address of the Letter of Credit Issuer set forth on the signature pages hereof and pursuant to the wiring instructions specified on Annex 1 for the Letter of Credit Issuer in satisfaction of the obligations of the Borrower set forth in subparagraph (i) above. (d) LOANS TO FUND DRAWINGS. Upon any Drawing, the Letter of Credit Issuer shall notify Agent if the Borrower has elected to reimburse the Letter of Credit Issuer using the proceeds of Revolving Loans. Upon receipt of such notice and if the conditions set forth in subparagraph (c)(ii) above have been satisfied, each Lender agrees to deliver to the Letter of Credit Issuer its PRO RATA share of the amount of Loans necessary to reimburse the Letter of Credit Issuer for any payment made by the Letter of Credit Issuer pursuant to such Drawing not later than one Business Day after receipt of such notice. Any funds delivered to the Letter of Credit Issuer under this paragraph (d) shall be delivered in the manner set forth in the first sentence of Section 2.03. Unless the Borrower complies with the applicable notice requirements as set forth in Section 2.02(a), any Loan used to repay any Reimbursement Obligation shall initially be a Base Rate Loan. SECTION 3.05. NATURE OF LETTER OF CREDIT ISSUER'S DUTIES. In determining whether to honor any Drawing under any Letter of Credit, the Letter of Credit Issuer shall be responsible only to determine that the documents and certificates required to be delivered under that Letter of Credit have been delivered and that they materially comply on their face with the requirements of that Letter of Credit. The Borrower otherwise assumes all risks of the acts and omissions of, or misuse of the Letters of Credit issued by the Letter of Credit Issuer by, the respective Beneficiaries of such Letters of Credit. In furtherance and not in limitation of the foregoing, but subject to the last sentence of this Section 3.05, neither the Letter of Credit Issuer nor any of the other Lenders shall be responsible (i) for the form, validity, sufficiency, accuracy, genuineness or legal effects of any document submitted by any party in connection with the application for and issuance of, or any Drawing honored under, a Letter of Credit even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) for 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) for errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex, telecopy or otherwise, whether or not they be in cipher; (iv) for errors in interpretation of technical terms; (v) for any loss or delay in the transmission or otherwise of any document required in order to make a drawing under a Letter of Credit, or the proceeds thereof; (vi) for the misapplication by the Beneficiary of a Letter of Credit, of the proceeds of any drawing honored under a Letter of Credit; and (vii) for any consequences arising from causes beyond the control of the Letter of Credit Issuer or the other Lenders. 27 None of the above shall affect, impair or prevent the vesting of any of the Letter of Credit Issuer's rights or powers hereunder. Without limitation of the foregoing, any action taken or omitted to be taken by the Letter of Credit Issuer under or in connection with any Letter of Credit, if taken or omitted in the absence of gross negligence or willful misconduct, shall not create against the Letter of Credit Issuer any liability to the Borrower or any Lender. SECTION 3.06. OBLIGATIONS ABSOLUTE. The obligations of the Borrower to reimburse the Letter of Credit Issuer for Drawings honored under Letters of Credit and the obligations of the Lenders under Section 3.01(c) to reimburse the Letter of Credit Issuer for any Reimbursement Obligation not reimbursed by the Borrower shall be joint and several and unconditional and irrevocable and shall be paid strictly in accordance with the terms of this Agreement under all circumstances including, without limitation, 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 the Borrower or any Affiliate of the Borrower may have at any time against a Beneficiary or any transferee of any Letter of Credit (or any Persons or entities for whom any such Beneficiary or transferee may be acting), the Letter of Credit Issuer, any Lender or any other Person, whether in connection with this Agreement, the transactions contemplated herein or any unrelated transaction; (iii) any draft, demand, certificate 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) the surrender or impairment of any security for the performance or observance of any of the terms of any of the Loan Documents; (v) any non-application or misapplication by the Beneficiary of the proceeds of any Drawing under a Letter of Credit; (vi) the fact that a Default or Event of Default shall have occurred and be continuing; or (vii) any other circumstance or happening whatsoever that may constitute a legal or equitable discharge of the obligations of the Borrower to reimburse the Letter of Credit Issuer for Drawings on Letters of Credit or of the obligations of the Lenders under Section 3.01(e) to reimburse the Letter of Credit Issuer for any Reimbursement Obligation not so reimbursed by the Borrower. SECTION 3.07. EXPIRATION DATE OF LETTERS OF CREDIT. If on the date (the "FACILITY TERMINATION DATE") this Agreement and the Letter of Credit Facility is terminated prior to the Expiration Date of any Letter of Credit outstanding hereunder, the Borrower shall, on the Facility Termination Date, deposit with the Letter of Credit Issuer an amount of money equal to the Stated Amount of such Letter of Credit in the Cash Collateral Account. If a Drawing pursuant to such Letter of Credit occurs on or prior to the Expiration Date of such Letter of Credit, the Borrower authorizes the Letter of Credit Issuer to use the monies deposited in the Cash Collateral Account to make payment to the Beneficiary with respect to such Drawing. If no Drawing occurs on or prior to the Expiration Date of such Letter of Credit, the Letter of Credit Issuer shall return to the Borrower the monies deposited in the Cash Collateral Account with 28 respect to such outstanding Letter of Credit on the date which is five (5) Business Days after the Expiration Date of such Letter of Credit. The Borrower hereby collaterally assigns to the Letter of Credit Issuer for its benefit and the benefit of the Lenders and grants to the Letter of Credit Issuer for its benefit and the benefit of the Lenders, a security interest in all funds held in the Cash Collateral Account from time to time and proceeds thereof, as security for the payment of all amounts due and to become due from the Borrower to the Letter of Credit Issuer and the Lenders under this Agreement. The Cash Collateral Account shall be in the name of the Borrower and the Letter of Credit Issuer as a cash collateral account but the Letter of Credit Issuer shall have sole dominion and control over, and sole access to, the Cash Collateral Account. Neither the Borrower nor any Person claiming on behalf of or through the Borrower shall have any right to withdraw any of the funds held in the Cash Collateral Account. The Borrower agrees that it will not (i) sell or otherwise dispose of any interest in the Cash Collateral Account or any funds held therein, or (ii) create or permit to exist any Lien upon or with respect to the Cash Collateral Account or any funds held therein, except as provided in or contemplated by this Agreement. The Letter of Credit Issuer shall exercise reasonable care in the custody and preservation of any funds held in the Cash Collateral Account and shall be deemed to have exercised such care if such funds are accorded treatment substantially equivalent to that which the Letter of Credit Issuer accords other funds deposited with the Letter of Credit Issuer, it being understood that the Letter of Credit Issuer shall not have any responsibility for taking any necessary steps to preserve rights against any parties with respect to any funds held in the Cash Collateral Account. SECTION 3.08. VOLUNTARY REDUCTION OF L/C COMMITMENT. The Borrower shall have the right to reduce permanently the amount of the L/C Commitment at any time and from time to time without penalty or premium but in no event more frequently than one time during any calendar month upon not less than three (3) Business Days prior written notice to the Letter of Credit Issuer of each such reduction, which notice shall specify the effective date thereof and the amount of any such reduction (which in the case of any partial reduction shall not be less than $1,000,000 and integral multiples of $100,000 in excess of that amount) and shall be irrevocable once given and effective only upon receipt by the Letter of Credit Issuer. The Letter of Credit Issuer will promptly transmit such notice to each Lender. Notwithstanding the foregoing, in no event shall the Borrower be permitted to reduce the L/C Commitment below an amount equal to the aggregate Stated Amount of the Letters of Credit outstanding at such time. The L/C Commitment once reduced pursuant to this Section may not be increased. ARTICLE IV OTHER LOAN AND PAYMENT PROVISIONS SECTION 4.01. INTEREST ON OVERDUE PAYMENTS. In the event the Borrower shall fail to pay when due (whether upon demand, at maturity, as required under Sections 2.05 and 2.09, by reason of acceleration or otherwise) any principal of, or interest on, any of the Loans or any Reimbursement Obligation or any other amount owing hereunder or under any Note or other Loan Document when due, such overdue amounts shall bear interest at the Post-Default Rate until such unpaid amount has been paid in full (whether before or after judgment). All interest provided for in this Section shall be immediately due and payable upon demand. SECTION 4.02. COMPUTATIONS. Unless otherwise expressly set forth herein, any accrued interest on any Loan and any accrued Fees shall be computed on the basis of a year of 360 days and the actual number of days elapsed. 29 SECTION 4.03. USURY. In no event shall the amount of interest due or payable in respect of the Loans exceed the maximum rate of interest allowed by Applicable Law and, in the event any such amount in excess of the maximum rate of interest allowed by Applicable Law is paid by the Borrower or received by any Lender, then such excess sum shall be credited as a payment of principal, unless the Borrower shall notify the respective Lender in writing that the Borrower elects to have such excess sum returned to it forthwith. It is the express intent of the parties hereto that the Borrower not pay and the Lenders not receive, directly or indirectly, in any manner whatsoever, interest in excess of that which may be lawfully paid by the Borrower under Applicable Law. SECTION 4.04. PAYMENTS. Except to the extent otherwise provided herein or in the Notes, all payments of principal, interest and other amounts to be made by the Borrower under this Agreement, the Notes or any other Loan Document shall be made in Dollars, in immediately available funds, to the Agent at the Agent's Principal Office, not later than 2:00 p.m. EST on the date on which such payment shall become due (each such payment made after such time on such due date to be deemed to have been made on the next succeeding Business Day) and shall be made in accordance with the wiring instructions set forth for the Agent on Annex I attached hereto. The parties agree that if the Borrower makes any payment due hereunder after 2:00 p.m. EST but before 5:00 p.m. EST on the date such payment is due, such late payment shall not constitute a Default under Section 11.01(a) hereof but shall nevertheless be deemed to have been paid as of the next succeeding Business Day as provided in the parenthetical phrase of the preceding sentence. Subject to Sections 4.05 and 4.06 hereof, the Agent or any Lender for whose account any such payment is made, may (but shall not be obligated to) debit the amount of any such payment which is not made by such time from any special or general deposit account of the Borrower with the Agent or such Lender, as the case may be (with notice to the Borrower, the other Lenders and the Agent). The Borrower shall, at the time of making each payment under this Agreement or any Note, specify to the Agent the amounts payable by the Borrower hereunder to which such payment is to be applied, and in the event that it fails to so specify, or an Event of Default has occurred and is continuing, the Agent shall apply such payment to the Loans, any Reimbursement Obligation or any other obligation of the Borrower under the Loan Documents in such manner as the Agent may determine to be appropriate, subject to Section 4.05 hereof. Each payment received by the Agent for the account of the Lenders under this Agreement or any Note shall be paid promptly to such Lender (but no later than the next Business Day), by wire transfer of immediately available funds in accordance with the wiring instructions set forth for such Lender on the Annex I attached hereto, for the account of such Lender at the applicable Lending Office of such Lender. If the due date of any payment under this Agreement or any Note would otherwise fall on a day which is not a Business Day such date shall be extended to the next succeeding Business Day and interest shall be payable for the period of such extension; PROVIDED, HOWEVER, that in no event shall any such due date be extended beyond the Revolving Termination Date and Term Loan Maturity Date. SECTION 4.05. PRO RATA TREATMENT. Unless set forth to the contrary herein, (a) each Borrowing of Revolving Loans and Term Loans, (b) each payment of the principal of or interest on the Revolving Loans and the Term Loans, and (c) each other payment to be made by the Borrower hereunder or under any Loan Document shall be made by, or credited to the account of, the Lenders PRO RATA in accordance with their respective Credit Percentages. All fees referred to in Section 3.03(b) shall be for the sole account of the respective Letter of Credit Issuer. SECTION 4.06. SHARING OF PAYMENTS, ETC. The Borrower agrees that, in addition to (and without limitation of) any right of set-off, banker's lien or counterclaim a Lender may otherwise have, each Lender shall be entitled, at its option, to offset balances held by it for the account of the Borrower at 30 any of such Lender's offices, in Dollars or in any other currency, against any principal of, or interest on, any of such Lender's Loans hereunder (or other Obligations, if any, owing to such Lender hereunder) which is not paid when due (regardless of whether such balances are then due to the Borrower), in which case such Lender shall promptly notify the Borrower, all other Lenders and the Agent thereof; PROVIDED, HOWEVER, such Lender's failure to give such notice shall not affect the validity of such offset. If a Lender shall obtain payment of any principal of, or interest on, any Loan made by it to the Borrower under this Agreement, or shall obtain payment on any other Secured Obligation, if any, owing by the Borrower or a Subsidiary through the exercise of any right of set-off, banker's lien or counterclaim or similar right or otherwise or through voluntary prepayments directly to a Lender or other payments made by the Borrower to a Lender not in accordance with the terms of this Agreement and such payment, pursuant to Section 4.05 hereof, should be distributed to the Lenders PRO RATA in accordance with their Credit Percentage, such Lender shall promptly purchase from the other Lenders participations in (or, if and to the extent specified by such Lender, direct interests in) the Loans made by the other Lenders or other Obligations arising under or in connection with the Loan Documents owed to such other Lenders in such amounts, and make such other adjustments from time to time as shall be equitable, to the end that all the Lenders