Document:

exv10w2

 

Exhibit 10.2

ENCORE WIRE CORPORATION

ENCORE WIRE LIMITED

$45,000,000

5.27% Senior Notes, Series 2004-A,

due August 27, 2011

NOTE PURCHASE AGREEMENT

Dated as of August 1, 2004

PPN: 29263@ AA 7

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 	 	 
	 	 	Section
	 	 	 	Page

	1.	 	AUTHORIZATION OF NOTES	 	 	1	 
	 
	 	1.1.	 	Description of the Notes	 	 	1	 
	 
	 	1.2.	 	Guaranties; Release of Subsidiary Guaranty	 	 	1	 
	2.	 	SALE AND PURCHASE OF NOTES	 	 	2	 
	3.	 	CLOSING	 	 	2	 
	4.	 	CONDITIONS TO CLOSING	 	 	3	 
	 
	 	4.1.	 	Representations and Warranties	 	 	3	 
	 
	 	4.2.	 	Performance; No Default	 	 	3	 
	 
	 	4.3.	 	Compliance Certificates	 	 	3	 
	 
	 	4.4.	 	Opinions of Counsel	 	 	3	 
	 
	 	4.5.	 	Purchase Permitted By Applicable Law, etc	 	 	4	 
	 
	 	4.6.	 	Sale of Other Notes	 	 	4	 
	 
	 	4.7.	 	Payment of Special Counsel Fees	 	 	4	 
	 
	 	4.8.	 	Private Placement Number	 	 	4	 
	 
	 	4.9.	 	Changes in Corporate Structure	 	 	4	 
	 
	 	4.10.	 	Guaranties	 	 	4	 
	 
	 	4.11.	 	Credit Agreement	 	 	5	 
	 
	 	4.12.	 	Funding Instructions	 	 	5	 
	 
	 	4.13.	 	Proceedings and Documents	 	 	5	 
	5.	 	REPRESENTATIONS AND WARRANTIES OF THE COMPANY	 	 	5	 
	 
	 	5.1.	 	Organization; Power and Authority	 	 	5	 
	 
	 	5.2.	 	Authorization, etc	 	 	5	 
	 
	 	5.3.	 	Disclosure	 	 	6	 
	 
	 	5.4.	 	Organization and Ownership of Shares of Subsidiaries	 	 	6	 
	 
	 	5.5.	 	Financial Statements	 	 	7	 
	 
	 	5.6.	 	Compliance with Laws, Other Instruments, etc	 	 	7	 
	 
	 	5.7.	 	Governmental Authorizations, etc	 	 	8	 
	 
	 	5.8.	 	Litigation; Observance of Statutes and Orders	 	 	8	 
	 
	 	5.9.	 	Taxes	 	 	9	 
	 
	 	5.10.	 	Title to Property; Leases	 	 	9	 
	 
	 	5.11.	 	Licenses, Permits, etc	 	 	9	 
	 
	 	5.12.	 	Compliance with ERISA	 	 	10	 
	 
	 	5.13.	 	Private Offering by the Company	 	 	11	 
	 
	 	5.14.	 	Use of Proceeds; Margin Regulations	 	 	11	 
	 
	 	5.15.	 	Existing Debt	 	 	11	 
	 
	 	5.16.	 	Foreign Assets Control Regulations, Anti-Terrorism Order, etc	 	 	12	 
	 
	 	5.17.	 	Status under Certain Statutes	 	 	12	 
	 
	 	5.18.	 	Environmental Matters	 	 	12	 
	 
	 	5.19.	 	Solvency of Subsidiary Guarantors	 	 	13	 

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	 	 	Section
	 	 	 	Page

	6.	 	REPRESENTATIONS OF THE PURCHASERS	 	 	13	 
	 
	 	6.1.	 	Purchase for Investment	 	 	13	 
	 
	 	6.2.	 	Source of Funds	 	 	13	 
	7.	 	INFORMATION AS TO THE PARENT AND THE COMPANY	 	 	15	 
	 
	 	7.1.	 	Financial and Business Information	 	 	15	 
	 
	 	7.2.	 	Officer’s Certificate	 	 	18	 
	 
	 	7.3.	 	Inspection	 	 	18	 
	8.	 	PREPAYMENT OF THE NOTES	 	 	19	 
	 
	 	8.1.	 	No Scheduled Prepayments	 	 	19	 
	 
	 	8.2.	 	Optional Prepayments with Make-Whole Amount	 	 	19	 
	 
	 	8.3.	 	Allocation of Partial Prepayments	 	 	19	 
	 
	 	8.4.	 	Maturity; Surrender, etc	 	 	20	 
	 
	 	8.5.	 	Purchase of Notes	 	 	20	 
	 
	 	8.6.	 	Make-Whole Amount	 	 	20	 
	9.	 	AFFIRMATIVE COVENANTS	 	 	22	 
	 
	 	9.1.	 	Compliance with Law	 	 	22	 
	 
	 	9.2.	 	Insurance	 	 	22	 
	 
	 	9.3.	 	Maintenance of Properties	 	 	22	 
	 
	 	9.4.	 	Payment of Taxes	 	 	22	 
	 
	 	9.5.	 	Corporate Existence, etc	 	 	23	 
	 
	 	9.6.	 	Additional Subsidiary Guarantors	 	 	23	 
	 
	 	9.7.	 	Ranking of Notes	 	 	23	 
	10.	 	NEGATIVE COVENANTS	 	 	24	 
	 
	 	10.1.	 	Consolidated Debt	 	 	24	 
	 
	 	10.2.	 	Interest Coverage	 	 	24	 
	 
	 	10.3.	 	Priority Debt	 	 	24	 
	 
	 	10.4.	 	Liens.	 	 	24	 
	 
	 	10.5.	 	Mergers, Consolidations, etc	 	 	26	 
	 
	 	10.6.	 	Sale of Assets	 	 	27	 
	 
	 	10.7.	 	Designation of Restricted and Unrestricted Subsidiaries	 	 	27	 
	 
	 	10.8.	 	Nature of Business	 	 	28	 
	 
	 	10.9.	 	Transactions with Affiliates	 	 	28	 
	11.	 	EVENTS OF DEFAULT	 	 	29	 
	12.	 	REMEDIES ON DEFAULT, ETC	 	 	31	 
	 
	 	12.1.	 	Acceleration	 	 	31	 
	 
	 	12.2.	 	Other Remedies	 	 	32	 
	 
	 	12.3.	 	Rescission	 	 	32	 
	 
	 	12.4.	 	No Waivers or Election of Remedies, Expenses, etc	 	 	32	 
	13.	 	REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES	 	 	32	 
	 
	 	13.1.	 	Registration of Notes	 	 	32	 

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	 	 	Section
	 	 	 	Page

	 
	 	13.2.	 	Transfer and Exchange of Notes	 	 	33	 
	 
	 	13.3.	 	Restriction on Transfer to Competitor	 	 	33	 
	 
	 	13.4.	 	Replacement of Notes	 	 	33	 
	14.	 	PAYMENTS ON NOTES	 	 	34	 
	 
	 	14.1.	 	Place of Payment	 	 	34	 
	 
	 	14.2.	 	Home Office Payment	 	 	34	 
	15.	 	EXPENSES, ETC	 	 	35	 
	 
	 	15.1.	 	Transaction Expenses	 	 	35	 
	 
	 	15.2.	 	Survival	 	 	35	 
	16.	 	SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT	 	 	35	 
	17.	 	AMENDMENT AND WAIVER	 	 	36	 
	 
	 	17.1.	 	Requirements	 	 	36	 
	 
	 	17.2.	 	Solicitation of Holders of Notes	 	 	36	 
	 
	 	17.3.	 	Binding Effect, etc	 	 	36	 
	 
	 	17.4.	 	Notes held by Company, etc	 	 	37	 
	18.	 	NOTICES	 	 	37	 
	19.	 	REPRODUCTION OF DOCUMENTS	 	 	37	 
	20.	 	CONFIDENTIAL INFORMATION	 	 	38	 
	21.	 	SUBSTITUTION OF PURCHASER	 	 	39	 
	22.	 	MISCELLANEOUS	 	 	39	 
	 
	 	22.1.	 	Successors and Assigns	 	 	39	 
	 
	 	22.2.	 	Payments Due on Non-Business Days	 	 	39	 
	 
	 	22.3.	 	Severability	 	 	39	 
	 
	 	22.4.	 	Construction	 	 	40	 
	 
	 	22.5.	 	Counterparts	 	 	40	 
	 
	 	22.6.	 	Governing Law	 	 	40	 
	 
	 	22.7.	 	Limitation on Interest	 	 	40	 

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	SCHEDULE A

	 	—
	 	Information Relating to Purchasers
	SCHEDULE B

	 	—
	 	Defined Terms
	 
	 	 	 	 
	SCHEDULE 5.4

	 	—
	 	Subsidiaries and Ownership of Subsidiary Stock
	SCHEDULE 5.5

	 	—
	 	Financial Statements
	SCHEDULE 5.14

	 	—
	 	Use of Proceeds
	SCHEDULE 5.15

	 	—
	 	Debt
	 
	 	 	 	 
	EXHIBIT 1.1

	 	—
	 	Form of Series 2004-A Senior Note
	EXHIBIT 1.2(a)

	 	—
	 	Form of Parent Guaranty
	EXHIBIT 1.2(b)

	 	—
	 	Form of Subsidiary Guaranty
	EXHIBIT 4.4(a)

	 	—
	 	Form of Opinion of Counsel for the Company
	EXHIBIT 4.4(b)

	 	—
	 	Form of Opinion of Special Counsel to the Purchasers

iv 

 

ENCORE WIRE CORPORATION

ENCORE WIRE LIMITED

1410 Millwood Road

McKinney, TX 75069

(972) 562-9473

Fax: (972) 562-4744

$45,000,000

5.27% Senior Notes, Series 2004-A,

due August 27, 2011

Dated as of August 1, 2004

TO EACH OF THE PURCHASERS LISTED IN

     THE ATTACHED SCHEDULE A:

Ladies and Gentlemen:

          ENCORE WIRE LIMITED, a Texas limited partnership (the “Company”), and
ENCORE WIRE CORPORATION, a Delaware corporation (the “Parent”), agree with you
as follows:

1. AUTHORIZATION OF NOTES.

1.1. Description of the Notes.

          The Company has authorized the issue and sale of $45,000,000 aggregate
principal amount of its 5.27% Senior Notes, Series 2004-A, due August 27, 2011
(the “Notes,” such term to include any Notes issued in substitution therefor
pursuant to Section 13 of this Agreement). The Notes shall be substantially in
the form set out in Exhibit 1.1, with such changes therefrom, if any, as may be
approved by you, the Other Purchasers and the Company. Certain capitalized
terms used in this Agreement are defined in Schedule B; references to a
“Schedule” or an “Exhibit” are, unless otherwise specified, to a Schedule or an
Exhibit attached to this Agreement.

1.2. Guaranties; Release of Subsidiary Guaranty.

     (a) Guaranties. The Notes will be guaranteed (i) by the Parent
pursuant to a guaranty in substantially the form of Exhibit 1.2(a) (the
“Parent Guaranty”) and (ii) by the Subsidiary Guarantors pursuant to a
guaranty in substantially the form of Exhibit 1.2(b) (the “Subsidiary
Guaranty,” and, together with the Parent Guaranty, the “Guaranties”).

 

 

     (b) Release of Subsidiary Guaranty. Each holder of a Note agrees to
release and discharge a Subsidiary Guarantor from the Subsidiary Guaranty
upon written request of the Company, provided that (i) such Subsidiary
has been, or concurrently with the release by the holders of Notes, will
be released and discharged as guarantor under and in respect of the
Credit Agreement and any other Senior Debt; (ii) such release and
discharge is not part of a plan of financing that contemplates such
Subsidiary Guarantor guaranteeing any other Debt of the Company or
becoming a borrower under the Credit Agreement; (iii) no Default or Event
of Default exists or will exist immediately following such release and
discharge; (iv) if any fee or other consideration is paid or given to any
holder of Debt in connection with such release, other than the repayment
of all or a portion of such Debt, each holder of a Note receives
equivalent consideration on a pro rata basis; and (v) at the time of such
written request, the Company delivers to each holder of Notes a
certificate of a Responsible Officer certifying the matters set forth in
clauses (i) through (iv).

2. SALE AND PURCHASE OF NOTES.

          Subject to the terms and conditions of this Agreement, the Company will
issue and sell to you and each of the other purchasers named in Schedule A (the
“Other Purchasers”), and you and the Other Purchasers will purchase from the
Company, at the Closing provided for in Section 3, Notes in the principal
amount and series specified opposite your names in Schedule A at the purchase
price of 100% of the principal amount thereof. Your obligation hereunder and
the obligations of the Other Purchasers are several and not joint obligations
and you shall have no liability to any Person for the performance or
non-performance by any Other Purchaser hereunder.

3. CLOSING.

          The sale and purchase of the Notes to be purchased by you and the Other
Purchasers shall occur at the offices of Gardner, Carton & Douglas LLP, Suite
3700, 191 North Wacker Drive, Chicago, Illinois 60606 at 9:00 a.m., Chicago
time, at a closing on August 27, 2004 (the “Closing”) or on such other Business
Day thereafter, not later than August 31, 2004, as may be agreed upon by the
Company and the purchasers that are scheduled to purchase Notes at such
Closing. At the Closing, the Company will deliver to you the Notes to be
purchased by you in the form of a single Note (or such greater number of Notes
in denominations of at least $100,000 as you may request) dated the date of
Closing and registered in your name (or in the name of your nominee), against
delivery by you to the Company or its order of immediately available funds in
the amount of the purchase price therefor by wire transfer of immediately
available funds for the account of the Company to account number 4779592667 at
Bank of America, N.A., 901 Main Street, 67th Floor, Dallas TX, ABA No. 111 0000
25. If at the Closing the Company fails to tender such Notes to you as
provided above in this Section 3, or any of the conditions specified in Section
4 shall not have been fulfilled to your satisfaction, you shall, at your
election, be relieved of all further obligations under this Agreement, without
thereby waiving any rights you may have by reason of such failure or such
nonfulfillment.

2

 

4. CONDITIONS TO CLOSING.

          Your obligation to purchase and pay for the Notes to be sold to you at the
Closing is subject to the fulfillment to your satisfaction, prior to or at the
Closing, of the following conditions:

4.1. Representations and Warranties.

          The representations and warranties of the Parent and the Company in this
Agreement shall be correct when made and at the time of the Closing.

4.2. Performance; No Default.

          The Parent and the Company shall have performed and complied with all
agreements and conditions contained in this Agreement required to be performed
or complied with by them prior to or at the Closing and after giving effect to
the issue and sale of the Notes (and the application of the proceeds thereof as
contemplated by Schedule 5.14) no Default or Event of Default shall have
occurred and be continuing. Neither the Parent nor any Subsidiary, including
the Company, shall have entered into any transaction since the date of the
Memorandum that would have been prohibited by Sections 10, had such Section
applied since such date.

4.3. Compliance Certificates.

     (a) Officer’s Certificate. The Parent and the Company each shall
have delivered to you an Officer’s Certificate, dated the date of such
Closing, certifying that the conditions specified in Sections 4.1, 4.2
and 4.9 have been fulfilled.

     (b) Secretary’s Certificate. The Parent, the Company and each
Subsidiary Guarantor shall have delivered to you a certificate certifying
as to the resolutions attached thereto and other corporate proceedings
relating to the authorization, execution and delivery of the Notes and
the Agreement.

4.4. Opinions of Counsel.

          You shall have received opinions in form and substance reasonably
satisfactory to you, dated the date of the Closing (a) from Thompson & Knight
LLP, counsel for the Parent, the Company and the Subsidiary Guarantors,
covering the matters set forth in Exhibit 4.4(a) and covering such other
matters incident to the transactions contemplated hereby as you or your counsel
may reasonably request (and the Parent and the Company instruct their counsel
to deliver such opinion to you) and (b) from Gardner Carton & Douglas LLP, your
special counsel in connection with such transactions, substantially in the form
set forth in Exhibit 4.4(b) and covering such other matters incident to such
transactions as you may reasonably request.

3

 

4.5. Purchase Permitted By Applicable Law, etc.

          On the date of the Closing your purchase of Notes shall (i) be permitted
by the laws and regulations of each jurisdiction to which you are subject,
without recourse to provisions (such as section 1405(a)(8) of the New York
Insurance Law) permitting limited investments by insurance companies without
restriction as to the character of the particular investment, (ii) not violate
any applicable law or regulation (including Regulation U, T or X of the Board
of Governors of the Federal Reserve System) and (iii) not subject you to any
tax, penalty or liability under or pursuant to any applicable law or
regulation, which law or regulation was not in effect on the date hereof. If
requested by you, you shall have received an Officer’s Certificate certifying
as to such matters of fact as you may reasonably specify to enable you to
determine whether such purchase is so permitted.

4.6. Sale of Other Notes.

          Contemporaneously with the Closing the Company shall sell to the Other
Purchasers and the Other Purchasers shall purchase the Notes to be purchased by
them at the Closing as specified in Schedule A.

4.7. Payment of Special Counsel Fees.

          Without limiting the provisions of Section 15.1, the Company shall have
paid on or before the Closing the fees, charges and disbursements of your
special counsel referred to in Section 4.4, to the extent reflected in a
reasonably detailed statement of such counsel rendered to the Company at least
one Business Day prior to the Closing.

4.8. Private Placement Number.

          A Private Placement Number issued by Standard & Poor’s CUSIP Service
Bureau (in cooperation with the Securities Valuation Office of the National
Association of Insurance Commissioners) shall have been obtained by Gardner
Carton & Douglas LLP for the Notes.

4.9. Changes in Corporate Structure.

          Neither the Parent nor the Company shall have changed its jurisdiction of
incorporation or been a party to any merger or consolidation and shall not have
succeeded to all or any substantial part of the liabilities of any other
entity, at any time following the date of the most recent financial statements
referred to in Schedule 5.5.

4.10. Guaranties.

          The Parent shall have executed and delivered the Parent Guaranty and each
Subsidiary Guarantor shall have executed and delivered the Subsidiary Guaranty.

4

 

4.11. Credit Agreement.

          You and your special counsel shall have been provided with a copy of the
executed Credit Agreement by the Company or the Parent.

4.12. Funding Instructions.

          At least three Business Days prior to the date of the Closing, each
Purchaser shall have received written instructions signed by a Responsible
Officer on letterhead of the Company confirming the information specified in
Section 3 including (i) the name and address of the transferee bank, (ii) such
transferee bank’s ABA number and (iii) the account name and number into which
the purchase price for the Notes is to be deposited.

4.13. Proceedings and Documents.

          All corporate and other proceedings in connection with the transactions
contemplated by this Agreement and all documents and instruments incident to
such transactions shall be reasonably satisfactory to you and your special
counsel, and you and your special counsel shall have received all such
counterpart originals or certified or other copies of such documents as you or
they may reasonably request.