shall share the benefit of such payment (net of any expenses which may be incurred by such Lender in obtaining or preserving such benefit) PRO RATA in accordance with their respective Credit Percentages. To such end, all the Lenders shall make appropriate adjustments among themselves (by the resale of participations sold or otherwise) if such payment is rescinded or must otherwise be restored. The Borrower agrees that any Lender so purchasing a participation (or direct interest) in the Loans or other Obligations arising under or in connection with the Loan Documents owed to such other Lenders made by other Lenders may exercise all rights of set-off, banker's lien, counterclaim or similar rights with respect to such participation as fully as if such Lender were a direct holder of Loans in the amount of such participation. Nothing contained herein shall require any Lender to exercise any such right or shall affect the right of any Lender to exercise, and retain the benefits of exercising, any such right with respect to any other indebtedness or obligation of the Borrower. SECTION 4.07. INSUFFICIENT FUNDS. If on any date the Agent receives funds insufficient to pay in full the principal of any Loans, any Reimbursement Obligation, or any interest, fees or expenses due and payable on or prior to such date, the Agent shall distribute any such funds received by it: (a) FIRST, to pay all reasonable expenses due and payable to the Agent PRO RATA in accordance with the respective amounts of such fees and expenses due and payable to Agent; (b) SECOND, to pay all fees and expenses due and payable to the Lenders (including the Letter of Credit Issuers) PRO RATA in accordance with the respective amounts of such fees and expenses due and payable to each such Lender; (c) THIRD, to pay all accrued but unpaid interest on all outstanding Loans PRO RATA in accordance with Section 4.05; and (d) FOURTH, to pay all amounts of principal outstanding on the Loans and any Reimbursement Obligation PRO RATA in accordance with Section 4.05. SECTION 4.08. FEES. All Fees payable on a per annum percentage basis shall be calculated on the basis of the actual number of days elapsed in a 360-day year. All Fees shall be payable in addition to, and not in lieu of, interest, compensation, expense, reimbursement, indemnification and other 31 Obligations. All Fees shall be fully earned and non-refundable when paid. All Fees shall bear interest, if not paid when due, at the Post-Default Rate and shall constitute Obligations. SECTION 4.09. [INTENTIONALLY OMITTED] SECTION 4.10. INCREASED COSTS. The Borrower agrees that if: (a) any change after the Agreement Date in any law, executive order or regulation or in any request, guideline or directive of any administrative or governmental authority (whether or not having the force of law) or in the interpretation thereof by any court or administrative or governmental authority charged with administration thereof, shall either impose, affect, modify or deem applicable any reserve, special deposit, capital maintenance or similar requirement against any Loan or Letter of Credit or the participation of any Lender therein or impose on the Agent, any Letter of Credit Issuer or any Lender any other condition regarding any Loan or Letter of Credit or any Lender's participation therein or (b) there shall occur any change after the Agreement Date in the basis of taxation of payments to any Lender, any Letter of Credit Issuer or the Agent of any amount owing to such Lender, any Letter of Credit Issuer or the Agent hereunder (except for a change in the rate of taxation on the overall net income of the Agent, any Letter of Credit Issuer or any Lender or the branches or foreign Subsidiaries of the Agent, any Letter of Credit Issuer or any Lender), and the result of any event referred to in clause (a) or (b) above shall be to increase the cost to such Lender, any Letter of Credit Issuer or the Agent of making or maintaining any Loan or issuing or maintaining any Letter of Credit hereunder or to reduce the rate of return on capital with respect to any Loan or Letter of Credit, then, upon demand by the Agent, any Letter of Credit Issuer or any such Lender, as the case may be, the Borrower shall immediately pay to the Agent, any Letter of Credit Issuer or such Lender, as the case may be, additional amounts which shall be sufficient to compensate the Agent, any Letter of Credit Issuer or such Lender for such increased cost, tax or reduced rate of return, together with interest on such amount from the date fifteen days after the date the Borrower receives the statement(s) referred to in the next sentence to the date the Borrower pays such increased cost, tax or reduced rate of return in full at the Base Rate. A statement setting forth the basis for requesting such compensation and the method for determining the amount thereof, submitted by the Agent, any Letter of Credit Issuer or such Lender, as the case may be, to the Borrower, shall be conclusive, absent manifest error. SECTION 4.11. STATEMENTS OF ACCOUNT. The Agent will account to the Borrower upon request but not more frequently than monthly with a statement of Loans, Letters of Credit, charges and payments made pursuant to this Agreement and the other Loan Documents, and such account rendered by the Agent shall be deemed final, binding and conclusive upon Borrower unless the Agent is notified by the Borrower in writing within thirty days after the date each account is delivered to Borrower that the Borrower objects to the information, calculations or items therein contained. Such notice shall only be deemed an objection to those items specifically objected to therein. The failure of the Agent to deliver such a statement of accounts shall not relieve or discharge the Borrower from its obligations hereunder. SECTION 4.12. DEFAULTING LENDER'S STATUS. Notwithstanding anything contained herein to the contrary, but in addition to provisions regarding the failure of a Lender to perform its obligations hereunder set forth elsewhere in this Agreement, so long as any Lender shall be in default in its obligation to fund its Credit Percentage of any Revolving Loan or participate to the extent of such Lender's Credit Percentage of any Reimbursement Obligation or shall have rejected its Commitment, then for purposes of voting or consenting to matters with respect to the Loan Documents, such Lender's Credit Percentage shall be deemed to be reduced prorata in proportion to the failure to fund, unless and until such failure to fulfill its obligation to fund is cured and such Lender shall have paid, as and to the 32 extent provided in this Agreement, to the applicable party, such amount then owing together with interest thereon as provided in this Agreement. No Commitment of any Lender shall be increased or otherwise affected by any such failure or rejection by any Lender. SECTION 4.13. AGENT'S RELIANCE. Neither the Agent nor any Lender shall incur any liability to the Borrower for acting upon any telefacsimile or telephonic notice referred to in this Agreement which the Agent or such Lender believes in good faith to have been given by a person authorized to deliver a Notice of Borrowing or a Request for Letter of Credit on behalf of the Borrower under Sections 2.02, 2.07, 2.11, 2.18, 3.02 or 3.08 hereof or for otherwise acting in good faith. ARTICLE V CONDITIONS PRECEDENT SECTION 5.01. CONDITIONS PRECEDENT TO EFFECTIVENESS. The effectiveness of this Agreement, and the obligation of the Lenders to make any Loans to the Borrower in accordance with the terms hereof and the obligation of any Letter of Credit Issuer to issue Letters of Credit in accordance with the terms hereof, are subject to the condition precedent that the Borrower deliver to the Agent each of the following, each of which shall be satisfactory in form and substance to the Lenders: (a) A Revolving Note executed and delivered by the Borrower, payable to each Lender and complying with the terms of Section 2.06; (b) A Term Note executed and delivered by the Borrower, payable to each Lender and complying with the requirements of Section 2.08; (c) The Pledge Agreement executed and delivered by Borrower to the Agent together with the original stock certificates for 65% of the issued and outstanding common stock of each of the Current Subsidiaries pledged and any other documentation required by Agent to perfect the Security Interest in those shares. (d) Estoppel letters from each of the holders of the Senior Notes stating the amount required to repay the Senior Notes in full. (e) Copies certified as of the Effective Date by the respective Secretary or Assistant Secretary of Borrower (each such Person shall be the "AUTHENTICATING PERSON" with respect to Borrower) of all corporate and other necessary action taken by Borrower to authorize the execution, delivery and performance of the Loan Documents to which it is a party; (f) (i) Copies certified as of the Effective Date by an Authenticating Person of the articles of incorporation of Borrower and each Subsidiary (certified by the Secretary of State or other appropriate authority of the jurisdiction of its incorporation) and by-laws of Borrower or each Subsidiary; (ii) a certificate of existence or other good standing certificate for Borrower and each Subsidiary issued as of a recent date by the Secretary of State of the jurisdiction of its incorporation, of the State in which its principal place of business is located and of each State in which any Inventory is located; and (iii) certificates dated as of the Effective Date signed by an Authenticating Person with respect to the incumbency and specimen signatures of each of the officers or other Persons of Borrower 33 and each Subsidiary who are authorized to execute and deliver this Agreement and the other Loan Documents to which Borrower or a Subsidiary is a party; (g) Copies of each of the policies of insurance (or binder or certificate of insurance with respect thereto) covering any of the tangible insurable property of the Borrower, together with loss payable clauses naming the Agent on behalf of the Lenders as loss payee, and naming the Agent on behalf of the Lenders as additional insureds which comply with the terms of the relevant Loan Documents; (h) Favorable UCC, tax, judgment and lien search reports with respect to the Borrower and any Subsidiary in all necessary or appropriate jurisdictions and under all legal and appropriate trade names indicating that there are no prior Liens on any of the property of Borrower or any Subsidiary other than Permitted Liens; (i) An opinion of counsel to the Borrower, dated the Effective Date and addressed to the Agent and the Lenders, in form and content reasonably satisfactory to the Agent and the Lenders; (j) A disbursement letter executed by the Borrower authorizing the disbursement of the proceeds of the Term Loans and any other Loans to be made on the Effective Date; (k) A Borrowing Base Certificate duly completed by the Borrower, such certificate to be prepared as of the Effective Date; (l) [Intentionally Omitted]. (m) A certificate from the chief financial officer of the Borrower dated the Effective Date to the effect that no material adverse change in the financial condition, business, operations or prospects of the Borrower or any of its Subsidiaries has occurred since June 30, 1999; and (o) Such other documents and instruments as Agent or any Lender may reasonably request. SECTION 5.02. CONDITIONS PRECEDENT TO ALL CREDIT EVENTS. The obligations of the Lenders to make Revolving Loans and the Term Loans and of any Letter of Credit Issuer to issue Letters of Credit are subject to the further condition precedent that, as of the date of each such Revolving Loan, and Term Loan and Date of Issuance of each such Letter of Credit and after giving effect thereto: (a) no Default or Event of Default shall have occurred and be continuing; (b) the representations and warranties made or deemed made by the Borrower in this Agreement and the other Loan Documents to which it is a party shall be true and correct in all material respects on and as of the date of the making of such Loan or the Date of Issuance of such Letter of Credit with the same force and effect as if made on and as of such date except to the extent that such representations and warranties expressly relate solely to an earlier date (in which case such representations and warranties shall have been true and accurate on and as of such earlier date); (c) no event or condition having a Material Adverse Effect with respect to the Borrower has occurred since the Effective Date and (d) the Borrower is in compliance with the Borrowing Base requirements. Each Notice of Borrowing, Continuation or Conversion, and Request for Letter of Credit delivered by the Borrower hereunder and each borrowing of Loans or issuance of a Letter of Credit shall constitute a certification by the Borrower to the effect set forth in the preceding sentence (both as of the date of such Notice of Borrowing, Continuation or Conversion or Request for Letter of Credit and, unless 34 the Borrower otherwise notifies the Agent prior to the date of such borrowing or issuance, as of the date of such borrowing or issuance). SECTION 5.03. CONDITIONS AS COVENANTS. In the event the Lenders make any Revolving Loan or Term Loan, or the Letter of Credit Issuer issues a Letter of Credit on or after the Agreement Date and prior to the satisfaction of all conditions precedent set forth in Section 5.01 hereof, the Borrower shall nevertheless cause such condition or conditions to be satisfied within thirty days after the date of the making of such Loan or the issuance of such Letter of Credit. ARTICLE VI REPRESENTATIONS AND WARRANTIES SECTION 6.01. REPRESENTATIONS AND WARRANTIES. The Borrower represents and warrants to the Agent and each of the Lenders as follows: (a) ORGANIZATION; POWER; QUALIFICATION. Each of the Borrower and its Subsidiaries is a corporation duly formed, validly existing and in good standing under the laws of its jurisdiction of incorporation, has the power and authority to own or lease its properties and to carry on its business as now being and hereafter proposed to be conducted and is duly qualified and is in good standing as a foreign corporation, and authorized to do business, in each jurisdiction in which the character of its properties or the nature of its business requires such qualification or authorization and where the failure to be so qualified or authorized could have a Material Adverse Effect on the Borrower or such Subsidiary. (b) OWNERSHIP STRUCTURE. Schedule 6.01(b) correctly sets forth as of November 11, 1999, the corporate structure of Borrower and ownership interests of the ten (10) shareholders (as provided to Borrower from a Blumberg Screen and for which Borrower does not undertake to verify the accuracy but which to the best of Borrower's knowledge and belief is not incorrect) owning the greatest number of shares of the Borrower including the correct legal name of the Borrower. Except as set forth in Schedule 6.01(b) neither the Borrower nor any Subsidiary has issued to any third party any securities convertible into or exercisable for equity interests in the Borrower or any Subsidiary or any options, warrants or other rights to acquire any securities convertible into or exercisable for such equity interests. (c) AUTHORIZATION OF AGREEMENT, NOTES, LOAN DOCUMENTS AND BORROWINGS. The Borrower has the right and power, and has taken all necessary action to authorize it, to borrow hereunder and to execute, deliver and perform this Agreement, the Notes and the other Loan Documents to which it is a party in accordance with their respective terms and to consummate the transactions contemplated hereby. This Agreement, the Notes and each of the other Loan Documents to which the Borrower is a party have been duly executed and delivered by the duly authorized officers of the Borrower and each is a legal, valid and binding obligation of the Borrower enforceable against the Borrower in accordance with its respective terms; provided that enforceability of the Loan Documents is subject to limitation by the general principles of equity and to bankruptcy, insolvency and similar laws affecting the enforcement of creditors' rights generally. (d) NO VIOLATION OF LAWS, ETC. The execution, delivery and performance by Borrower of any Loan Document to which it is a party in accordance with its terms and the Credit Events hereunder do not and will not, by the passage of time, the giving of notice, a determination of materiality, the satisfaction 35 of any condition, any combination of the foregoing, or otherwise: (i) require any Governmental Approval or violate any Applicable Law relating to Borrower; (ii) conflict with, result in a breach of or constitute a default under the charter or bylaws of Borrower, or any indenture, agreement or other instrument to which the Borrower or any of its Subsidiaries is a party or by which it or any of its properties may be bound where such conflict, breach or default could have a Material Adverse Effect on Borrower; or (iii) result in or require the creation or imposition of any Lien upon or with respect to any property now owned or hereafter acquired by the Borrower or any of its Subsidiaries other than Permitted Liens. (e) COMPLIANCE WITH LAW; GOVERNMENTAL APPROVALS. The Borrower and each Subsidiary is in compliance with each Governmental Approval applicable to it and in compliance with all other Applicable Law relating to the Borrower and each Subsidiary, except for noncompliances which, and Governmental Approvals the failure to possess which, would not, singly or in the aggregate, cause a Default or Event of Default or have a Material Adverse Effect on the Borrower or the Subsidiary and in respect of which adequate reserves have been established on the books of the Borrower or the Subsidiary in accordance with GAAP. (f) TITLES TO PROPERTIES. Each of the Borrower and its Subsidiaries has good, marketable and legal title to, or a valid leasehold interest in, its properties and assets including, but not limited to, those reflected on the consolidated balance sheet of Borrower as at June 30, 1999, except those which have been disposed of by the Borrower or such Subsidiary subsequent to such date in the ordinary course of business. None of the properties or assets owned by the Borrower or any of its Subsidiaries and none of the Borrower's or any of its Subsidiaries' leasehold interests are subject to any Lien, except Permitted Liens. (g) INDEBTEDNESS AND GUARANTEES. Schedule 6.01(g) is a complete and correct listing of all (i) Indebtedness for Money Borrowed of the Borrower or any Subsidiary, (ii) Guarantees of the Borrower or any Subsidiary, and (iii) all letters of credit and acceptances issued or created by any Person for the account of the Borrower or any Subsidiary. The Borrower and its Subsidiaries have performed and are in compliance with all of the terms of such Indebtedness and such Guarantees and all instruments and agreements relating thereto, and no default or event of default, or event or condition which with the giving of notice, the lapse of time, a determination of materiality, the satisfaction of any other condition or any combination of the foregoing, would constitute such a default or event of default, exists with respect to any such Indebtedness or Guarantees, the aggregate principal balance of which exceeds $250,000. (h) LITIGATION. Except as set forth on Schedule 6.01(h), there are no actions, suits or proceedings pending (nor, to the knowledge of the Borrower, threatened, nor is there any basis therefor) against or in any other way relating adversely to or affecting the Borrower or any Subsidiary or any of their respective property in any court or before any arbitrator of any kind or before or by any governmental body which could have a Material Adverse Effect on Borrower or any Subsidiary. There are no strikes or walkouts in progress relating to any labor contracts to which the Borrower or any Subsidiary is a party. (i) TAX RETURNS AND PAYMENTS. All federal, state and other tax returns of the Borrower required by Applicable Law to be filed have been duly filed, and all federal, state and other taxes, assessments and other governmental charges or levies upon the Borrower and its properties, income, 36 profits and assets which are due and payable have been paid, except any such nonpayment which is at the time permitted under Section 7.06. (j) FINANCIAL STATEMENTS. The Borrower has furnished to each Lender copies of the consolidated balance sheet of the Borrower as at June 30, 1999, and the related consolidated statements of income and cash flows for the period covered thereby, certified by the President or Chief Financial Officer or other senior executive officer of the Borrower to be complete and correct and present fairly in all material respects, in accordance with GAAP consistently applied throughout the period involved, the financial position of the Borrower as at its date and the results of operations and the cash flows for such period. Except as disclosed in such balance sheet or statements, the Borrower and its Subsidiaries have no material liabilities, contingent or otherwise, and nor were there any material unrealized or anticipated losses of the Borrower or any of its Subsidiaries for the period covered thereby. (k) ERISA. The Borrower and its Affiliates are in compliance with ERISA in all material respects. No Reportable Event has occurred and is continuing with respect to any Plan; to the knowledge of the Borrower, no notice of intent to terminate a Plan has been filed nor has any Plan been terminated, the termination of which would result in liability to the Borrower or any Subsidiary of the Borrower in excess of $50,000 in the aggregate at any one time; no circumstance exists which constitutes grounds under Section 4042 of ERISA entitling the PBGC to institute proceedings to terminate, or appoint a trustee to administer, a Plan, nor has the PBGC instituted any such proceedings; neither the Borrower nor any Affiliate has completely or partially withdrawn under Sections 4201 or 4204 of ERISA from a Multiemployer Plan which withdrawal would result in liability to the Borrower in excess of $50,000 in the aggregate at any one time; the Borrower and each Affiliate has met its minimum funding requirements under ERISA with respect to all of its Plans and there are no unfunded vested liabilities in excess of $50,000 in the aggregate at any one time; and neither the Borrower nor any Affiliate has incurred any liability to the PBGC under ERISA in excess of $50,000 in the aggregate at any one time, which liability has not been satisfied. (l) ABSENCE OF DEFAULTS. No event has occurred and is continuing: (i) which constitutes a Default or an Event of Default; or (ii) which constitutes, or which with the passage of time, the giving of notice, a determination of materiality, the satisfaction of any condition, or any combination of the foregoing, would constitute, a default or event of default by the Borrower or any of its Subsidiaries under any material agreement (other than this Agreement) or judgment, decree or order to which the Borrower or any of its Subsidiaries is a party or by which the Borrower or any of its Subsidiaries or any of their properties may be bound. (m) ACCURACY AND COMPLETENESS OF INFORMATION. All written information, reports and other papers and data furnished to Agent or any Lender by, on behalf of, or at the direction of, Borrower or any Subsidiary (including, without limitation, all information regarding location, amount and other particulars of the Inventory and Accounts of the Borrower and its Subsidiaries) were, at the time the same were so furnished, complete and correct in all material respects, to the extent necessary to give the recipient a true and accurate knowledge of the subject matter, or, in the case of financial statements, present fairly in all material respects, in accordance with GAAP consistently applied throughout the periods involved, the financial position of the Persons involved as at the date thereof and the results of operations for such periods. No fact is known to the Borrower which has had, or may in the future have (so far as the Borrower can reasonably foresee), a Material Adverse Effect upon the Borrower or any Subsidiary which has not been set forth in the financial statements referred to in Section 6.01(j) or in such information, reports or other papers or data or otherwise disclosed in writing to the Agent and the 37 Lenders prior to the Agreement Date. No document furnished or statement made to any Agent or Lender in connection with the negotiation, preparation or execution of this Agreement or any of the other Loan Documents contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary in order to make the statements contained therein not misleading. (n) ENVIRONMENTAL LAWS. Borrower and its Subsidiaries are in compliance in all material respects with all terms and conditions of all Governmental Approvals required under Environmental Laws to be obtained by Borrower and its Subsidiaries for operation in the ordinary course of business. Neither the Borrower nor any of its Subsidiaries is aware of, or has received notice of, any past, present, or future events, conditions, circumstances, activities, practices, incidents, actions, or plans which may prevent compliance or continued compliance in all material respects with Environmental Laws which have not been completely remediated to the extent required by the applicable Environmental Laws. There is no civil, criminal, or administrative action, suit, demand, claim, hearing, notice, or demand letter, notice or violation, investigation, or proceeding pending or, to the Borrower's knowledge, threatened, against the Borrower or any of its Subsidiaries relating in any way to Environmental Laws. (o) MONARCH ACQUISITION AGREEMENT. The closing of the transactions contemplated by the Monarch Acquisition Agreement shall occur after the making of the Term Loans, and the Borrower has not waived or in any way amended, without the prior written consent of the Agent, any condition to the obligations of the Borrower to consummate the transactions contemplated under the Monarch Acquisition Agreement. A true and complete copy of the Monarch Acquisition Agreement (including all exhibits, schedules and amendments thereto) has been delivered to the Agent. The Borrower is not in default under any of the Monarch Acquisition Agreement or under any instrument or document to be delivered in connection therewith. The representations and warranties made in the Monarch Acquisition Agreements by the Borrower and, to the best knowledge of the Borrower, by the sellers thereunder, are true and correct in all material respects on and as of the Effective Date as though made on and as of such date. (p) SENIOR MANAGEMENT EMPLOYMENT AGREEMENTS. Borrower has entered into employment agreements with Messrs. Pincourt, Maltby, Valdes and Mitchell for terms of not less than five (5) years from July 15, 1999, true and complete copies of which have been delivered to the Agent. (q) TRADEMARKS. The tradenames and trademarks listed on Schedule 6.01(q) attached hereto are all of the tradenames and trademarks included in the computation of Borrower's Tangible Net Worth. The current valuations of such tradenames and trademarks used in calculating Borrower's Tangible Net Worth are shown on Schedule 6.01(q). (r) OWNERSHIP OF SUBSIDIARIES AND COLLATERAL. Borrower is the owner of one hundred percent (100%) of all shares of voting stock of each of the Subsidiaries except as shown on Schedule 6.01(b), the Collateral issued by each of the Subsidiaries is shown on the books of that Subsidiary as being owned by the Borrower and that there are no restrictions on the granting to the Agent by the Borrower of a security interest in the Collateral as set forth in the Pledge Agreement. SECTION 6.02. SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC. All statements contained in any certificate, financial statement or other instrument delivered by or on behalf of Borrower to Agent or any Lender pursuant to or in connection with this Agreement or any of the other Loan Documents (including, but not limited to, any such statement made in or in connection with any amendment thereto or any statement contained in any certificate, financial statement or other instrument delivered by or on 38 behalf of Borrower prior to the date hereof and delivered to Agent or such Lender in connection with the closing the transactions contemplated hereby) shall constitute representations and warranties made by the Borrower under this Agreement. All representations and warranties made under this Agreement shall be deemed to be made at and as of the Agreement Date, the Effective Date, the date of making each Loan, the date of each Continuation or Conversion thereof and the Date of Issuance of each Letter of Credit, except to the extent that such representations and warranties expressly relate solely to an earlier date (in which case such representations and warranties shall have been true and accurate on and as of such earlier date). ARTICLE VII AFFIRMATIVE COVENANTS For so long as any of the Obligations remain unpaid or unperformed, or this Agreement is in effect, unless the Lenders shall otherwise consent in the manner provided for in Section 13.07, the Borrower will and will cause each of its Subsidiaries to: SECTION 7.01. PRESERVATION OF EXISTENCE AND SIMILAR MATTERS. Preserve and maintain its respective existence, rights, franchises, licenses and privileges in the jurisdiction of its formation and qualify and remain qualified and authorized to do business in each jurisdiction in which the character of its properties or the nature of its business requires such qualification or authorization and the failure to be so qualified or authorized could have a Material Adverse Effect on the Borrower or such Subsidiary. SECTION 7.02. COMPLIANCE WITH APPLICABLE LAW. Comply with all Applicable Law (including, without limitation, all Environmental Laws) as the same may be amended from time to time, and obtain all Governmental Approvals required by the Borrower or any of its Subsidiaries to be so obtained, except where such noncompliance would not have a Material Adverse Effect on Borrower or where the Borrower or such Subsidiary is challenging in good faith by appropriate proceedings (diligently pursued) the application or enforcement of such Applicable Law or requirement for such Governmental Approval and against which adequate reserves have been established in accordance with GAAP. SECTION 7.03. MAINTENANCE OF PROPERTY. In addition to, and not in derogation of, the requirements of any of the other Loan Documents, (a) protect and preserve all of its properties, including, but not limited to, copyrights, patents, trade names and trademarks, and maintain in good repair, working order and condition all tangible properties, and (b) from time to time make or cause to be made all needed and appropriate repairs, renewals and replacements to such properties, so that the business carried on in connection therewith may be properly and advantageously conducted at all times. SECTION 7.04. CONDUCT OF BUSINESS. At all times carry on its business in the same fields as disclosed in Borrower's 10K filing with the SEC for the fiscal year ended September 30, 1998. Neither Borrower nor any of its Subsidiaries shall enter into any field of business not otherwise engaged in as of the date hereof. SECTION 7.05. INSURANCE. Maintain at all times with such insurance companies as shall be reasonably