5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

          Each of the Company and the Parent represents and warrants to you that:

5.1. Organization; Power and Authority.

          Each of the Company and the Parent is a limited partnership or corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of organization, and is duly qualified as a foreign limited
partnership or corporation and is in good standing in each jurisdiction in
which such qualification is required by law, other than those jurisdictions as
to which the failure to be so qualified or in good standing could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. Each of the Company and the Parent has the limited partnership
or corporate power and authority to own or hold under lease the properties it
purports to own or hold under lease, to transact the business it transacts and
proposes to transact, to execute and deliver this Agreement, the Parent
Guaranty (in the case of the Parent) and the Notes (in the case of the Company)
and to perform the provisions hereof and thereof.

5.2. Authorization, etc.

          This Agreement and the Notes have been duly authorized by all necessary
limited partnership action on the part of the Company, and this Agreement
constitutes, and upon execution and delivery thereof each Note will constitute,
a legal, valid and binding obligation of the Company enforceable against the
Company in accordance with its terms, except as such enforceability may be
limited by (i) applicable bankruptcy, insolvency, reorganization,

5

 

moratorium or other similar laws affecting the enforcement of creditors’ rights
generally and (ii) general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).

          The Guaranties have been duly authorized by all necessary corporate action
on the part of the Parent or each Subsidiary Guarantor, as the case may be, and
upon execution and delivery thereof will constitute the legal, valid and
binding obligation of the Parent and each Subsidiary Guarantor, enforceable
against the Parent or each Subsidiary Guarantor, as the case may be, in
accordance with their respective terms, except as such enforceability may be
limited by (i) applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors’ rights generally and (ii) general principles of equity (regardless
of whether such enforceability is considered in a proceeding in equity or at
law).

5.3. Disclosure.

          The Parent and the Company, through their agent, Banc of America
Securities LLC, have delivered to you and each Other Purchaser a copy of a
Private Placement Memorandum, dated July 2004 (the “Memorandum”), relating to
the transactions contemplated hereby. The Memorandum fairly describes, in all
material respects, the general nature of the business and principal properties
of the Parent and its Subsidiaries, including the Company. This Agreement, the
Memorandum, the documents, certificates or other writings delivered to you by
or on behalf of the Company in connection with the transactions contemplated
hereby and the financial statements listed in Schedule 5.5, taken as a whole,
do not contain any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein not misleading in light
of the circumstances under which they were made. Except as disclosed in the
Memorandum, or in one of the documents, certificates or other writings
identified therein, or in the financial statements listed in Schedule 5.5,
since December 31, 2003, there has been no change in the financial condition,
operations, business or properties of the Parent or any Subsidiary, including
the Company, except changes that individually or in the aggregate could not
reasonably be expected to have a Material Adverse Effect. There is no fact
known to the Parent or the Company that could reasonably be expected to have a
Material Adverse Effect that has not been set forth herein or in the Memorandum
or in the other documents, certificates and other writings delivered to you by
or on behalf of the Parent or the Company specifically for use in connection
with the transactions contemplated hereby.

5.4. Organization and Ownership of Shares of Subsidiaries.

     (a) Schedule 5.4 contains (except as noted therein) complete and
correct lists of (i) the Parent’s Subsidiaries, showing, as to each
Subsidiary, the correct name thereof, the jurisdiction of its
organization and the percentage of shares of each class of its capital
stock or similar equity interests outstanding owned by the Parent and
each other Subsidiary, including the Company, (ii) the Parent’s
Affiliates, other than Subsidiaries, and (iii) the Parent’s and the
Company’s directors and senior officers.

6

 

     (b) All of the outstanding shares of capital stock or similar equity
interests of each Subsidiary shown in Schedule 5.4 as being owned by the
Parent and its Subsidiaries, including the Company, have been validly
issued, are fully paid and nonassessable and are owned by the Parent or
another Subsidiary, including the Company, free and clear of any Lien
(except as otherwise disclosed in Schedule 5.4).

     (c) Each Subsidiary identified in Schedule 5.4 is a corporation or
other legal entity duly organized, validly existing and in good standing
under the laws of its jurisdiction of organization, and is duly qualified
as a foreign corporation or other legal entity and is in good standing in
each jurisdiction in which such qualification is required by law, other
than those jurisdictions as to which the failure to be so qualified or in
good standing could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. Each such Subsidiary has the
corporate or other power and authority to own or hold under lease the
properties it purports to own or hold under lease and to transact the
business it transacts and proposes to transact.

     (d) No Subsidiary is a party to, or otherwise subject to any legal
restriction or any agreement (other than this Agreement, the agreements
listed on Schedule 5.4 and customary limitations imposed by corporate,
partnership or limited liability company law statutes) restricting the
ability of such Subsidiary to pay dividends out of profits or make any
other similar distributions of profits to the Company or any of its
Subsidiaries that owns outstanding shares of capital stock or similar
equity interests of such Subsidiary.

5.5. Financial Statements.

          The Parent has delivered to you and each Other Purchaser copies of the
consolidated financial statements of the Parent and its Subsidiaries, including
the Company, listed on Schedule 5.5. All of said financial statements
(including in each case the related schedules and notes) fairly present in all
material respects the consolidated financial position of the Parent and its
Subsidiaries, including the Company, as of the respective dates specified in
such Schedule and the consolidated results of their operations and cash flows
for the respective periods so specified and have been prepared in accordance
with GAAP consistently applied throughout the periods involved except as set
forth in the notes thereto (subject, in the case of any interim financial
statements, to normal year-end adjustments and to the absence of footnotes).

5.6. Compliance with Laws, Other Instruments, etc.

          The execution, delivery and performance by the Company and the Parent of
this Agreement and by the Company of the Notes will not (i) contravene, result
in any breach of, or constitute a default under, or result in the creation of
any Lien in respect of any property of the Parent or any Subsidiary, including
the Company, under, any indenture, mortgage, deed of trust, loan, purchase or
credit agreement, lease, corporate charter or by-laws, or any other Material
agreement or instrument to which the Parent or any Subsidiary, including the
Company, is bound or by which any of their respective properties may be bound
or affected, (ii) conflict with or result in a breach of any of the terms,
conditions or provisions of any order, judgment, decree, or

7

 

ruling of any court, arbitrator or Governmental Authority applicable to the
Parent or any Subsidiary, including the Company, or (iii) violate any provision
of any statute or other rule or regulation of any Governmental Authority
applicable to the Parent or any Subsidiary, including the Company.

          The execution, delivery and performance by each of the Parent and each
Subsidiary Guarantor of the Guaranty to which it is a party will not (i)
contravene, result in any breach of, or constitute a default under, or result
in the creation of any Lien in respect of any property of the Parent or such
Subsidiary Guarantor under, any agreement, or corporate charter or by-laws, to
which the Parent or such Subsidiary Guarantor is bound or by which the Parent
or such Subsidiary Guarantor or any of their properties may be bound or
affected, (ii) conflict with or result in a breach of any of the terms,
conditions or provisions of any order, judgment, decree, or ruling of any
court, arbitrator or Governmental Authority applicable to the Parent or such
Subsidiary Guarantor or (iii) violate any provision of any statute or other
rule or regulation of any Governmental Authority applicable to the Parent or
such Subsidiary Guarantor.

5.7. Governmental Authorizations, etc.

          No consent, approval or authorization of, or registration, filing or
declaration with, any Governmental Authority is required in connection with the
execution, delivery or performance by the Company of this Agreement or the
Notes or the execution, delivery or performance by the Parent of this Agreement
or the Parent Guaranty or by each Subsidiary Guarantor of the Subsidiary
Guaranty.

5.8. Litigation; Observance of Statutes and Orders.

     (a) There are no actions, suits or proceedings pending or, to the
knowledge of the Parent or the Company, threatened against or affecting
the Parent or any Subsidiary, including the Company, or any property of
the Parent or any Subsidiary, including the Company, in any court or
before any arbitrator of any kind or before or by any Governmental
Authority that, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect.

     (b) Neither the Parent nor any Subsidiary, including the Company, is
in default under any term of any agreement or instrument to which it is a
party or by which it is bound, or any order, judgment, decree or ruling
of any court, arbitrator or Governmental Authority or is in violation of
any applicable law, ordinance, rule or regulation (including
Environmental Laws and the USA Patriot Act) of any Governmental
Authority, which default or violation, individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect.

5.9. Taxes.

          The Parent and its Subsidiaries, including the Company, have filed all tax
returns that are required to have been filed in any jurisdiction, and have paid
all taxes shown to be due and payable on such returns and all other taxes and
assessments levied upon them or their

8

 

properties, assets, income or franchises, to the extent such taxes and
assessments have become due and payable and before they have become delinquent,
except for any taxes and assessments (i) the amount of which is not
individually or in the aggregate Material or (ii) the amount, applicability or
validity of which is currently being contested in good faith by appropriate
proceedings and with respect to which the Parent or a Subsidiary, as the case
may be, has established adequate reserves in accordance with GAAP. Neither the
Parent nor the Company knows of any basis for any other tax or assessment that
could reasonably be expected to have a Material Adverse Effect. The charges,
accruals and reserves on the books of the Parent and its Subsidiaries,
including the Company, in respect of Federal, state or other taxes for all
fiscal periods are, in the good faith judgment of the Parent, adequate. The
federal income tax liabilities of the Parent and its Subsidiaries, including
the Company, have been determined by the Internal Revenue Service and paid for
all fiscal years up to and including the fiscal year ended December 31, 2001.

5.10. Title to Property; Leases.

          The Parent and its Subsidiaries, including the Company, have good and
defensible title to their respective Material properties, including all such
properties reflected in the most recent audited balance sheet referred to in
Section 5.5 or acquired by the Company or any Subsidiary after said date
(except as sold or otherwise disposed of in the ordinary course of business),
in each case free and clear of Liens prohibited by this Agreement. All leases
that individually or in the aggregate are Material are valid and subsisting and
are in full force and effect in all material respects.