satisfactory to the Agent, with all premiums thereon to be paid, insurance with respect to its properties and business against such casualties and contingencies (including but not limited to public liability and business interruption) and in such amounts as is customary in the case of similarly situated 39 corporations engaged in the same or similar businesses and are consistent with Borrower's current insurance practices as of the Effective Date. From time to time deliver to the Agent upon its request a detailed list, together with copies of all policies of the insurance then in effect, stating the names of the insurance companies, the amounts and rates of the insurance, the dates of the expiration thereof and the properties and risks covered thereby. SECTION 7.06. PAYMENT OF TAXES AND CLAIMS. Pay or discharge when due (a) all taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits or upon any properties belonging to it, and (b) all lawful claims of materialmen, mechanics, carriers, warehousemen and landlords for labor, materials, supplies and rentals which, if unpaid, might become a material Lien on any of its properties or which would otherwise materially adversely affect the value of any Collateral; PROVIDED, HOWEVER, that this Section shall not require the payment or discharge of any such tax, assessment, charge, levy or claim which is being contested in good faith by appropriate proceedings which operate to suspend the collection thereof and for which adequate cash reserves have been established in an amount in accordance with GAAP; PROVIDED, FURTHER, HOWEVER, neither the Borrower nor any of its Subsidiaries may contest any such tax, assessment, charge, levy or claim if the contest thereof will impair the value or marketability of any Collateral or the Agent's Security Interest therein. SECTION 7.07. VISITS AND INSPECTIONS. Permit representatives or agents of Agent or any Lender, from time to time, as often as may be reasonably requested and reasonably necessary for monitoring of the Loans, but only during normal business hours, at the expense of the Borrower, to: (a) visit and inspect the properties (including Collateral inspections to occur not more than four times annually) of the Borrower and its Subsidiaries; (b) inspect and make extracts from relevant books and records of the Borrower and its Subsidiaries, including but not limited to management letters prepared by independent accountants; (c) discuss with principal officers, and independent accountants of the Borrower and its Subsidiaries, the business, assets, liabilities, financial conditions, results of operations and business prospects of the Borrower and its Subsidiaries; and (d) conduct an audit of the Collateral. SECTION 7.08. USE OF PROCEEDS. (a) Use the proceeds of all Revolving Loans to finance its working capital requirements and for general corporate purposes only; (b) use the proceeds of the Term Loans to pay the purchase price for the acquisition of Monarch and transaction expenses incidental thereto; (c) to repay all amounts due pursuant to the Senior Notes; and (d) not use any part of the proceeds of the Revolving Loans to purchase or carry, or to reduce or retire or refinance any credit incurred to purchase or carry, any margin stock (within the meaning of Regulations U and X of the Board of Governors of the Federal Reserve System) or to extend credit to others for the purpose of purchasing or carrying any margin stock. SECTION 7.09. INTEREST RATE PROTECTION. Within 60 days after the Agreement Date, Borrower shall provide Agent with written evidence in form and substance acceptable to the Required Lenders that Borrower has entered into an agreement with a financial institution having a Standard & Poors credit rating of "A" or better protecting Borrower against risks of increases in interest rates. SECTION 7.10. SUBSIDIARY SECURITIES REGISTRATION. If any Subsidiary shall become registered and traded in any nationally recognized stock exchange, Borrower shall cause each Subsidiary to promptly and completely file all reports required to be filed under the 1934 Act, such that all current public information as defined in Rule 144 is available and at the request of the Agent, each Subsidiary will, if applicable, use its best efforts to cooperate in good faith with the Agent to release any restrictions 40 on the stock certificates for the Collateral as and when permitted under the 1933 Act. At Agent's request, Borrower shall cause each Subsidiary, at its expense, to file whatever forms, statements or documents which are necessary with the SEC and other regulatory agencies so that any legend and/or other restrictions associated with the Collateral may be cleared or released as soon as possible. ARTICLE VIII INFORMATION For so long as any of the Obligations remains unpaid or unperformed, or this Agreement is in effect, unless the Lenders shall otherwise consent in the manner set forth in Section 13.07, the Borrower will furnish to the Agent and each Lender at its Lending Office: SECTION 8.01. QUARTERLY REPORTS. Within forty-five (45) days after the close of each quarterly accounting period of the Borrower, except Borrower's fiscal year end, a copy of Form 10Q as filed by Borrower with the SEC for such period. In the event Borrower does not file a Form 10Q with the SEC within forty-five (45) days after the close of each quarterly accounting period of Borrower, Borrower shall, within such forty-five (45) day period, deliver the consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such period and the related consolidated statement of income of the Borrower and its Subsidiaries for such period, setting forth in comparative form the figures as at the end of and for the corresponding fiscal quarter of the prior fiscal year, all of which shall be certified by an Authorized Representative of Borrower of Borrower to present fairly in all material respects, in accordance with GAAP consistently applied (subject to changes resulting from normal year-end adjustments), the consolidated financial position of the Borrower and its Subsidiaries as at the date thereof and the results of operations for such period. With each such report Borrower shall submit to the Agent a fully completed compliance certificate in the form attached hereto as Exhibit "K" duly certified in form and substance acceptable to Agent by an Authorized Representative of Borrower. SECTION 8.02. YEAR-END STATEMENTS. Within one hundred twenty (120) days after the end of each fiscal year of the Borrower, a copy of Form 10K as filed by Borrower with the SEC. In the event Borrower does not file a Form 10K with the SEC within one hundred twenty (120) days after the close of each fiscal year of Borrower, Borrower shall, within such one hundred twenty (120) day period, deliver the consolidated balance sheet of the Borrower as at the end of such fiscal year and the related consolidated statements of income and cash flows of the Borrower and its Subsidiaries for such fiscal year, setting forth in comparative form the figures as at the end of and for the previous fiscal year, all of which shall be certified by an Authorized Representative of Borrower to present fairly in all material respects, in accordance with GAAP consistently applied, the consolidated financial position of the Borrower and its Subsidiaries as at the date thereof and the consolidated results of operations for such period, and also shall be certified by McGladrey & Pullen, LLP or such other independent certified public accountants of recognized national standing proposed by Borrower and otherwise reasonably acceptable to the Lenders, whose certificate shall be in scope and substance satisfactory to the Lenders and who shall have authorized the Borrower to deliver such financial statements and certification thereof to the Agent and the Lenders pursuant to this Agreement. Together with each delivery of the annual financial statements required above, Borrower shall deliver to the Agent and each Lender a letter from the Borrower's accountants stating that in performing the audit necessary to render an opinion on the financial statements delivered under this Section 8.02, they obtained no knowledge of any Default or Event of Default by the Borrower in the fulfillment of the terms and provisions of this Agreement insofar as they related to financial matters (which at the date of such statement remains uncured), or if the 41 accountants have obtained knowledge of such Default or Event of Default, a statement specifying the nature and period of existence thereof. Within ninety (90) days after the beginning of each fiscal year of Borrower, Borrower shall deliver to Agent, in form and substance reasonably acceptable to Agent, a report of the projected financial performance of Borrower and its Subsidiaries for that fiscal year on a consolidated basis. SECTION 8.03. BORROWING BASE CERTIFICATE. Not later than 5:00 p.m. EST on the twenty-fifth (25th) day of each calendar month (or more frequently, if requested by the Agent), a duly completed Borrowing Base Certificate, with respect to the immediately prior month period, certified by an Authorized Representative of Borrower. SECTION 8.04. COPIES OF OTHER REPORTS. (a) Promptly upon receipt thereof, copies of all reports, if any, submitted to the Borrower by the Borrower's independent public accountants including any management report; and (b) From time to time and promptly upon each request, such data, certificates, reports, statements, opinions of counsel, documents or further information regarding the business, assets, liabilities, financial condition, results of operations or business prospects of the Borrower and its Subsidiaries as any Lender or the Agent may reasonably request. The rights of the Lenders and the Agent under this Section are in addition to and not in derogation of their rights under any other provision of this Agreement or any of the other Loan Documents. SECTION 8.05. NOTICE OF LITIGATION AND OTHER MATTERS. Prompt notice of: (a) the commencement of all proceedings and investigations by or before any governmental or nongovernmental body and all actions and proceedings in any court or other tribunal or before any arbitrator against or in any other way relating adversely to, or adversely affecting, the Borrower or any Subsidiary or any of their respective properties, assets or businesses which, if adversely determined or resolved, could have a Material Adverse Effect on the Borrower or any Subsidiary, as applicable, including without limitation, any claim, action, demand, suit, proceeding, hearing, study, or investigation, based on or related to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling or the emission, discharge, release or threatened release into the environment, of any pollutant, contaminant (chemical or industrial), toxic, or other Hazardous Material; (b) any change in the Senior Management of the Borrower unless within one hundred twenty (120) days the senior manager is replaced by a manager of comparable experience and ability as determined in the reasonable judgment of the Required Lenders and any change in the business, assets, liabilities, financial condition, results of operations or business prospects of the Borrower or any Subsidiary which has had or may have a Material Adverse Effect on the business operations of the Borrower or any Subsidiary, as applicable; and (c) any Default or Event of Default or any event which constitutes or which with the passage of time, the giving of notice, a determination of materiality, the satisfaction of any condition or any combination of any of the foregoing would constitute a default or event of default by the Borrower or any Subsidiary under any material agreement (other than this Agreement) to which the Borrower or any Subsidiary is a party or by which the Borrower or any Subsidiary or any of its respective properties may 42 be bound and such action that the Borrower or such Subsidiary is taking to remedy such Default, Event of Default or event. SECTION 8.06. ERISA. As soon as possible and in any event within 30 days after the Borrower knows, or has reason to know, that: (a) any Termination Event with respect to a Plan has occurred or will occur; or (b) the existence of any Unfunded Vested Accrued Benefits under all Plans; or (c) the Borrower or any Affiliate is in "default" (as defined in Section 4219(c)(5) of ERISA) with respect to payments to a Multiemployer Plan required by reason of its complete or partial withdrawal (as described in Section 4203 or 4205 of ERISA) from such Plan, a certificate of the President or Chief Executive Officer of the Borrower setting forth the details of such of the events described in clauses (a) through (c) as applicable and the action which is proposed to be taken with respect thereto, together with any notice or filing which may be required by the PBGC or other agency of the United States government with respect to such of the events described in clauses (a) through (c) as applicable. ARTICLE IX NEGATIVE COVENANTS So long as any of the Obligations remains unpaid or unperformed, or this Agreement is in effect, unless the Lenders shall otherwise consent in the manner set forth in Section 13.07, the Borrower will not, and will not permit any of its Subsidiaries to, directly or indirectly: SECTION 9.01. INDEBTEDNESS FOR BORROWED MONEY. Create, assume, or otherwise become or remain obligated in respect of, or permit or suffer to exist or to be created, assumed or incurred or to be outstanding any Indebtedness for Money Borrowed, except that this Section shall not apply to (a) Indebtedness for Money Borrowed represented by the Loans and the Notes, (b) the Indebtedness set forth on Schedule 6.01(g), (c) reasonable and customary business expenses incurred in the ordinary course of Borrower's or its Subsidiaries' businesses and trade debt incurred in the ordinary course of business, (d) Indebtedness secured by Permitted Liens, and (e) intracompany Indebtedness between the Borrower and any of its Subsidiaries or between Subsidiaries which do not, in the aggregate for all Subsidiaries, exceed Two Million and No/100 Dollars ($2,000,000.00) at any one time and which are made in the ordinary course of Borrower's and the Subsidiaries' businesses as currently conducted or has otherwise been approved by the Required Lenders; PROVIDED, HOWEVER, that such Indebtedness described in subparagraph (b) that is owing by the Borrower or any of its Subsidiaries to an Affiliate thereof shall be subordinated to the Obligations on terms and conditions satisfactory to the Agent in its sole discretion. SECTION 9.02. GUARANTIES. Become or remain liable on or under any Guaranty, except for any Guaranty in existence on the date hereof and set forth on Schedule 6.01(g). SECTION 9.03. INVESTMENTS. Acquire any Person or any Business Unit of any Person or make or purchase any investment or permit any investment to be outstanding other than investments in 43 existence as of the date hereof, acquisition of the assets of Monarch pursuant to the Monarch Acquisition Agreement and those permitted under Section 9.08, 9.10 and 9.11. SECTION 9.04. LIENS. Create, assume, incur or permit or suffer to exist or to be created, assumed or incurred, any Lien upon any of its properties or assets of any character whether now owned or hereafter acquired other than Permitted Liens or to enter into an agreement with any Person restricting or prohibiting the creation of liens or other encumbrances on the property of Borrower or any Subsidiary. SECTION 9.05. RESTRICTED DISTRIBUTIONS AND PURCHASES. Declare or make any Restricted Distribution or Restricted Purchase. SECTION 9.06. MERGER, CONSOLIDATION AND OTHER ARRANGEMENTS. Merge or consolidate with any other Person, acquire any other Person or liquidate or dissolve or wind-up its respective affairs, or enter into any partnerships, joint ventures or sale-leaseback transactions or purchase or otherwise acquire (in one or a series of related transactions) any part of the property or assets (other than purchases or other acquisitions of inventory, materials and equipment in the ordinary course of business) of any Person. SECTION 9.07. PLANS. Take any action which would cause any Unfunded Vested Accrued Benefits under any Plan of the Borrower and its Affiliates to exist. SECTION 9.08. LOANS. Extend credit to, or make any advance, loan or contribution of money or goods to, any Person other than salary and travel advances outstanding to employees of the Borrower and its Subsidiaries, consistent with the past practices of the Borrower and its Subsidiaries, in an aggregate amount at any time outstanding not to exceed $500,000 and extensions of loans to Subsidiaries disclosed on Schedule 6.01(g) on terms approved by the Agent in its reasonable judgment. SECTION 9.09. SUBSIDIARIES. Incorporate, create or acquire any Subsidiary. SECTION 9.10. TRANSACTIONS WITH AFFILIATES. Enter into any transaction or series of transactions, whether or not related or in the ordinary course of business, with any other Affiliate of the Borrower or such Subsidiary, other than on terms and conditions substantially as favorable to the Borrower or such Subsidiary as would be obtainable by the Borrower or such Subsidiary at the time in a comparable arm's-length transaction with a Person not an Affiliate PROVIDED, HOWEVER, that this Section 9.10 shall not prohibit any transaction solely among the Borrower and its current Subsidiaries shown on Schedule 6.01(b) provided such transactions are within the ordinary course of Borrower's business as currently conducted. SECTION 9.11. NO SALE OF ASSETS. Sell, lease, assign, transfer or otherwise dispose of any assets whether in one or a series of transactions (whether or not related) other than: (a) Inventory in the ordinary course of business; (b) obsolete or worn out property disposed of in the ordinary course of business; (c) the disposition by Todhunter Bahamas, Limited of its assets located in the Bahamas, provided the net proceeds of such assets shall be retained by Borrower or a Subsidiary; and (d) other dispositions of assets; PROVIDED that: (x) such other dispositions are for fair value; (y) the aggregate consideration (whether in the form of cash, promissory notes or other instruments) for such other dispositions does not exceed $500,000 in the aggregate for any fiscal year; and (z) such consideration is reinvested in the business of the Borrower. 44 SECTION 9.12. CHANGE IN ACCOUNTING METHOD OR FISCAL YEAR END. Make any change in accounting treatment and reporting practices except as required by GAAP, or change its fiscal year end. SECTION 9.13. CHANGE OF SENIOR MANAGEMENT OR CONTROL. Allow any change in Senior Management unless within one hundred twenty (120) days the senior manager is replaced by a manager of comparable experience and ability as determined in the reasonable judgment of the Required Lenders or a change in Control. SECTION 9.14. CHANGE IN ORGANIZATIONAL DOCUMENTS. Make any change in the articles of incorporation, bylaws or other organizational documents affecting the governance of Borrower or any Subsidiary, including, without limitation, any provision affecting any voting rights or percentages for approval of any corporate action. SECTION 9.15. ADDITIONAL SUBSIDIARIES EQUITIES. Allow any Subsidiary to issue any additional shares of common stock or other evidence of equity ownership whether privately or to the public or by way of stock dividend, stock split or stock sale. ARTICLE X FINANCIAL COVENANTS So long as any of the Obligations remain unpaid or unperformed or this Agreement is in effect, unless the Lenders shall otherwise consent in the manner set forth in Section 13.07, the Borrower and all Subsidiaries shall, on a consolidated basis: SECTION 10.01. MINIMUM TANGIBLE NET WORTH. Maintain a Tangible Net Worth as of the last day of each fiscal quarter of Borrower of not less than $28,000,000 for each fiscal quarter of Borrower ending after March 31, 2000 through September 30, 2000, and thereafter Tangible Net Worth shall be a minimum of $28,000,000, plus 50% of the annual net income (but not loss) of the Borrower and its Subsidiaries for the prior fiscal year of Borrower (on a consolidated basis in accordance with GAAP) and on or prior to the date of determination, plus 75% of the net proceeds of any equity or subordinated debt offering completed by Borrower after the Agreement Date. SECTION 10.02. INTEREST COVERAGE RATIO. Maintain the ratio of EBITDA to Consolidated Interest Expense determined at the end of each fiscal quarter of Borrower for the four consecutive fiscal quarters then ended at least as follows: 3.0 to 1.0 between 3/31/00 and 9/30/01 4.0 to 1.0 between 12/31/01 and 9/30/03 5.0 to 1.0 thereafter SECTION 10.03. FIXED CHARGE COVERAGE. Maintain, at all times after March 31, 2000, a Fixed Charge Coverage Ratio of not less than 1.5 to 1.0 which shall be tested at each fiscal quarter end of Borrower for the four consecutive quarters then ended. SECTION 10.04. FUNDED DEBT RATIO. Maintain, at all times Funded Debt of not greater than sixty-five percent (65%) of the sum of Funded Debt plus Tangible Net Worth as of the end of each of the 45 four fiscal quarters in Borrower's fiscal year 2000 (beginning March 31, 2000), not greater than sixty percent (60%) for fiscal quarters ended in Borrower's fiscal year 2001, not greater than fifty-five percent (55%) for fiscal quarters ended in Borrower's fiscal year 2002, and not greater than fifty percent (50%) for each fiscal quarter ended thereafter. SECTION 10.05. FUNDED DEBT TO EBITDA. Maintain a ratio of Funded Debt to EBITDA of not more than 3.75:1 as of the end of any fiscal quarter of Borrower after March 31, 2000 during the fiscal year of Borrower ending September 30, 2000, 3.00:1 as of the end of any fiscal quarter of Borrower during the fiscal year of Borrower ending September 30, 2001, and 2.50:1 as of the end of any fiscal quarter of Borrower at all times thereafter. Such ratio shall be measured on the basis of the financial results of Borrower for the most recent four (4) fiscal quarters of Borrower ending on the dates of measurement. ARTICLE XI DEFAULT SECTION 11.01. EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default, whatever the reason for such event and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment or order of any court or any order, rule or regulation of any Governmental Authority or nongovernmental body: (a) DEFAULT IN PAYMENT. The Borrower shall fail to pay when due (whether upon demand, at maturity, by reason of acceleration or otherwise) the principal of, or interest on, any of the Loans or Notes, or any amount payable hereunder when and as required to be made pursuant to any Reimbursement Obligation, or shall fail to pay when due any of the other obligations owing by the Borrower under this Agreement or any other Loan Document within ten (10) days after the date due. (b) MISREPRESENTATIONS. Any statement, representation or warranty made or deemed made by or on behalf of the Borrower under this Agreement or under any other Loan Document, or any amendment hereto or thereto, or in any other statement at any time furnished or made or deemed made by or on behalf of the Borrower to the Agent or any Lender in connection with any Loan Document or with respect to the transactions contemplated by the Loan Documents, shall at any time prove to have been incorrect or misleading in any material respect when furnished or made or deemed made. (c) DEFAULT IN PERFORMANCE. (i) The Borrower shall fail to perform or observe any term, covenant, condition or agreement contained in Article IX or Article X and such failure shall continue for thirty (30) days, or (ii) the Borrower shall fail to perform or observe any term, covenant, condition or agreement contained in this Agreement or any other Loan Document to which it is a party and not otherwise mentioned in this Section 11.01 and such failure shall continue for a period of thirty days. (d) VOLUNTARY BANKRUPTCY PROCEEDING. The Borrower or any Subsidiary shall: (i) commence a voluntary case under the federal bankruptcy laws (as now or hereafter in effect); (ii) file a petition seeking to take advantage of any other laws, domestic or foreign, relating to bankruptcy, insolvency, reorganization, winding up or adjustment of debts; (iii) consent to or fail to contest in a timely and appropriate manner any petition filed against it in an involuntary case under such bankruptcy laws or other laws; (iv) apply for or consent to or fail to contest in a timely and appropriate manner, the 46 appointment of, or the taking of possession by, a receiver, custodian, trustee, or liquidator of itself or of a substantial part of its property, domestic or foreign; (v) admit in writing its inability to pay its debts as they become due; (vi) make a general assignment for the benefit of creditors; (vii) make a conveyance fraudulent as to creditors under any state or federal law; or (viii) take any corporate or partnership action for the purpose of effecting any of the foregoing. (e) INVOLUNTARY BANKRUPTCY PROCEEDING. A case or other proceeding shall be commenced against the Borrower or any Subsidiary in any court of competent jurisdiction seeking and not dismissed within sixty (60) days after the date of filing: (i) relief under the federal bankruptcy laws (as now or hereafter in effect) or under any other laws, domestic or foreign, relating to bankruptcy, insolvency, reorganization, winding up or adjustment of debts; or (ii) the appointment of a trustee, receiver, custodian, liquidator or the like for such Person or all or any substantial part of its assets, domestic or foreign. (f) LITIGATION. The Borrower shall challenge or contest in any action, suit or proceeding in any court or before any arbitrator or governmental body the validity or enforceability of this Agreement, any Note or any other Loan Document. (g) JUDGMENT. A judgment or order for the payment of money individually or in the aggregate equal to or greater than $250,000 shall be entered against the Borrower or any Subsidiary by any court and such judgment or order shall continue undischarged, unstayed and unbonded for thirty (30) days after filing. (h) ATTACHMENT. A warrant or writ of attachment or execution or similar process shall be issued against any property of the Borrower or any Subsidiary for an amount equal to or greater than $250,000 which shall continue undischarged and unbonded for a period of thirty (30) days. (i) ERISA. (i) Any Termination Event with respect to a Plan shall occur and continue uncured for a period of ninety (90) days after occurrence if curable; (ii) any Plan shall incur an "accumulated funding deficiency" (as defined in Section 412 of the Internal Revenue Code or Section 302 of ERISA) for which a waiver has not been obtained in accordance with the applicable provisions of the Internal Revenue Code and ERISA; or (iii) the Borrower is in "default" (as defined in Section 4219(c)(5) of ERISA) with respect to payments to a Multiemployer Plan resulting from the Borrower's complete or partial withdrawal (as described in Section 4203 or 4205 of ERISA) from such Multiemployer Plan. (j) CROSS DEFAULT. Borrower or any Subsidiary defaults (whether as primary obligor or as guarantor or other surety) in any payment of principal of or interest on any other obligation for Money Borrowed (or any Capitalized Lease Obligation, any obligation under a conditional sale or other title retention agreement, any obligation issued or assumed as full or partial payment for property whether or not secured by a purchase money mortgage or any obligation under notes payable or drafts accepted representing extensions of credit) beyond any period of grace provided with respect thereto; or Borrower or any Subsidiary fails to perform or observe any other agreement, term or condition contained in any agreement under which any such obligation is created (or if any other event thereunder or under any such agreement shall occur and be continuing) and the effect of such failure or other event is to cause, or to permit the holder or holders of such obligation (or a trustee on behalf of such holder or holders) to cause, such obligation to become due (or to be repurchased or defeased by Borrower or any Subsidiary) prior to its stated maturity. 47 (k) MATERIAL ADVERSE EFFECT. Any change shall have occurred in the business, assets, liabilities, financial condition, results of operations or business prospects of the Borrower or any of its Subsidiaries which has had or may have a Material Adverse Effect on the Borrower and its Subsidiaries, taken as a whole. (l) SECURITY INTEREST. The Security Interest shall for any reason cease to be a valid, enforceable, perfected and first-priority Lien on any of the Collateral, subject only to Permitted Liens. SECTION 11.02. REMEDIES. Upon the occurrence of an Event of Default the following provisions shall apply: (a) ACCELERATION; TERMINATION OF FACILITIES. (i) AUTOMATIC. Upon the occurrence of an Event of Default specified in Sections 11.01(d) or (e), then (A)(1) the principal of, and the interest on, the Loans and the Notes at the time outstanding, (2) an amount equal to the Stated Amount of all Letters of Credit outstanding as of the date of the occurrence of the Event of Default and (3) all of the other obligations of the Borrower hereunder, including, but not limited to, the other amounts owed to the Lenders and the Agent under this Agreement, the Notes or any of the other Loan Documents, and all other Obligations, shall become automatically due and payable by the Borrower without presentment, demand, protest, or other notice of any kind, all of which are expressly waived by the Borrower and (B) the Revolving Credit Facility and the Letter of Credit Facility, the obligations of the Lenders to make Revolving Loans under the Revolving Credit Facility, the obligation of the Letter of Credit Issuer to issue Letters of Credit under the Letter of Credit Facility and each Lender's respective Commitment shall immediately and automatically terminate. (ii) OPTIONAL. If any other Event of Default shall have occurred and be continuing (other than an Event of Default specified in Section 11.01(d) or (e)), then (xx) the Agent, at the direction of the Required Lenders, shall: (A) declare (1) the principal of, and interest on, the Loans and the Notes at the time outstanding, (2) an amount equal to the Stated Amount of all Letters of Credit outstanding as of the date of the occurrence of the Event of Default and (3) all of the other obligations of the Borrower hereunder, including, but not limited to, the other amounts owed to the Lenders and the Agent under this Agreement, the Notes or any of the other Loan Documents, and all other Obligations, to be forthwith due and payable, whereupon the same shall immediately become due and payable without presentment, demand, protest or other notice of any kind, all of which are expressly waived by the Borrower and (B) terminate each Lender's respective Commitment, the Revolving Credit Facility and the Letter of Credit Facility, the obligation of the Lenders to make Revolving Loans under the Revolving Credit Facility and the obligation of the Letter of Credit Issuer to issue Letters of Credit under the Letter of Credit Facility. (b) LOAN DOCUMENTS. The Agent, upon the direction of the Required Lenders, shall exercise any and all of its rights under any and all of the other Loan Documents. (c) CASH COLLATERAL. The Agent, upon the direction and at the election of the Required Lenders, may require the Borrower to deposit into the Cash Collateral Account the amounts specified in Sections 11.02(a)(i)(A)(2) or 11.02(a)(ii)(A)(2), as applicable. The monies so deposited therein shall be used in the manner specified in Section 3.07 hereof as if the Facility Termination Date were the date the applicable Event of Default had occurred. 