5.11. Licenses, Permits, etc.

     (a) the Parent and its Subsidiaries, including the Company, own or
possess all licenses, permits, franchises, authorizations, patents,
copyrights, service marks, trademarks and trade names, or rights thereto
necessary for the conduct of their businesses without known conflict with
the rights of others;

     (b) to the knowledge of the Parent and the Company, no product of
the Parent or any Subsidiary, including the Company, infringes any
license, permit, franchise, authorization, patent, copyright, service
mark, trademark, trade name or other right owned by any other Person; and

     (c) to the knowledge of the Parent, there is no violation by any
Person of any right of the Parent or any of its Subsidiaries, including
the Company, with respect to any patent, copyright, service mark,
trademark, trade name or other right owned or used by the Parent or any
of its Subsidiaries, including the Company;

except, in each instance, for the lack of ownership or possession, conflicts or
violations that, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.

9

 

5.12. Compliance with ERISA.

     (a) The Parent and each ERISA Affiliate, including the Company, have
operated and administered each Plan in compliance with all applicable
laws except for such instances of noncompliance as have not resulted in
and could not reasonably be expected to result in a Material Adverse
Effect. Neither the Parent nor any ERISA Affiliate, including the
Company, has incurred any liability pursuant to Title I or IV of ERISA or
the penalty or excise tax provisions of the Code relating to employee
benefit plans (as defined in Section 3 of ERISA), and no event,
transaction or condition has occurred or exists that could reasonably be
expected to result in the incurrence of any such liability by the Parent
or any ERISA Affiliate, including the Company, or in the imposition of
any Lien on any of the rights, properties or assets of the Parent or any
ERISA Affiliate, including the Company, in either case pursuant to Title
I or IV of ERISA or to such penalty or excise tax provisions or to
Section 401(a)(29) or 412 of the Code, other than such liabilities or
Liens as could not be individually or in the aggregate Material.

     (b) The present value of the aggregate benefit liabilities under
each of the Plans (other than Multiemployer Plans), determined as of the
end of such Plan’s most recently ended plan year on the basis of the
actuarial assumptions specified for funding purposes in such Plan’s most
recent actuarial valuation report, did not exceed the aggregate current
value of the assets of such Plan allocable to such benefit liabilities.
The term “benefit liabilities” has the meaning specified in section 4001
of ERISA and the terms “current value” and “present value” have the
meaning specified in section 3 of ERISA.

     (c) The Parent and its ERISA Affiliates, including the Company, have
not incurred withdrawal liabilities (and are not subject to contingent
withdrawal liabilities) under section 4201 or 4204 of ERISA in respect of
Multiemployer Plans that individually or in the aggregate are Material.

     (d) The expected postretirement benefit obligation (determined as of
the last day of the Parent’s most recently ended fiscal year in
accordance with Financial Accounting Standards Board Statement No. 106,
without regard to liabilities attributable to continuation coverage
mandated by section 4980B of the Code) of the Parent and its ERISA
Affiliates, including the Company, is not Material.

     (e) The execution and delivery of this Agreement and the issuance
and sale of the Notes hereunder will not involve any transaction that is
subject to the prohibitions of section 406 of ERISA or in connection with
which a tax could be imposed pursuant to section 4975(c)(1)(A)-(D) of the
Code. The representation by the Parent and the Company in the first
sentence of this Section 5.12(e) is made in reliance upon and subject to
the accuracy of your representation in Section 6.2 as to the sources of
the funds used to pay the purchase price of the Notes to be purchased by
you.

10

 

5.13. Private Offering by the Company.

          None of the Parent, the Company or anyone acting on their behalf has
offered the Notes or any similar securities for sale to, or solicited any offer
to buy any of the same from, or otherwise approached or negotiated in respect
thereof with, any Person other than you, the Other Purchasers and not more than
two other Institutional Investors, each of which has been offered the Notes at
a private sale for investment. None of the Parent, the Company or anyone
authorized to act on their behalf has taken, or will take, any action that
would subject the issuance or sale of the Notes to the registration
requirements of Section 5 of the Securities Act.

5.14. Use of Proceeds; Margin Regulations.

          The Company will apply the proceeds of the sale of the Notes to repay Debt
as set forth in Schedule 5.14 and for general corporate purposes. No part of
the proceeds from the sale of the Notes will be used, directly or indirectly,
for the purpose of buying or carrying any margin stock within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System (12 CFR
221), or for the purpose of buying or carrying or trading in any securities
under such circumstances as to involve the Company in a violation of Regulation
X of said Board (12 CFR 224) or to involve any broker or dealer in a violation
of Regulation T of said Board (12 CFR 220). Margin stock does not constitute
more than 5% of the value of the consolidated assets of the Company and its
Subsidiaries and the Company does not have any present intention that margin
stock will constitute more than 5% of the value of such assets. As used in
this Section, the terms “margin stock” and “purpose of buying or carrying”
shall have the meanings assigned to them in said Regulation U.

5.15. Existing Debt.

     (a) Except as described therein, Schedule 5.15 sets forth a complete
and correct list of all outstanding Debt of the Parent and its
Subsidiaries, including the Company, as of June 30, 2004, since which
date there has been no Material change in the amounts, interest rates,
sinking funds, installment payments or maturities of the Debt of the
Company or its Subsidiaries. Neither the Parent nor any Subsidiary,
including the Company, is in default and no waiver of default is
currently in effect, in the payment of any principal or interest on any
Debt of the Parent or such Subsidiary, including the Company, and no
event or condition exists with respect to any Debt of the Parent or any
Subsidiary, including the Company, that would permit (or that with notice
or the lapse of time, or both, could permit) one or more Persons to cause
such Debt to become due and payable before its stated maturity or before
its regularly scheduled dates of payment.

     (b) Except as disclosed in Schedule 5.15, neither the Parent nor any
Subsidiary, including the Company, has agreed or consented to cause or
permit in the future (upon the happening of a contingency or otherwise)
any of its property, whether now owned or hereafter acquired, to be
subject to a Lien not permitted by Section 10.4.

11

 

5.16. Foreign Assets Control Regulations, Anti-Terrorism Order, etc.

          Neither the sale of the Notes by the Company hereunder nor its use of the
proceeds thereof will violate (a) the Trading with the Enemy Act, as amended,
(b) any of the foreign assets control regulations of the United States Treasury
Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling
legislation or executive order relating thereto, (c) the Anti-Terrorism Order
or (d) the United States Foreign Corrupt Practices Act of 1997, as amended.
Without limiting the foregoing, neither Company nor any Subsidiary (i) is a
blocked person described in the Specially Designated Nationals and Blocked
Persons List of the Office of Foreign Assets Control or in Section 1 of the
Anti-Terrorism Order or (ii) engages in any dealings or transactions, or is
otherwise associated, with any such person.

5.17. Status under Certain Statutes.

          Neither the Parent nor any Subsidiary, including the Company, is subject
to regulation under the Investment Company Act of 1940, as amended, the Public
Utility Holding Company Act of 1935, as amended, the Interstate Commerce Act,
as amended by the ICC Termination Act, as amended, or the Federal Power Act, as
amended.

5.18. Environmental Matters.

          Neither the Parent nor any Subsidiary, including the Company, has
knowledge of any claim or has received any notice of any claim, and no
proceeding has been instituted raising any claim against the Parent or any of
its Subsidiaries, including the Company, or any of their respective real
properties now or formerly owned, leased or operated by any of them or other
assets, alleging any damage to the environment or violation of any
Environmental Laws, except, in each case, such as could not reasonably be
expected to result in a Material Adverse Effect. Except as otherwise disclosed
to you in writing,

     (a) neither the Parent nor any Subsidiary, including the Company,
has knowledge of any facts which could give rise to any claim, public or
private, of violation of Environmental Laws or damage to the environment
emanating from, occurring on or in any way related to real properties now
or formerly owned, leased or operated by any of them or to other assets
or their use, except, in each case, such as could not reasonably be
expected to result in a Material Adverse Effect;

     (b) neither the Parent nor any Subsidiary, including the Company,
has stored any Hazardous Materials on real properties now or formerly
owned, leased or operated by any of them and has not disposed of any
Hazardous Materials in a manner contrary to any Environmental Laws in
each case in any manner that could reasonably be expected to result in a
Material Adverse Effect; and

     (c) all buildings on all real properties now owned, leased or
operated by the Parent or any of its Subsidiaries, including the Company,
are in compliance with applicable Environmental Laws, except where
failure to comply could not reasonably be expected to result in a
Material Adverse Effect.

12

 

5.19. Solvency of Subsidiary Guarantors.

          After giving effect to the transactions contemplated herein and after
giving due consideration to any rights of contribution (i) each Subsidiary
Guarantor has received fair consideration and reasonably equivalent value for
the incurrence of its obligations under the Subsidiary Guaranty, (ii) the fair
value of the assets of each Subsidiary Guarantor (both at fair valuation and at
present fair saleable value) exceeds its liabilities, (iii) each Subsidiary
Guarantor is able to and expects to be able to pay its debts as they mature,
and (iv) each Subsidiary Guarantor has capital sufficient to carry on its
business as conducted and as proposed to be conducted.

6. REPRESENTATIONS OF THE PURCHASERS.

6.1. Purchase for Investment.

          You represent that you are purchasing the Notes for your own account or
for one or more separate accounts maintained by you or for the account of one
or more pension or trust funds and not with a view to the distribution thereof,
provided that the disposition of your or their property shall at all times be
within your or their control. You understand that the Notes have not been
registered under the Securities Act and may be resold only if registered
pursuant to the provisions of the Securities Act or if an exemption from
registration is available, except under circumstances where neither such
registration nor such an exemption is required by law, and that the Company is
not required to register the Notes. You represent that you are an “accredited
investor” within the meaning of subparagraph (a)(1), (2), (3) or (7) of Rule
501 of Regulation D under the Securities Act.

6.2. Source of Funds.

          You represent that at least one of the following statements is an accurate
representation as to each source of funds (a “Source”) to be used by you to pay
the purchase price of the Notes to be purchased by you hereunder:

     (a) the Source is an “insurance company general account” (as the
term is defined in the United States Department of Labor’s Prohibited
Transaction Exemption (“PTE”) 95-60) in respect of which the reserves and
liabilities (as defined by the annual statement for life insurance
companies approved by the National Association of Insurance Commissioners
(the “NAIC Annual Statement”)) for the general account contract(s) held
by or on behalf of any employee benefit plan together with the amount of
the reserves and liabilities for the general account contract(s) held by
or on behalf of any other employee benefit plans maintained by the same
employer (or affiliate thereof as defined in PTE 95-60) or by the same
employee organization in the general account do not exceed 10% of the
total reserves and liabilities of the general account (exclusive of
separate account liabilities) plus surplus as set forth in the NAIC
Annual Statement filed with such Purchaser’s state of domicile; or

13

 

     (b) the Source is a separate account that is maintained solely in
connection with such Purchaser’s fixed contractual obligations under
which the amounts payable, or credited, to any employee benefit plan (or
its related trust) that has any interest in such separate account (or to
any participant or beneficiary of such plan (including any annuitant))
are not affected in any manner by the investment performance of the
separate account; or

     (c) the Source is either (i) an insurance company pooled separate
account, within the meaning of PTE 90-1 (issued January 29, 1990), or
(ii) a bank collective investment fund, within the meaning of PTE 91-38
(issued August 12, 1991) and, except as you have disclosed to the
Obligors in writing pursuant to this paragraph (c), no employee benefit
plan or group of plans maintained by the same employer or employee
organization beneficially owns more than 10% of all assets allocated to
such pooled separate account or collective investment fund; or

     (d) the Source constitutes assets of an “investment fund” (within
the meaning of Part V of PTE 84-14 (the “QPAM Exemption”)) managed by a
“qualified professional asset manager” or “QPAM” (within the meaning of
Part V of the QPAM Exemption), no employee benefit plan’s assets that are
included in such investment fund, when combined with the assets of all
other employee benefit plans established or maintained by the same
employer or by an affiliate (within the meaning of Section V(c)(1) of the
QPAM Exemption) of such employer or by the same employee organization and
managed by such QPAM, exceed 20% of the total client assets managed by
such QPAM, the conditions of Part I(c) and (g) of the QPAM Exemption are
satisfied, neither the QPAM nor a person controlling or controlled by the
QPAM (applying the definition of “control” in Section V(e) of the QPAM
Exemption) owns a 5% or more interest in any Obligor and (i) the identity
of such QPAM and (ii) the names of all employee benefit plans whose
assets are included in such investment fund have been disclosed to the
Obligors in writing pursuant to this clause (d); or

     (e) the Source constitutes assets of a “plan(s)” (within the meaning
of Section IV of PTE 96-23 (the “INHAM Exemption”)) managed by an
“in-house asset manager” or “INHAM” (within the meaning of Part IV of the
INHAM exemption), the conditions of Part I(a), (g) and (h) of the INHAM
Exemption are satisfied, neither the INHAM nor a person controlling or
controlled by the INHAM (applying the definition of “control” in Section
IV(h) of the INHAM Exemption) owns a 5% or more interest in any Obligor
and (i) the identity of such INHAM and (ii) the name(s) of the employee
benefit plan(s) whose assets constitute the Source have been disclosed to
the Obligors in writing pursuant to this clause (e); or

     (f) the Source is a governmental plan; or

     (g) the Source is one or more employee benefit plans, or a separate
account or trust fund comprised of one or more employee benefit plans,
each of which has been identified to the Obligors in writing pursuant to
this paragraph (g); or

14

 

     (h) the Source does not include assets of any employee benefit plan,
other than a plan exempt from the coverage of ERISA.

As used in this Section 6.2, the terms “employee benefit plan”, “governmental
plan” and “separate account” shall have the respective meanings assigned to
such terms in section 3 of ERISA.

7. INFORMATION AS TO THE PARENT AND THE COMPANY.

7.1. Financial and Business Information.

          The Parent will deliver to each holder of Notes that is an Institutional Investor:

     (a) Quarterly Statements — within 60 days (or such other shorter
period within which Quarterly Reports on Form 10-Q are required to be
timely filed with the Securities and Exchange Commission, including any
extension permitted by Rule 12b-25 of the Exchange Act) after the end of
each quarterly fiscal period in each fiscal year of the Parent (other
than the last quarterly fiscal period of each such fiscal year),
duplicate copies of,

     (i) a consolidated balance sheet of the Parent and its
Subsidiaries, including the Company, as at the end of such quarter,

     (ii) consolidated statements of income and shareholders’
equity of the Parent and its Subsidiaries, including the Company,
for such quarter and (in the case of the second and third quarters)
for the portion of the fiscal year ending with such quarter, and

     (iii) consolidated statements of cash flows of the Parent and
its Subsidiaries, including the Company, for such quarter or (in
the case of the second and third quarters) for the portion of the
fiscal year ending with such quarter,

setting forth in each case in comparative form the figures for the
corresponding periods in the previous fiscal year, all in reasonable
detail, prepared in accordance with GAAP applicable to quarterly
financial statements generally, and certified by a Senior Financial
Officer as fairly presenting, in all material respects, the financial
position of the companies being reported on and their results of
operations and cash flows, subject to changes resulting from year-end
adjustments, provided that delivery within the time period specified
above of copies of the Parent’s Quarterly Report on Form 10-Q prepared in
compliance with the requirements therefor and filed with the Securities
and Exchange Commission shall be deemed to satisfy the requirements of
this Section 7.1(a);

     (b) Annual Statements — within 105 days (or such other shorter
period within which Annual Reports on Form 10-K are required to be timely
filed with the Securities and Exchange Commission, including any
extension permitted by Rule 12b-25 of the Exchange Act) after the end of
each fiscal year of the Parent, duplicate copies of,

15

 

     (i) a consolidated balance sheet of the Parent and its
Subsidiaries, including the Company, as at the end of such year,
and

     (ii) consolidated statements of income, shareholders’ equity
and cash flows of the Parent and its Subsidiaries, including the
Company, for such year,

setting forth in each case in comparative form the figures for the
previous fiscal year, all in reasonable detail, prepared in accordance
with GAAP, and accompanied by an opinion thereon of independent certified
public accountants of recognized regional or national standing, which
opinion shall state that such financial statements present fairly, in all
material respects, the financial position of the companies being reported
upon and their results of operations and cash flows and have been
prepared in conformity with GAAP, and that the examination of such
accountants in connection with such financial statements has been made in
accordance with generally accepted auditing standards, and that such
audit provides a reasonable basis for such opinion in the circumstances;
provided that the delivery within the time period specified above of the
Parent’s Annual Report on Form 10-K for such fiscal year (together with
the Parent’s annual report to shareholders, if any, prepared pursuant to
Rule 14a-3 under the Exchange Act) prepared in accordance with the
requirements therefor and filed with the Securities and Exchange
Commission shall be deemed to satisfy the requirements of this Section
(b);

     (c) Unrestricted Subsidiaries — if, at the time of delivery of any
financial statements pursuant to Section 7.1(a) or (b), Unrestricted
Subsidiaries account for more than 10% of (i) the consolidated total
assets of the Parent and its Subsidiaries, including the Company,
reflected in the consolidated balance sheet included in such financial
statements or (ii) the consolidated revenues of the Parent and its
Subsidiaries, including the Company, reflected in the consolidated
statement of income included in such financial statements, an unaudited
balance sheet for all Unrestricted Subsidiaries taken as whole as at the
end of the fiscal period included in such financial statements and the
related unaudited statements of income, stockholders’ equity and cash
flows for such Unrestricted Subsidiaries for such period, together with
consolidating statements reflecting all eliminations or adjustments
necessary to reconcile such group financial statements to the
consolidated financial statements of the Parent and its Subsidiaries,
including the Company, shall be delivered together with the financial
statements required pursuant to Sections 7.1(a) and (b);

     (d) SEC and Other Reports — promptly upon their becoming available,
one copy of (i) each financial statement, report, notice or proxy
statement sent by the Parent or any Subsidiary, including the Company, to
public securities holders generally, and (ii) each regular or periodic
report, each registration statement that shall have become effective
(without exhibits except as expressly requested by such holder), and each
final prospectus and all amendments thereto filed by the Parent or any
Subsidiary, including the Company, with the Securities and Exchange
Commission and of all press releases and other statements made available
generally by the Company or any Subsidiary to the public concerning
developments that are Material;

16

 

     (e) Notice of Default or Event of Default — promptly, and in any
event within five Business Days after a Responsible Officer becoming
aware of the existence of any Default or Event of Default, a written
notice specifying the nature and period of existence thereof and what
action the Parent or the Company is taking or proposes to take with
respect thereto;

     (f) ERISA Matters — promptly, and in any event within five Business
Days after a Responsible Officer becoming aware of any of the following,
a written notice setting forth the nature thereof and the action, if any,
that the Parent or an ERISA Affiliate, including the Company, proposes to
take with respect thereto:

     (i) with respect to any Plan, any reportable event, as defined
in section 4043(b) of ERISA and the regulations thereunder, for
which notice thereof has not been waived pursuant to such
regulations as in effect on the date hereof; or