48 SECTION 11.03. RIGHTS CUMULATIVE. The rights and remedies of the Agent and the Lenders under this Agreement, the Notes and each of the other Loan Documents shall be cumulative and not exclusive of any rights or remedies which it would otherwise have under Applicable Law. In exercising its rights and remedies the Agent and the Lenders may be selective and no failure or delay by the Agent or any of the Lenders in exercising any right shall operate as a waiver of it, nor shall any single or partial exercise of any power or right preclude its other or further exercise or the exercise of any other power or right. ARTICLE XII THE AGENT SECTION 12.01. AUTHORIZATION AND ACTION. Each Lender hereby appoints and authorizes the Agent to take such action as Agent on such Lender's behalf and to exercise such powers under this Agreement and the other Loan Documents as are delegated to Agent by the terms hereof and thereof, together with such powers as are reasonably incidental thereto. The power of attorney set forth herein shall be irrevocable and coupled with an interest. The relationship between Agent and the Lenders shall be that of principal and agent only and nothing herein shall be construed to deem Agent a trustee for any Lender nor to impose on Agent duties or obligations other than those expressly provided for herein. At the request of a Lender, the Agent will forward to each Lender copies or, where appropriate, originals of the documents delivered to the Agent pursuant to Section 6.01 hereof. The Agent will also furnish to any Lender, upon the request of such Lender, a copy of any certificate or notice furnished to the Agent by the Borrower, or any other Affiliate of the Borrower, pursuant to this Agreement or any other Loan Document not already delivered to such Lender pursuant to the terms of this Agreement or any such other Loan Document. As to any matters not expressly provided for by the Loan Documents (including, without limitation, enforcement or collection of the Notes), the Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Required Lenders, and such instructions shall be binding upon all Lenders and all holders of Notes; PROVIDED, HOWEVER, that Agent shall not be required to take any action which is contrary to this Agreement or any other Loan Document or Applicable Law. Not in limitation of the foregoing, Agent shall not exercise any right or remedy it or the Lenders may have under any Loan Document upon the occurrence of a Default or an Event of Default unless the Required Lenders have so directed Agent to exercise such right or remedy. SECTION 12.02. AGENT'S RELIANCE, ETC. Neither the Agent nor any directors, officers, agents, employees or counsel shall be liable for any action taken or omitted to be taken by it or them under or in connection with this Agreement, except for its or their own gross negligence or willful misconduct. Without limiting the generality of the foregoing, Agent: (a) may treat the payee of any Note as the holder thereof until such Agent receives written notice of the assignment or transfer thereof signed by such payee and in form satisfactory to the Agent; (b) may consult with legal counsel (including counsel for the Borrower), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (c) makes no warranty or representation to any Lender and shall not be responsible to any Lender for any statements, warranties or representations made in or in connection with this Agreement or any other Loan Document including, without limitation, any Borrowing Base Certificate; (d) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of any of this Agreement or any other Loan Document or the 49 satisfaction of any conditions precedent under this Agreement or any Loan Document on the part of any or all of the Borrower or other Persons or inspect the property, books or records of any or all of the Borrower or any other Person; (e) shall not be responsible to any Lender for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other Loan Document, any other instrument or document furnished pursuant thereto or any collateral covered thereby or the perfection or priority of any Lien in favor of any Agent on behalf of the Lenders in any such collateral; and (f) shall incur no liability under or in respect of this Agreement or any other Loan Document by acting upon any notice, consent, certificate or other instrument or writing (which may be by telephone or telecopy) believed by it to be genuine and signed, sent or given by the proper party or parties. SECTION 12.03. AGENT AS LENDER. SouthTrust Bank, National Association, as a Lender, shall have the same rights and powers under this Agreement and any other Loan Document as any other Lender and may exercise the same as though it were not the Agent; and the term "Lender" or "Lenders" shall, unless otherwise expressly indicated, include the Agent in its individual capacity. The Agent and its Affiliates may each accept deposits from, maintain deposits or credit balances for, invest in, lend money to, act as trustee under indentures of, and generally engage in any kind of business with the Borrower, or any other Affiliate thereof as if it were any other bank and without any duty to account therefor to the other Lenders. SECTION 12.04. LENDER CREDIT DECISION, ETC. Each Lender expressly acknowledges that neither the Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or other Affiliates has made any representations or warranties to such Lender and that no act by Agent hereinafter taken, including any review of the affairs of the Borrower, shall be deemed to constitute any representation or warranty by Agent to any Lender. Each Lender acknowledges that it has, independently and without reliance upon Agent, any other Lender or counsel to Agent, and based on the financial statements of the Borrower and its Affiliates, its review of the Loan Documents, the legal opinions required to be delivered to it hereunder, the advice of its own counsel and such other documents and information as it has deemed appropriate, made its own credit and legal analysis and decision to enter into this Agreement and the transaction contemplated hereby. Each Lender also acknowledges that it will, independently and without reliance upon the Agent, any other Lender or counsel to the Agent, and based on such review, advice, documents and information as it shall deem appropriate at the time, continue to make its own decisions in taking or not taking action under the Loan Documents. Except for notices, reports and other documents expressly required to be furnished to the Lenders by Agent hereunder, Agent shall have no duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, financial and other condition or creditworthiness of the Borrower or any other Affiliate thereof which may come into possession of Agent or any of its officers, directors, employees, agents, attorneys-in-fact or other Affiliates. SECTION 12.05. INDEMNIFICATION. The Lenders agree to indemnify Agent (to the extent not reimbursed by the Borrower and without limiting the obligation of the Borrower to do so) PRO RATA in accordance with the Lenders' respective Credit Percentages, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may at any time be imposed on, incurred by, or asserted against Agent in any way relating to or arising out of the Loan Documents or any action taken or omitted by Agent under the Loan Documents; PROVIDED, HOWEVER, that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements to the extent resulting from Agent's gross negligence or willful misconduct or if Agent 50 fails to follow the written direction of the Lenders unless such failure is pursuant to the advice of counsel of which the Lenders have received notice. Without limiting the generality of the foregoing, each Lender agrees to reimburse Agent promptly upon demand for its ratable share of any reasonable out-of-pocket expenses (including reasonable counsel fees) incurred by Agent in connection with the preparation, execution, administration, or enforcement of, or legal advice with respect to the rights or responsibilities of the parties under, the Loan Documents, to the extent that Agent is not reimbursed for such expenses by the Borrower. The agreements in this Section shall survive the payment of the Loans and all other amounts payable hereunder or under the other Loan Documents and the termination of this Agreement. SECTION 12.06. COLLATERAL MATTERS. (a) Each Lender authorizes and directs the Agent to enter into the Loan Documents for the benefit of the Lenders. Each Lender hereby agrees that, except as otherwise set forth herein, any action taken by the Lenders in accordance with the provisions of this Agreement or the Loan Documents, and the exercise by the Lenders of the powers set forth herein or therein, together with such other powers as are reasonably incidental thereto, shall be authorized and binding upon all of the Lenders. Except as otherwise required by Section 13.07, the Agent is hereby authorized on behalf of all of the Lenders, without the necessity of any notice to or further consent from any Lender, from time to time prior to an Event of Default, to take any action with respect to any Loan Documents including any action which may be necessary or desirable to maintain, perfect or realize on the Security Interest granted in the Collateral. (b) The Lenders hereby authorize the Agent, at its option and in its discretion, to release any Lien hereafter granted to or held by the Agent upon any Collateral owned by Borrower or its Subsidiaries (i) upon termination of the Commitments and payment and satisfaction of all of the Obligations at any time arising under or in respect of this Agreement or the Loan Documents or the transactions contemplated hereby or thereby or (ii) constituting property being sold or disposed of upon receipt of the proceeds of such sale by the Agent if the Borrower certifies to the Agent that the sale or disposition is made in compliance with Section 9.11 hereof (and the Agent may rely conclusively on any such certificate, without further inquiry). Upon request by the Agent at any time, the Lenders will confirm in writing the Agent's authority to release particular types or items of Collateral pursuant to this Section 12.06. (c) Upon any sale and transfer of Collateral which is expressly permitted pursuant to the terms of this Agreement, or consented to in writing by the Lenders and upon at least five (5) Business Days' prior written request by the Borrower, the Agent shall (and is hereby irrevocably authorized by the Lenders to) execute such documents as may be necessary to evidence the release of the Liens granted to the Agent for the benefit of the Lenders herein or pursuant hereto upon the Collateral that was sold or transferred; PROVIDED, HOWEVER, that (i) the Agent shall not be required to execute any such document on terms which, in the Agent's opinion, would expose the Agent to liability or create any obligation or entail any consequence other than the release of such Liens without recourse or warranty and (ii) such release shall not in any manner discharge, affect or impair the Secured Obligations or any Liens upon (or obligations of the Borrower or any Subsidiary in respect of) all interests retained by the Borrower or any Subsidiary, including (without limitation) the proceeds of the sale, all of which shall continue to constitute part of the Collateral. In the event of any sale or transfer of Collateral, or any foreclosure with respect to any of the Collateral, the Agent shall be authorized to deduct all of the expenses reasonably incurred by the Agent from the proceeds of any such sale, transfer or foreclosure. 51 (d) The Agent shall have no obligation whatsoever to the Lenders or to any other Person to assure that the Collateral exists or is owned by the Borrower or any Subsidiary or is cared for, protected or insured or that the Liens granted to the Agent herein or pursuant hereto have been properly or sufficiently or lawfully created, perfected, protected or enforced or are entitled to any particular priority, or to exercise or to continue exercising at all or in any manner or under any duty of care, disclosure or fidelity any of the rights, authorities and powers granted or available to the Agent in this Section 12.06 or in any of the Loan Documents, it being understood and agreed that in respect of the Collateral, or any act, omission or event related thereto, the Agent may act in any manner it may deem appropriate, in its sole discretion, given the Agent's own interest in the Collateral as one of the Lenders and that the Agent shall have no duty or liability whatsoever to the Lenders, except in each case for its gross negligence or willful misconduct. (e) At any time or times, in order to comply with any legal requirement in any jurisdiction or in order to facilitate the validity, perfection, priority or enforceability of the security interests of the Agent in the Collateral, the Agent may appoint another bank or trust company or one or more Persons, to act as co-agent or co-agents, jointly with the Agent, or to act as separate agent or agents on behalf of the Agent and the Lenders with such power and authority as may be necessary for the effectual operation of the provisions hereof and of the other Loan Documents and specified in the instrument of appointment. SECTION 12.07. SUCCESSOR AGENT. Agent may resign at any time in its capacity as Agent under the Loan Documents by giving written notice thereof to the Lenders and the Borrower. In the event of a material breach of its duties hereunder, any Agent may be removed as an Agent under the Loan Documents at any time by the Required Lenders. Upon any such resignation or removal, the Lenders shall have the right to appoint a successor Agent. If no successor Agent shall have been so appointed by the Lenders, and shall have accepted such appointment, within 30 days after the resigning Agent's giving of notice of resignation or the Required Lenders' removal of the resigning Agent, then the resigning Agent may, on behalf of the Lenders, appoint a successor Agent, which shall be a Lender, if any Lender shall be willing to serve, and otherwise shall be a commercial bank having combined capital and surplus of at least $1,000,000,000 and reasonably acceptable to the Lenders. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the resigning Agent, and the retiring Agent shall be discharged from its duties and obligations under the Loan Documents. After any resigning Agent's resignation or removal hereunder as Agent, the provisions of this Article XII shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under the Loan Documents. ARTICLE XIII MISCELLANEOUS SECTION 13.01. NOTICES. Unless otherwise provided herein, communications provided for hereunder shall be in writing and shall be mailed, telecopied or delivered as follows: 52 If to the Borrower: Todhunter International, Inc. 222 Lakeview Avenue Suite 1500 West Palm Beach, FL 33401 Attn: A. Kenneth Pincourt, Jr. Telephone: (561) 655-8977 Telecopier: (561) 655-9718 with a copy to: Gunster Yoakley Valdes-Fauli & Stewart, P.A. Phillips Point 777 South Flagler Drive Suite 500 East West Palm Beach, Florida 33401-6194 Attn: Michael V. Mitrione, Esq. Telephone: (561) 650-0553 Telecopier: (561) 655-5677 If to any Agent or Lender: To such Person's address or telecopy number, as applicable, set forth on the then current Annex I attached hereto. or, as to each party at such other address as shall be designated by such party in a written notice to the other parties. All such notices and other communications shall be effective (i) if mailed, when received; (ii) if telefacsimile, when transmitted with electronic confirmation of receipt; or (iii) if hand delivered, when delivered. Notwithstanding the immediately preceding sentence, all notices or communications to Agent or any Lender under Articles II and III shall be effective only when actually received. SECTION 13.02. EXPENSES. The Borrower will pay all reasonable present and future expenses of the Agent and the Lenders in connection with the following expenses which shall not include internal expenses of the Agent or any Lender: (a) the negotiation, preparation, execution, delivery and administration of this Agreement, the Notes and each of the other Loan Documents, whenever the same shall be executed and delivered, including appraisers' fees, search fees, recording fees and the fees and disbursements of: (i) Akerman, Senterfitt & Eidson, P.A., counsel for the Agent, and (ii) each local and foreign counsel retained by the Agent; (b) the negotiation, preparation, execution and delivery of any waiver, amendment or consent by the Agent or any Lender relating to this Agreement, the Notes or any of the other Loan Documents; (c) any restructuring, refinancing or "workout" of the transactions contemplated by this Agreement, the Notes and the other Loan Documents, or any material amendment to the terms of this Agreement or any other Loan Document, including the fees and disbursements of counsel to Agent or any Lender; (d) consulting on a reasonable basis with one or more Persons engaged by the Agent, including appraisers, collateral inspectors, accountants and lawyers, concerning or related to the servicing of this Agreement or the nature, scope or value of any right or remedy of Agent or any Lender 53 hereunder, under the Notes or under any of the other Loan Documents, including any review of factual matters in connection therewith, which expenses shall include the fees and disbursements of such Persons; (e) the collection or enforcement of the obligations of the Borrower under this Agreement, the Notes or any other Loan Document including the fees and disbursements of counsel to the Agent or any Lender if such collection or enforcement is done by, through or with the assistance of an attorney; (f) prosecuting or defending any claim in any way arising out of, related to, or connected with this Agreement, the Notes or any of the other Loan Documents, which expenses shall include the fees and disbursements of counsel to Agent or any Lender and of experts and other consultants retained by Agent or any Lender; and (g) the exercise by Agent or any Lender of any right or remedy granted to it under this Agreement, the Notes or any of the other Loan Documents including the fees and disbursements of counsel to Agent or any Lender. SECTION 13.03. STAMP, INTANGIBLE AND RECORDING TAXES. The Borrower will pay any and all stamp, intangible, registration, recordation and similar taxes, fees or charges and shall indemnify the Agent and each Lender against any and all liabilities with respect to or resulting from any delay in the payment or omission to pay any such taxes, fees or charges, which may be payable or determined to be payable in connection with the execution, delivery, performance or enforcement of this Agreement, the Notes and any of the other Loan Documents or the perfection of any rights or Liens thereunder. SECTION 13.04. SETOFF. Subject to Section 4.06 and in addition to any rights now or hereafter granted under Applicable Law and not by way of limitation of any such rights, from and after the occurrence of an Event of Default each Lender is hereby authorized by the Borrower, at any time or from time to time, without notice to the Borrower 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, but not limited to, indebtedness evidenced by certificates of deposit, whether matured or unmatured) and any other indebtedness at any time held or owing by such Lender or any Affiliate of such Lender, to or for the credit or the account of the Borrower against and on account of any of the Obligations, irrespective of whether or not the Lenders shall have declared any or all of the Loans and other Obligations to be due and payable as permitted by Section 11.02, and although such obligations shall be contingent or unmatured. The benefits of such setoff shall be shared by the Lenders in accordance with the pro rata share of their aggregate Commitments as compared to the aggregate Commitments of all Lenders. SECTION 13.05. LITIGATION. (a) EACH PARTY HERETO ACKNOWLEDGES THAT ANY DISPUTE OR CONTROVERSY BETWEEN OR AMONG THE BORROWER, THE AGENT OR ANY OF THE LENDERS WOULD BE BASED ON DIFFICULT AND COMPLEX ISSUES OF LAW AND FACT. ACCORDINGLY, EACH OF THE LENDERS, THE AGENT AND THE BORROWER HEREBY WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING OF ANY KIND OR NATURE IN ANY COURT OR TRIBUNAL IN WHICH AN ACTION MAY BE COMMENCED BY OR AGAINST THE BORROWER ARISING OUT OF THIS AGREEMENT, THE NOTES OR ANY OTHER LOAN DOCUMENT OR IN CONNECTION WITH THE COLLATERAL OR ANY LIEN OR BY REASON OF ANY OTHER CAUSE OR DISPUTE WHATSOEVER BETWEEN OR AMONG THE BORROWER, THE AGENT OR ANY OF THE LENDERS OF ANY KIND OR NATURE. 54 (b) THE BORROWER, THE AGENT AND EACH LENDER EACH HEREBY AGREE THAT THE CIRCUIT COURT OF THE FIFTEENTH JUDICIAL CIRCUIT OF FLORIDA, LOCATED IN PALM BEACH COUNTY, FLORIDA AND THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF FLORIDA, SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN OR AMONG ANY OR ALL OF THE BORROWER, THE AGENT OR ANY OF THE LENDERS, PERTAINING DIRECTLY OR INDIRECTLY TO THIS AGREEMENT, THE NOTES OR ANY OTHER LOAN DOCUMENT OR TO ANY MATTER ARISING HERE FROM OR THEREFROM OR THE COLLATERAL. THE BORROWER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR PROCEEDING COMMENCED IN SUCH COURTS. THE CHOICE OF FORUM SET FORTH IN THIS SECTION SHALL NOT BE DEEMED TO PRECLUDE THE BRINGING OF ANY ACTION BY AGENT OR ANY LENDER FOR THE ENFORCEMENT BY SUCH AGENT OR LENDER OF ANY JUDGMENT OBTAINED IN SUCH FORUM IN ANY OTHER APPROPRIATE JURISDICTION. (c) THE FOREGOING WAIVERS HAVE BEEN MADE WITH THE ADVICE OF COUNSEL AND WITH A FULL UNDERSTANDING OF THE LEGAL CONSEQUENCES THEREOF. SECTION 13.06. ASSIGNABILITY. (a) The Borrower shall not have the right to assign this Agreement or any interest therein except with the prior written consent of the Agent and the Lenders. (b) Notwithstanding Section 13.06(c) below, without the consent of the Agent and the Borrower (i) any Lender may make, carry or transfer Loans at, to or for the account of, any of its branch offices or the office of an Affiliate of such Lender or (ii) any Lender may pledge any Loans or Notes to any Federal Reserve Bank. (c) Each Lender may, with the consent of the Agent and the Borrower (which consent will not be unreasonably withheld or delayed), assign to one or more financial institutions all or a portion of its respective Commitment; PROVIDED, HOWEVER, that (i) for each such assignment, the parties thereto shall execute and deliver to the Agent for acceptance and recording by the Agent in the Register (as defined below), an Assignment and Assumption Agreement substantially in the form of Exhibit "L" (each an "ASSIGNMENT AND ASSUMPTION AGREEMENT"), together with any Note subject to such assignment and a processing and recordation fee of $2,500, which, unless otherwise agreed, shall be payable by the assignor, and (ii) no such assignment shall be for less than one hundred percent (100%) of the Commitment of such Lender, unless such assignment is to a then-current holder of a Note. Upon the effectiveness of the Assignment and Assumption Agreement as provided therein, from and after the date specified as the effective date in the Assignment and Assumption Agreement (the "ACCEPTANCE DATE"), (x) 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 and Assumption Agreement, such assignee shall have the rights and obligations of a "Lender" hereunder and (y) the assignor thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Assumption Agreement, relinquish its rights (other than any rights it may have pursuant to Sections 13.02 and 13.10 which will survive such assignment) and be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption Agreement covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, the Notes and the other Loan 55 Documents such Lender shall cease to be a party hereto). Agent and each Lender agrees that in connection with any such assignment, they will exert good faith efforts to assure that Borrower and the assignment are not subject to Florida documentary stamp or transfer taxes by reason of such assignment. If however after the exertion of good faith efforts such assignment is found to be subject to such taxes, Borrower shall be obligated to pay same and any interest, penalties or fees in connection therewith. (d) The Agent shall maintain at the Principal Office a copy of each Assignment and Assumption Agreement delivered to and accepted by it and a register for the recordation of the names and addresses of the Lenders and the Commitments of each Lender from time to time (the " REGISTER"). The Agent shall give notice to each Lender of any assignment. The Borrower, the Agent and the Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. The Register and copies of each Assignment and Assumption Agreement shall be available for inspection by the Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice to the Agent. (e) Upon its receipt of an Assignment and Assumption Agreement executed by an assigning Lender, together with each Note subject to such assignment (the "SURRENDERED NOTE"), the Agent shall, if such Assignment and Assumption Agreement has been completed and is in substantially the form of Exhibit "L", (i) accept such Assignment and Assumption Agreement, (ii) record the information contained therein in the Register, (iii) give prompt notice thereof to the Borrower and (iv) revise the information set forth on Annex I to reflect the effect of such Assignment and Assumption Agreement, and distribute a copy of such revised Annex I to each Lender and the Borrower. Within five Business Days after its receipt of such notice, the Borrower shall acknowledge such Assignment and Assumption Agreement and shall execute and deliver to the Agent in exchange for the Surrendered Note or Notes a new Note or Notes to the order of the assignee in an amount equal to the Commitment or Commitments assumed by it pursuant to such Assignment and Assumption Agreement and, if the assigning Lender has retained a Commitment or Commitments hereunder, a new Note or Notes to the order of the assigning Lender in an amount equal to the Commitment or Commitments retained by it hereunder. Such new Note or Notes shall re-evidence the indebtedness outstanding under the old Note or Notes and shall be in an aggregate principal amount equal to the aggregate principal amount of such Surrendered Note or Surrendered Notes, shall be dated the Agreement Date and shall otherwise be in substantially the form, of the Note or Notes subject to such assignments. The assignment by a Lender of a Commitment or portion thereof to another Person and the execution and delivery of a new Note or Notes shall not constitute a novation of the indebtedness evidenced by the Surrendered Note or Surrendered Notes and incurred in connection with such assigned Commitment. (f) Each Lender may sell participations (PROVIDED, HOWEVER, that prior to selling any such participations, such Lender shall have given the prior written notice to the Agent and the Borrower of such participation) to one or more parties in or to all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment, the Loans owing to it and the Note or Notes held by it); PROVIDED, HOWEVER, that (i) such Lender's obligations under this Agreement (including, without limitation, its Commitment to the Borrower hereunder) shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) such Lender shall remain the holder of any such Note for all purposes of this Agreement, (iv) the Borrower, the Agent, and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and (v) such Lender shall not transfer, grant, assign or sell any participation under which the participant shall have rights to approve any amendment or waiver of this Agreement except to the extent such amendment or 56 waiver would (A) extend the final maturity date or the date of the payments of any installment of fees or principal or interest of any Loans or Reimbursement Obligations in which such participant is participating, (B) reduce the amount of any installment of principal of the Loans or Reimbursement Obligations in which such participant is participating, (C) reduce the interest rate applicable to the Loans or Reimbursement Obligations in which such participant is participating, or (D) except as otherwise expressly provided in this Agreement, reduce any fees payable to the Lenders hereunder. (g) Each Lender agrees that, without the prior written consent of the Borrower and the Agent, it will not make any assignment hereunder in any manner or under any circumstances that would require registration or qualification of, or filings in respect of, any Loan or Note under the securities laws of the United States of America or of any other jurisdiction. (h) In connection with the efforts of any Lender to assign its rights or obligations or to participate interests, such Lender may disclose any information in its possession regarding the Borrower; PROVIDED, HOWEVER, that prior to disclosing any such information, such Lender shall receive the prior written consent of the Agent. SECTION 13.07. AMENDMENTS. Except as otherwise expressly provided in this Agreement, any consent or approval required or permitted by this Agreement or in any Loan Document to be given by the Lenders may be given, and any term of this Agreement or of any other Loan Document may be amended, and the performance or observance by the Borrower of any terms of this Agreement or such other Loan Document or the continuance of any Default or Event of Default may be waived (either generally or in a particular instance and either retroactively or prospectively) with, but only with, the written consent of the Borrower and the written consent of the Required Lenders. Notwithstanding the foregoing, the rates of interest on the Loans and the Notes, the dates on which any interest payable by the Borrower under any Loan Document is due, the Revolving Termination Date, the repayment obligations with respect to any Reimbursement Obligations, any financial covenant, the amount and payment date of any Fees (other than Fees payable solely to the Agent) and this Section 13.07 may not be amended, or the Borrower's compliance thereunder may not be waived, without the written consent of all the Lenders and the Borrower. Further, the definition of any minimum requirement necessary for the Lenders to take action hereunder, Available Revolving Commitment, Revolving Commitment, L/C Commitment Amount and L/C Termination Date may not be amended without the written consent of all of the Lenders and the Borrower. Further, the Form of Borrowing Base Certificate, the definitions used therein and the percentages and advance rates used in calculating the Borrowing Base may not be amended without the written consent (which may be given orally and confirmed in writing) of all of the Lenders and the Borrower other than any immaterial changes approved by the Agent in ordinary course. Further, no amendment, waiver or consent unless in writing and signed by the Agent, in addition to the Lenders required hereinabove to take such action, shall affect the rights or duties of the Agent under this Agreement or any of the other Loan Documents. Further, no Collateral at any time held by the Agent shall be released or disposed of by the Agent unless all of the Lenders so