     (ii) the taking by the PBGC of steps to institute, or the
threatening by the PBGC of the institution of, proceedings under
section 4042 of ERISA for the termination of, or the appointment of
a trustee to administer, any Plan, or the receipt by the Parent or
any ERISA Affiliate of a notice from a Multiemployer Plan that such
action has been taken by the PBGC with respect to such
Multiemployer Plan; or

     (iii) any event, transaction or condition that could result in
the incurrence of any liability by the Parent or an ERISA
Affiliate, including the Company, pursuant to Title I or IV of
ERISA or the penalty or excise tax provisions of the Code relating
to employee benefit plans, or in the imposition of any Lien on any
of the rights, properties or assets of the Parent or an ERISA
Affiliate, including the Company, pursuant to Title I or IV of
ERISA or such penalty or excise tax provisions, if such liability
or Lien, taken together with any other such liabilities or Liens
then existing, could reasonably be expected to have a Material
Adverse Effect;

     (g) Notices from Governmental Authority — promptly, and in any
event within 30 days of receipt thereof, copies of any notice to the
Company or any Subsidiary from any Federal or state Governmental
Authority relating to any order, ruling, statute or other law or
regulation that could reasonably be expected to have a Material Adverse
Effect; and

     (h) Requested Information — with reasonable promptness, such other
data and information relating to the business, operations, affairs,
financial condition, assets or properties of the Parent or any of its
Subsidiaries, including the Company, or relating to the ability of the
Parent or the Company to perform its obligations hereunder and under the
Notes as from time to time may be reasonably requested by any such holder
of Notes.

17

 

7.2. Officer’s Certificate.

          Each set of financial statements delivered to a holder of Notes pursuant
to Section 7.1(a) or Section 7.1(b) shall be accompanied by a certificate of a
Senior Financial Officer setting forth:

     (a) Covenant Compliance — the information (including detailed
calculations) required in order to establish whether the Parent was in
compliance with the requirements of Section 10.1 through Section 10.9,
inclusive, during the quarterly or annual period covered by the
statements then being furnished (including with respect to each such
Section, where applicable, the calculations of the maximum or minimum
amount, ratio or percentage, as the case may be, permissible under the
terms of such Sections, and the calculation of the amount, ratio or
percentage then in existence); and

     (b) Event of Default — a statement that such officer has reviewed
the relevant terms hereof and has made, or caused to be made, under his
or her supervision, a review of the transactions and conditions of the
Parent and its Subsidiaries, including the Company, from the beginning of
the quarterly or annual period covered by the statements then being
furnished to the date of the certificate and that such review shall not
have disclosed the existence during such period of any condition or event
that constitutes a Default or an Event of Default or, if any such
condition or event existed or exists (including any such event or
condition resulting from the failure of the Parent or any Subsidiary,
including the Company, to comply with any Environmental Law), specifying
the nature and period of existence thereof and what action the Parent or
the Company shall have taken or proposes to take with respect thereto.

7.3. Inspection.

          The Parent and the Company will permit the representatives of each holder
of Notes that is an Institutional Investor:

     (a) No Default — if no Default or Event of Default then exists, at
the expense of such holder and upon reasonable prior notice to the Parent
or the Company, to visit the principal executive office of the Parent or
the Company, to discuss the affairs, finances and accounts of the Parent
and its Subsidiaries, including the Company, with the Parent’s and the
Company’s officers, and (with the consent of the Parent and the Company,
which consent will not be unreasonably withheld) its independent public
accountants, and (with the consent of the Parent and the Company which
consent will not be unreasonably withheld), to visit the other offices
and properties of the Parent and each Subsidiary, including the Company,
all at such reasonable times and as often as may be reasonably requested
in writing; and

     (b) Default — if a Default or Event of Default then exists, at the
expense of the Company, to visit and inspect any of the offices or
properties of the Parent or any Subsidiary, including the Company, to
examine all their respective books of account, records, reports and other
papers, to make copies and extracts therefrom, and to discuss

18

 

their respective affairs, finances, and accounts with their
respective officers and independent public accountants (and by this
provision the Parent and the Company authorize said accountants to
discuss the affairs, finances and accounts of the Parent and its
Subsidiaries, including the Company), all at such times and as often as
may be requested.

8. PREPAYMENT OF THE NOTES.

8.1. No Scheduled Prepayments.

          No regularly scheduled prepayments are due on the Notes prior to their
stated maturity.

8.2. Optional Prepayments with Make-Whole Amount.

          The Company may, at its option, upon notice as provided below, prepay at
any time all, or from time to time any part of, the Notes in an amount not less
than $1,000,000 in the aggregate in the case of a partial prepayment, at 100%
of the principal amount so prepaid, plus the Make-Whole Amount determined for
the prepayment date with respect to such principal amount. The Company will
give each holder of Notes written notice of each optional prepayment under this
Section 8.2 not less than 30 days and not more than 60 days prior to the date
fixed for such prepayment. Each such notice shall specify such date, the
aggregate principal amount of the Notes to be prepaid on such date, the
principal amount of each Note held by such holder to be prepaid (determined in
accordance with Section 8.3), and the interest to be paid on the prepayment
date with respect to such principal amount being prepaid, and shall be
accompanied by a certificate of a Senior Financial Officer as to the estimated
Make-Whole Amount due in connection with such prepayment (calculated as if the
date of such notice were the date of the prepayment), setting forth the details
of such computation. Two Business Days prior to such prepayment, the Company
shall deliver to each holder of Notes a certificate of a Senior Financial
Officer specifying the calculation of such Make-Whole Amount as of the
specified prepayment date.

8.3. Allocation of Partial Prepayments.

          In the case of each partial prepayment of the Notes, the principal amount
of the Notes to be prepaid shall be allocated among all of the Notes at the
time outstanding in proportion, as nearly as practicable, to the respective
unpaid principal amounts thereof not theretofore called for prepayment.

8.4. Maturity; Surrender, etc.

          In the case of each prepayment of Notes pursuant to this Section 8, the
principal amount of each Note to be prepaid shall mature and become due and
payable on the date fixed for such prepayment, together with interest on such
principal amount accrued to such date and the applicable Make-Whole Amount, if
any. From and after such date, unless the Company shall fail to pay such
principal amount when so due and payable, together with the interest and Make-

19

 

Whole Amount, if any, as aforesaid, interest on such principal amount shall
cease to accrue. Any Note paid or prepaid in full shall be surrendered to the
Company and canceled and shall not be reissued, and no Note shall be issued in
lieu of any prepaid principal amount of any Note.

8.5. Purchase of Notes.

          Neither the Parent nor the Company will, and will not permit any Affiliate
to, purchase, redeem, prepay or otherwise acquire, directly or indirectly, any
of the outstanding Notes except (a) upon the payment or prepayment of the Notes
in accordance with the terms of this Agreement and the Notes or (b) pursuant to
an offer to purchase made by the Company or an Affiliate pro rata to the
holders of all Notes at the time outstanding upon the same terms and
conditions. Any such offer shall provide each holder with sufficient
information to enable it to make an informed decision with respect to such
offer, and shall remain open for at least 30 Business Days. If the holders of
more than 25% of the principal amount of the Notes then outstanding accept such
offer, the Company shall promptly notify the remaining holders of such fact and
the expiration date for the acceptance by holders of Notes of such offer shall
be extended by the number of days necessary to give each such remaining holder
at least ten Business Days from its receipt of such notice to accept such
offer. The Company will promptly cancel all Notes acquired by it or any
Affiliate pursuant to any payment, prepayment or purchase of Notes pursuant to
any provision of this Agreement and no Notes may be issued in substitution or
exchange for any such Notes.

8.6. Make-Whole Amount.

          The term “Make-Whole Amount” means, with respect to any Note, an amount
equal to the excess, if any, of the Discounted Value of the Remaining Scheduled
Payments with respect to the Called Principal of such Note over the amount of
such Called Principal, provided that the Make-Whole Amount may in no event be
less than zero. For the purposes of determining the Make-Whole Amount, the
following terms have the following meanings:

     “Called Principal” means, with respect to any Note, the principal of
such Note that is to be prepaid pursuant to Section 8.2 or has become or
is declared to be immediately due and payable pursuant to Section 12.1,
as the context requires.

     “Discounted Value” means, with respect to the Called Principal of
any Note, the amount obtained by discounting all Remaining Scheduled
Payments with respect to such Called Principal from their respective
scheduled due dates to the Settlement Date with respect to such Called
Principal, in accordance with accepted financial practice and at a
discount factor (applied on the same periodic basis as that on which
interest on the Notes is payable) equal to the Reinvestment Yield with
respect to such Called Principal.

     “Reinvestment Yield” means, with respect to the Called Principal of
any Note, .50% over the yield to maturity implied by (i) the yields
reported, as of 10:00 A.M. (New York City time) on the second Business
Day preceding the Settlement Date with respect to such Called Principal,
on the display designated as the “PX1 Screen” on the Bloomberg Financial
Market Service (or such other display as may replace the PX1 Screen on
Bloomberg Financial Market Service) for actively traded U.S. Treasury

20

 

securities having a maturity equal to the Remaining Average Life of such
Called Principal as of such Settlement Date, or (ii) if such yields are
not reported as of such time or the yields reported as of such time are
not ascertainable, the Treasury Constant Maturity Series Yields reported,
for the latest day for which such yields have been so reported as of the
second Business Day preceding the Settlement Date with respect to such
Called Principal, in Federal Reserve Statistical Release H.15 (519) (or
any comparable successor publication) for actively traded U.S. Treasury
securities having a constant maturity equal to the Remaining Average Life
of such Called Principal as of such Settlement Date. Such implied yield
will be determined, if necessary, by (a) converting U.S. Treasury bill
quotations to bond-equivalent yields in accordance with accepted
financial practice and (b) interpolating linearly between (1) the
actively traded U.S. Treasury security with the maturity closest to and
greater than the Remaining Average Life and (2) the actively traded U.S.
Treasury security with the maturity closest to and less than the
Remaining Average Life.

     “Remaining Average Life” means, with respect to any Called
Principal, the number of years (calculated to the nearest one-twelfth
year) obtained by dividing (i) such Called Principal into (ii) the sum of
the products obtained by multiplying (a) the principal component of each
Remaining Scheduled Payment with respect to such Called Principal by (b)
the number of years (calculated to the nearest one-twelfth year) that
will elapse between the Settlement Date with respect to such Called
Principal and the scheduled due date of such Remaining Scheduled Payment.

     “Remaining Scheduled Payments” means, with respect to the Called
Principal of any Note, all payments of such Called Principal and
interest thereon that could be due after the Settlement Date with respect
to such Called Principal if no payment of such Called Principal were made
prior to its scheduled due date, provided that if such Settlement Date is
not a date on which interest payments are due to be made under the terms
of the Notes, then the amount of the next succeeding scheduled interest
payment will be reduced by the amount of interest accrued to such
Settlement Date and required to be paid on such Settlement Date pursuant
to Section 8.2 or 12.1.

     “Settlement Date” means, with respect to the Called Principal of any
Note, the date on which such Called Principal is to be prepaid pursuant
to Section 8.2 or has become or is declared to be immediately due and
payable pursuant to Section 12.1, as the context requires.

9. AFFIRMATIVE COVENANTS.

          Each of the Parent and the Company covenants that so long as any of the
Notes are outstanding:

9.1. Compliance with Law.

          The Parent and the Company will, and will cause each other Subsidiary to,
comply with all laws, ordinances or governmental rules or regulations to which
each of them is

21

 

subject, including, Environmental Laws, and will obtain and maintain in effect
all licenses, certificates, permits, franchises and other governmental
authorizations necessary to the ownership of their respective properties or to
the conduct of their respective businesses, in each case to the extent
necessary to ensure that non-compliance with such laws, ordinances or
governmental rules or regulations or failures to obtain or maintain in effect
such licenses, certificates, permits, franchises and other governmental
authorizations could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.

9.2. Insurance.

          The Parent and the Company will, and will cause each Restricted Subsidiary
to, maintain, with financially sound and reputable insurers, insurance with
respect to their respective properties and businesses against such casualties
and contingencies, of such types, on such terms and in such amounts (including
deductibles, co-insurance and self-insurance, if customary reserves are
maintained with respect thereto) as is customary in the case of entities of
established reputations engaged in the same or a similar business and similarly
situated.

9.3. Maintenance of Properties.

          The Parent and the Company will, and will cause each Restricted Subsidiary
to, maintain and keep, or cause to be maintained and kept, their respective
properties in good repair, working order and condition (other than ordinary
wear and tear), so that the business carried on in connection therewith may be
properly conducted at all times, provided that this Section shall not prevent
the Parent or any Subsidiary, including the Company, from discontinuing the
operation and the maintenance of any of its properties if such discontinuance
is desirable in the conduct of its business and the Parent has concluded that
such discontinuance could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.

9.4. Payment of Taxes.

          The Parent and the Company will, and will cause each other Subsidiary to,
file all tax returns required to be filed in any jurisdiction and to pay and
discharge all taxes shown to be due and payable on such returns and all other
taxes, assessments, governmental charges, or levies imposed on them or any of
their properties, assets, income or franchises, to the extent such taxes and
assessments have become due and payable and before they have become delinquent,
and all claims for which sums have become due and payable that have or might
become a Lien on properties or assets of the Parent or any Subsidiary,
including the Company, provided that neither the Parent nor any Subsidiary,
including the Company, need pay any such tax or assessment or claims if (i) the
amount, applicability or validity thereof is contested by the Parent or such
Subsidiary on a timely basis in good faith and in appropriate proceedings, and
the Parent or a Subsidiary, including the Company, has established adequate
reserves therefor in accordance with GAAP on the books of the Parent or such
Subsidiary or (ii) the nonpayment of all such taxes and assessments in the
aggregate could not reasonably be expected to have a Material Adverse Effect.

22

 

9.5. Corporate Existence, etc.

          Each of the Parent and the Company will at all times preserve and keep in
full force and effect its corporate existence. Subject to Sections 10.5 and
10.6, the Parent and the Company will at all times preserve and keep in full
force and effect the corporate existence of each Restricted Subsidiary (unless
merged into the Parent or a Wholly Owned Restricted Subsidiary, including the
Company) and all rights and franchises of the Parent and its Restricted
Subsidiaries, including the Company, unless, in the good faith judgment of the
Parent, the termination of or failure to preserve and keep in full force and
effect each corporate existence, right or franchise could not, individually or
in the aggregate, have a Material Adverse Effect.

9.6. Additional Subsidiary Guarantors.

          The Parent and the Company will cause any Subsidiary that (whether or not
required by the terms of the Credit Agreement) is to become a party to, or
guarantee, Debt in respect of the Credit Agreement or any other Senior Debt, to
enter into the Subsidiary Guaranty concurrently therewith and as a part thereof
to deliver to each of the holders:

     (a) a copy of an executed joinder to the Subsidiary Guaranty;

     (b) a certificate signed by a Responsible Officer confirming the
accuracy of the representations and warranties in Sections 5.2, 5.6, 5.7
and 5.19, with respect to such Subsidiary and the Subsidiary Guaranty as
it relates to such Subsidiary, as applicable; and

     (c) an opinion of counsel (who may be counsel for the Company)
reasonably satisfactory to the Required Holders addressed to each holder
of the Notes to the effect that the Subsidiary Guaranty of such Person
has been duly authorized, executed and delivered and that the Subsidiary
Guaranty constitutes the legal, valid and binding contract and agreement
of such Person enforceable in accordance with its terms, except as an
enforcement of such terms may be limited by bankruptcy, insolvency,
fraudulent conveyance and similar laws affecting the enforcement of
creditors’ rights generally and by general equitable principles.

9.7. Ranking of Notes.

          The Debt evidenced by the Notes will at all times rank at least pari passu
with all of the Company’s outstanding unsecured Senior Debt.

10. NEGATIVE COVENANTS.

          Each of the Parent and the Company covenants that so long as any of the
Notes are outstanding:

10.1. Consolidated Debt.

          The Parent will not permit the ratio of Consolidated Debt (as of the end
of any fiscal quarter of the Parent) to Consolidated EBITDA (for the Parent’s
then most recently

23

 

completed four fiscal quarters) (a) to be greater than 3.50 to 1.00 at any time
or (b) to be greater than 3.25 to 1.00 for more than two consecutive fiscal
quarters.

10.2. Interest Coverage.

          The Parent will not permit the ratio of Consolidated EBIT to Consolidated
Interest Expense (in each case for the Parent’s then most recently completed
four fiscal quarters) to be less than 2.0 to 1.0 at any time.

10.3. Priority Debt.

          The Parent and the Company will not permit Priority Debt to exceed 20% of
Consolidated Net Worth (determined as of the end of the Parent’s most recently
completed fiscal quarter) at any time.

10.4. Liens.

          The Parent and the Company will not, and will not permit any Restricted
Subsidiary to, permit to exist, create, assume or incur, directly or
indirectly, any Lien on its properties or assets, whether now owned or
hereafter acquired, unless the Notes are equally and ratably secured by a Lien
on the same property and assets pursuant to an agreement reasonably acceptable
to the Required Holders, except:

     (a) Liens for taxes, assessments or governmental charges not then
due and delinquent or the nonpayment of which is permitted by Section
9.4;

     (b) Liens incidental to the conduct of business or the ownership of
properties and assets (including landlords’, lessors’, carriers’,
operators’, warehousemen’s, mechanics’, materialmen’s and other similar
Liens) and Liens to secure the performance of bids, tenders, leases or
trade contracts, or to secure statutory obligations (including
obligations under workers compensation, unemployment insurance and other
social security legislation), surety or appeal bonds or other Liens of
like general nature incurred in the ordinary course of business and not
in connection with the borrowing of money;

     (c) encumbrances in the nature of leases, subleases, zoning
restrictions, easements, rights of way and other rights and restrictions
of record on the use of real property and defects in title arising or
incurred in the ordinary course of business, which, individually and in
the aggregate, do not materially impair the use or value of the property
or assets subject thereto;

     (d) any attachment or judgment Lien, unless the judgment it secures
has not, within 60 days after the entry thereof, been discharged or
execution thereof stayed pending appeal, or has not been discharged
within 60 days after the expiration of any such stay;

24

 

     (e) Liens securing Debt of a Restricted Subsidiary to the Parent or
to another Restricted Subsidiary, including the Company;

     (f) Liens (i) existing on property at the time of its acquisition by
the Parent or a Restricted Subsidiary, including the Company, and not
created in contemplation thereof, whether or not the Debt secured by such
Lien is assumed by the Parent or a Restricted Subsidiary; including the
Company, or (ii) on property created contemporaneously with its
acquisition or within 365 days of the acquisition or completion of
construction or development thereof to secure or provide for all or a
portion of the purchase price or cost of the acquisition, construction or
development of such property after the date of Closing; or (iii) existing
on property of a Person at the time such Person is merged or consolidated
with, or becomes a Restricted Subsidiary of, or substantially all of its
assets are acquired by, the Parent or a Restricted Subsidiary, including
the Company, and not created in contemplation thereof; provided that in
the case of clauses (i), (ii) and (iii) such Liens do not extend to
additional property of the Parent or any Restricted Subsidiary, including
the Company, (other than property that is an improvement to or is
acquired for specific use in connection with the subject property) and
that the aggregate principal amount of Debt secured by each such Lien
does not exceed the fair market value (determined in good faith by one or
more officers of the Parent to whom authority to enter into such
transaction has been delegated by the board of directors of the Parent)
of the property subject thereto;

     (g) Liens resulting from extensions, renewals or replacements of
Liens permitted by paragraphs (e), (f) and (g), provided that (i) there
is no increase in the principal amount or decrease in maturity of the
Debt secured thereby at the time of such extension, renewal or
replacement, (ii) any new Lien attaches only to the same property
theretofore subject to such earlier Lien and (iii) immediately after such
extension, renewal or replacement no Default or Event of Default would
exist; and

     (h) Liens securing Debt not otherwise permitted by paragraphs (a)
through (g) of this Section 10.4, provided that Priority Debt does not
exceed 20% of Consolidated Net Worth at any time.