direct the Agent and except in accordance with Section 12.06 hereof. No waiver shall extend to or affect any obligation not expressly waived or impair any right consequent thereon. No course of dealing or delay or omission on the part of any Lender or the Agent in exercising any right shall operate as a waiver thereof or otherwise be prejudicial thereto. Except as otherwise explicitly provided for herein or in any other Loan Document, no notice to or demand upon the Borrower shall entitle the Borrower to other or further notice or demand in similar or other circumstances. In no event shall the Borrower be required to enter into an amendment pursuant to this Section 13.07 if such amendment would otherwise require the consent of all of the Lenders as provided in this Section 13.07. Notwithstanding any of the foregoing to the contrary, the 57 consent of the Borrower shall not be required for any amendment, modification or waiver of the provisions of Article XII (other than the provisions of Section 12.07). In addition, the Borrower and the Lenders hereby authorize the Agent to modify this Agreement by unilaterally amending or supplementing Annex I from time to time in the manner requested by the Borrower, the Agent or any Lender in order to reflect any assignments or transfers of the Commitments as provided for hereunder; PROVIDED, HOWEVER, that the Agent shall promptly deliver a copy of any such modification to the Borrower and each Lender. SECTION 13.08. NONLIABILITY OF AGENT AND LENDERS. The relationship between the Borrower and the Lenders and the Agent shall be solely that of borrower and lender. Neither the Agent nor any Lender shall have any fiduciary responsibilities to the Borrower. Neither the Agent nor any Lender undertake any responsibility to the Borrower to review or inform the Borrower of any matter in connection with any phase of the Borrower's business or operations. SECTION 13.09. INFORMATION. Except as otherwise provided by law, the Agent and Lenders shall utilize all non-public information obtained pursuant to the requirements of this Agreement which has been identified as confidential or proprietary by the Borrower in accordance with its customary procedure for handling confidential information of this nature and in accordance with safe and sound banking practices but in any event may make disclosure: (i) to any of their respective Affiliates (provided they shall agree to keep such information confidential in accordance with the terms of this Section 13.09); (ii) as reasonably required by any BONA FIDE transferee or participant in connection with the contemplated transfer of any Commitment or participations therein as permitted hereunder (Agent and Lender agree to exert good faith efforts to require such transferee or participant to maintain such information in confidence); (iii) as required by any Governmental Authority or representative thereof or pursuant to legal process; (iv) to such Lender's independent auditors and other professional advisors (provided they shall be notified of the confidential nature of the information); and (v) after the happening and during the continuance of an Event of Default, to any other Person, in connection with the exercise of the Lender's rights hereunder or under any of the other Loan Documents. SECTION 13.10. INDEMNIFICATION. The Borrower shall and hereby agrees to, indemnify, defend and hold harmless the Agent and each of the Lenders and their respective directors, officers, agents, employees and counsel from and against (a) any and all losses, claims, damages, liabilities, deficiencies, judgments or expenses incurred by any of them (except to the extent that it is finally judicially determined to have resulted from their own gross negligence or willful misconduct) and (b) any such losses, claims, damages, liabilities, deficiencies, judgments or expenses incurred in connection with any remedial or other action taken by the Borrower, any Subsidiary or any of the Lenders in connection with compliance by the Borrower, any Subsidiary or any of their respective properties, with any federal, state or local Environmental Laws or other environmental rules, regulations, orders, directions, ordinances, criteria or guidelines. If and to the extent that the obligations of the Borrower hereunder are unenforceable for any reason, the Borrower hereby agrees to make the maximum contribution to the payment and satisfaction of such obligations which is permissible under Applicable Law. The obligations of the Borrower hereunder shall survive any termination of this Agreement and the other Loan Documents and the payment in full of the Obligations, and are in addition to, and not in substitution of, any other of their obligations set forth in this Agreement. SECTION 13.11. SURVIVAL. Notwithstanding any termination of this Agreement, or of the other Loan Documents, the expense reimbursements and indemnities to which the Agent and the Lenders are entitled under the provisions of Sections 13.02 and 13.10 and any other provision of this Agreement and 58 the other Loan Documents shall continue in full force and effect and shall protect the Agent and the Lenders against events arising after such termination as well as before. SECTION 13.12. TITLES AND CAPTIONS. Titles and captions of Articles, Sections, subsections and clauses in this Agreement are for convenience only, and neither limit nor amplify the provisions of this Agreement. SECTION 13.13. SEVERABILITY OF PROVISIONS. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective only to the extent of such prohibition or unenforceability without invalidating the remainder of such provision or the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. SECTION 13.14. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF FLORIDA WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF. SECTION 13.15. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and shall be binding upon all parties, their successors and assigns. SECTION 13.16. OBLIGATIONS WITH RESPECT TO BORROWER. The Borrower expressly waives all rights it may now or in the future have under any statute, or at common law, or at law or in equity, or otherwise, to compel any Agent or Lender to proceed in respect of the Obligations against the Borrower or any other Person or against any security for the payment and performance of the Obligations before proceeding against, or as a condition to preceding against, the Borrower. The Borrower further expressly waives and agrees not to assert or take advantage of any defense based upon the failure of any Agent or Lender to commence an action in respect of the Obligations against any other Person or any security for the payment and performance of the Obligations. The Borrower agrees that any notice or directive given at any time to any Agent or Lender which is inconsistent with the waivers in the preceding sentences shall be null and void and may be ignored by such Agent or Lender, and, in addition, may not be pleaded or introduced as evidence in any litigation relating to this Agreement for the reason that such pleading or introduction would be at variance with the written terms of this Agreement, unless the Agent and the Lenders have specifically agreed otherwise in writing. The foregoing waivers are the essence of the transaction contemplated by this Agreement and the Loan Documents and, but for such waivers, the Lenders would decline to make the Loans and purchase participations in the Letters of Credit and the Letter of Credit Issuer would decline to issue the Letters of Credit under this Agreement. The Borrower represents, warrants and agrees that its obligations under this Agreement and the other Loan Documents are not and shall not be subject to any counterclaims, offsets or defenses of any kind against the Agent or the Lenders now existing or which may arise in the future, other than compulsory counterclaims or defenses which would be lost if not asserted in that action. SECTION 13.17. BINDING EFFECT. All of the terms and provisions of this Agreement shall be binding upon, inure to the benefit of, and be enforceable by the parties hereto and their respective legal representatives, successors and permitted assigns, whether so expressed or not. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their authorized officers all as of the day and year first above written. 59 THE BORROWER: TODHUNTER INTERNATIONAL, INC. By: /s/ A. Kenneth Pincourt, Jr. ---------------------------------------- Print Name: A. Kenneth Pincourt, Jr. Title: Chairman and Chief Executive Officer 60 THE AGENT: SOUTHTRUST BANK, NATIONAL ASSOCIATION By: /s/ D. Guy Guenthner ---------------------------------------- Print: Name: D. Guy Guenthner Title: Group Vice President Address for Notices: SouthTrust Bank, National Association 1700 Palm Beach Lakes Blvd. 6th Floor West Palm Beach, FL 33401 Telephone: (561) 712-1037 Telecopy: (561) 712-9633 and 420 North 20th Street Birmingham, Alabama 35203 Attn: Florida Corporate Banking (West Palm Beach) Telephone: 727-825-2742 Telecopier: 727-898-5319 With a copy to: Akerman, Senterfitt & Eidson, P.A. 777 South Flagler Drive, Suite 900 Phillips Point - East Tower West Palm Beach, Florida 33401-6125 Attn: Russell T. Kamradt, Esq. Telephone: (561) 659-5990 Telecopier: (561) 659-6313 THE LENDERS: SOUTHTRUST BANK, NATIONAL ASSOCIATION By: /s/ D. Guy Guenthner ----------------------------------------- Print: Name: D. Guy Guenthner Title: Group Vice President 61 Address for Notices: 1700 Palm Beach Lakes Blvd. 6th Floor West Palm Beach, FL 33401 Telephone: (561) 712-1037 Telecopy: (561) 712-9633 and 420 North 20th Street Birmingham, Alabama 35203 Attn: Florida Corporate Banking Telephone: 727-825-2742 Telecopier: 727-898-5319 With a copy to: Akerman, Senterfitt & Eidson, P.A. 777 South Flagler Drive, Suite 900 Phillips Point - East Tower West Palm Beach, Florida 33401-6125 Attn: Russell T. Kamradt, Esq. Telephone: (561) 659-5990 Telecopier: (561) 659-6313 62 FIRST UNION NATIONAL BANK By: /s/ M. Walker Duvall ------------------------------------- Print Name: M. Walker Duvall Title: Director Address for Notices: 1950 Hillsboro Blvd., 2nd Floor Deerfield Beach, FL 33442 Telephone: (954) 596-6888 Telecopy: (954) 596-6893 and First Union National Bank 4299 NW 36th Street Miami Springs, FL 33166 Attn: Marguerita Alfonso Telephone: (305) 883-4169 Telecopy: (305) 883-4198 With a copy to: First Union National Bank 301 S. College Street 32nd Floor - Legal Division Charlotte, NC 28288-0630 Attn: Robert F. Hampson, Esq. Telephone: (704) 374-4102 Telecopy: (704) 383-0649 63 SUNTRUST BANK, SOUTH FLORIDA, N.A. By: /s/ Leslie L. Downs ------------------------------------- Print Name: Leslie L. Downs Title: Vice President Address for Notices: 501 S. Flagler Drive 2nd Floor West Palm Beach, FL 33401 Telephone: (561) 835-2649 Telecopy: (561) 385-2640 64 NATIONAL CITY BANK OF KENTUCKY, NATIONAL ASSOCIATION By: /s/ Tom Gurbach ------------------------------------- Print Name: Tom Gurbach Title: Vice President Address for Notices: Attn: Todd Ethington 101 South 5th Street Location # T-08J Louisville, Kentucky 40202 Telephone: 502-581-4397 Telecopy: 502-581-5122 65 BARCLAYS BANK, PLC By: /s/ Gregory G. Roll ------------------------------------- Print Name: Gregory G. Roll Title: Vice President Address for Notices: 801 Brickell Avenue Miami, FL 33131 Telephone: (305) 376-8750 Telecopy: (305) 371-8028 Attn: Gregory Roll With a copy to: Steel, Hector & Davis 200 S. Biscayne Boulevard Suite 4000 Miami, FL 33131-2398 Attn: James E. Morgan, Esq. Telephone: (305) 577-7000 Telecopy: __________________ 66 ANNEX I TO CREDIT AGREEMENT LIST OF LENDERS, CREDIT PERCENTAGES AND LENDING OFFICES
LENDER CREDIT PERCENTAGE SOUTHTRUST BANK, NATIONAL ASSOCIATION 29.577% Lending Office (All Types): 420 North 20th Street Birmingham, AL 35203 Attn: Florida Corporate Banking (West Palm Beach) Wiring Instructions: SouthTrust Bank, National Association ABA #062-0000-80 Birmingham, AL Account Number: 131009 Ref: Todhunter International Attn: Joanne Gunding Call: 727-825-2733 (upon receipt) Barclays Bank, PLC 21.126% 801 Brickell Avenue Miami, FL 33131 Wiring Instructions: Barclays Bank, PLC ABA #066010746 Miami, FL Account Number: unassigned at this time Ref: Todhunter International, Inc. and Subsidiaries Attn: Gregory G. Roll First Union National Bank 21.126% 1950 Hillsboro Blvd., 2nd Floor Deerfield Beach, FL 33442 Wiring Instructions: First Union National Bank ABA # 053000219 Charlotte, NC Account Number: GL45916-2008 Ref: Todhunter International, Inc. Attn: Cindy Petry-Jax SunTrust Bank, South Florida, N.A. 14.084 501 S. Flagler Drive 2nd Floor West Palm Beach, FL 33401 Wiring Instructions: SunTrust Bank, South Florida, N.A. ABA #067006076 Ft. Lauderdale, FL Account Number: 9607004110 Ref: Todhunter International, Inc. and Subsidiaries Attn: Jennifer Campbell National City Bank of Kentucky, National Association 14.084 Attn: Todd Ethington 101 South 5th Street Location # T-08J Louisville, Kentucky 40202 Wiring Instructions: National City Bank of Kentucky ABA #083000056 Louisville, KY Account Number: unassigned at this time Ref: Todhunter International, Inc. and Subsidiaries Attn: Deana Trotter
EX-99.2 4 EXHIBIT 99.2 NEWS RELEASE TODHUNTER INTERNATIONAL, INC. COMPLETES PURCHASE OF MONARCH WINE COMPANY WEST PALM BEACH, FLORIDA, NOVEMBER 18, 1999 Todhunter International, Inc. (THT, AMEX) today announced that it completed the purchase of the assets of Monarch Wine Company of Atlanta, Georgia, a privately held company. Monarch specializes in the manufacture of wines, including custom blended wines and cooking wines for the food industry and base wines for producers of vinegar and cordials. The purchase price was $23.5 million and was funded from a $71 million Credit Agreement, among Todhunter and a syndicate of lenders. The Credit Agreement also funded the refinancing of existing debt under favorable terms. A. Kenneth Pincourt, Jr., Chairman and Chief Executive Officer of Todhunter, said: "The addition of Monarch will expand Todhunter's presence in the food and beverage alcohol industries and leverage its existing manufacturing facilities through increased volumes. This acquisition will also substantially increase cash flow and will be earnings accretive." Howard Weinstein, President and a major stockholder of Monarch, will become President of the Monarch Wine Division of Todhunter. In 1998, Monarch's sales were $16 million and Todhunter's were $75 million. Based on currently available information, Todhunter estimates that pro forma earnings before interest, taxes, depreciation and amortization (EBITDA) for 1998 would have increased from $12.4 million before the acquisition to $18.3 million after the acquisition. Todhunter International, Inc. is a major distiller and supplier of brandy, rum and wine to the beverage alcohol industry. The Company also produces vinegar and other alcohol related products, owns the Cruzan line of rums from the Virgin Islands and is the importer of Porfidio tequila. Statements contained in this press release, other than historical facts, are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Todhunter intends that such forward-looking statements shall be subject to the safe harbors created thereby. These statements involve various risks and uncertainties, including without limitation those contained in the section entitled "Forward-Looking Statements" in Todhunter's Annual Report on Form 10-K for the fiscal year ended September 30, 1998. As a result, future results may differ materially from the expected results represented by the forward- looking statements contained in this press release. Contact: A. KENNETH PINCOURT, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER WILLIAM J. VIGGIANO, ASSISTANT CONTROLLER TELEPHONE NO.: (561) 655-8977 -----END PRIVACY-ENHANCED MESSAGE-----