10.5. Mergers, Consolidations, etc.

          The Parent and the Company will not, and will not permit any Restricted
Subsidiary to, consolidate with or merge with any other Person or convey,
transfer, sell or lease all or substantially all of its assets in a single
transaction or series of transactions to any Person except that:

     (a) the Company may consolidate or merge with the Parent or convey,
transfer, sell or lease all or substantially all of its assets in a
single transaction or series of transactions to the Parent, provided that
the Parent is the successor or survivor; and

25

 

     (b) the Parent may consolidate or merge with any other Person or
convey, transfer, sell or lease all or substantially all of its assets in
a single transaction or series of transactions to any Person, provided
that:

     (i) the successor formed by such consolidation or the survivor
of such merger or the Person that acquires by conveyance, transfer,
sale or lease of all or substantially all of the assets of the
Parent as an entirety, as the case may be, shall be a solvent
corporation organized and existing under the laws of the United
States or any state thereof (including the District of Columbia),
and, if the Parent is not such corporation, such corporation (y)
shall have executed and delivered to each holder of any Notes its
assumption of the due and punctual performance and observance of
each covenant and condition of this Agreement and the Parent
Guaranty and (z) shall have caused to be delivered to each holder
of any Notes an opinion of outside counsel reasonably satisfactory
to the Required Holders, to the effect that all agreements or
instruments effecting such assumption are enforceable in accordance
with their terms and comply with the terms hereof; and

     (ii) after giving effect to such transaction, no Default or
Event of Default shall exist; and

     (c) any Restricted Subsidiary other than the Company may (x) merge
into the Parent or the Company (provided that the Parent or the Company
is the surviving entity) or another Restricted Subsidiary or (y) sell,
transfer or lease all or any part of its assets to the Parent or the
Company or another Restricted Subsidiary, or (z) merge or consolidate
with, or sell, transfer or lease all or substantially all of its assets
to, any Person in a transaction that is permitted by Section 10.6 or, as
a result of which, such Person becomes a Restricted Subsidiary; provided
in each instance set forth in clauses (x) through (z) that, immediately
after giving effect thereto, there shall exist no Default or Event of
Default;

No such conveyance, transfer, sale or lease of all or substantially all of the
assets of the Parent shall have the effect of releasing the Parent or any
successor corporation that shall theretofore have become such in the manner
prescribed in this Section 10.5 from its liability under this Agreement or the
Notes.

10.6. Sale of Assets.

          Except as permitted by Section 10.5, the Parent and the Company will not,
and will not permit any Restricted Subsidiary to, sell, lease, transfer or
otherwise dispose of, including by way of merger (collectively a
“Disposition”), any assets, including capital stock of Subsidiaries, in one or
a series of transactions, to any Person, other than:

     (a) Dispositions in the ordinary course of business;

     (b) Dispositions by a Restricted Subsidiary, including the Company,
to the Parent or another Restricted Subsidiary, including the Company;

26

 

     (c) Dispositions not otherwise permitted by clauses (a) or (b) of
this Section 10.6, provided that the aggregate net book value of all
assets so disposed of in any fiscal year pursuant to this Section 10.6(c)
does not exceed 10% of Consolidated Total Assets as of the end of the
immediately preceding fiscal year.

Notwithstanding the foregoing provisions of this Section 10.6, the Parent may,
or may permit any Restricted Subsidiary, including the Company to, make a
Disposition and the assets subject to such Disposition shall not be subject to
or included in any of the limitations or the computation contained in foregoing
Section 10.6(c) of the preceding sentence if:

     (A) such assets are leased back by the Parent or any Restricted
Subsidiary, including the Company, as lessee, within 365 days of the
original acquisition or construction thereof by the Parent or such
Restricted Subsidiary, including the Company; or

     (B) the net proceeds from such Disposition are within 365 days of
such Disposition:

     (i) reinvested in productive assets used in carrying on the
business of the Parent and its Restricted Subsidiaries, including
the Company; or

     (ii) applied to the payment or prepayment of any outstanding
Senior Debt (including the Notes) of the Parent or any Restricted
Subsidiary, including the Company.

Any prepayment of Notes pursuant to this Section 10.6 shall be in
accordance with Sections 8.2 and 8.3, without regard to the minimum
prepayment requirements of Section 8.2.

10.7. Designation of Restricted and Unrestricted Subsidiaries.

          The Parent may designate any Restricted Subsidiary as an Unrestricted
Subsidiary and any Unrestricted Subsidiary as a Restricted Subsidiary by notice
in writing given to the holders of the Notes; provided that,

     (a) if such Subsidiary initially is designated a Restricted
Subsidiary, then such Restricted Subsidiary may be subsequently
designated as an Unrestricted Subsidiary and such Unrestricted Subsidiary
may be subsequently designated as a Restricted Subsidiary, but no further
changes in designation may be made;

     (b) if such Subsidiary initially is designated an Unrestricted
Subsidiary, then such Unrestricted Subsidiary may be subsequently
designated as a Restricted Subsidiary and such Restricted Subsidiary may
be subsequently designated as an Unrestricted Subsidiary, but no further
changes in designation may be made;

     (c) the Parent may not designate a Restricted Subsidiary as an
Unrestricted Subsidiary unless: (i) such Restricted Subsidiary does not
own, directly or indirectly, any

27

 

Debt or capital stock of the Parent or any other Restricted
Subsidiary, including the Company, (ii) such designation, considered as a
sale of assets, is permitted pursuant to Section 10.6, and (iii)
immediately before and after such designation there exists no Default or
Event of Default;

     (d) notwithstanding Section 10.4(g), if an Unrestricted Subsidiary
is designated as a Restricted Subsidiary, all outstanding Debt and Liens
of such Subsidiary shall be deemed to have been incurred as of the date
of such designation; and

     (e) the Parent may not designate the Company or any Subsidiary
Guarantor an Unrestricted Subsidiary.

10.8. Nature of Business.

          The Parent and the Company will not, and will not permit any other
Restricted Subsidiary to, engage in any business if, as a result, the general
nature of the business in which the Parent and its Restricted Subsidiaries,
including the Company, taken as a whole, would then be engaged would be
substantially changed from the general nature of the business of the Parent and
its Restricted Subsidiaries, including the Company, taken as a whole, as
described in the Memorandum.

10.9. Transactions with Affiliates.

          The Parent and the Company will not, and will not permit any other
Restricted Subsidiary to, enter into directly or indirectly any Material
transaction or Material group of related transactions (including the purchase,
lease, sale or exchange of properties of any kind or the rendering of any
service) with any Affiliate (other than the Parent, the Company or another
Restricted Subsidiary), except in the ordinary course and pursuant to the
reasonable requirements of the Parent’s, the Company’s or such Restricted
Subsidiary’s business and upon fair and reasonable terms no less favorable to
the Parent, the Company or such Restricted Subsidiary than would be obtainable
in a comparable arm’s-length transaction with a Person not an Affiliate.

11. EVENTS OF DEFAULT.

          An “Event of Default” shall exist if any of the following conditions or
events shall occur and be continuing:

     (a) the Company defaults in the payment of any principal or
Make-Whole Amount, if any, on any Note when the same becomes due and
payable, whether at maturity or at a date fixed for prepayment or by
declaration or otherwise; or

     (b) the Company defaults in the payment of any interest on any Note
for more than five Business Days after the same becomes due and payable;
or

     (c) the Parent or the Company defaults in the performance of or
compliance with any term contained in Sections 10.1, 10.2, 10.3, 10.4,
10.5 or 10.6; or

28

 

     (d) the Parent or the Company defaults in the performance of or
compliance with any term contained herein (other than those referred to
in paragraphs (a), (b) and (c) of this Section 11) and such default is
not remedied within 30 days after the earlier of (i) a Responsible
Officer obtaining actual knowledge of such default and (ii) the Parent or
the Company receiving written notice of such default from any holder of a
Note; or

     (e) any representation or warranty made in writing by or on behalf
of the Company or any Guarantor or by any officer of the Company or any
Guarantor in this Agreement, the Parent Guaranty, the Subsidiary Guaranty
or in any writing furnished in connection with the transactions
contemplated hereby or thereby proves to have been false or incorrect in
any material respect on the date as of which made; or

     (f) (i) the Company, any Guarantor or any Restricted Subsidiary is
in default (as principal or as guarantor or other surety) in the payment
of any principal of or premium or make-whole amount or interest in excess
of $50,000 on any Debt that is outstanding in an aggregate principal
amount exceeding $5,000,000 beyond any period of grace provided with
respect thereto, or (ii) the Company or any Restricted Subsidiary is in
default in the performance of or compliance with any term of any evidence
of any Debt that is outstanding in an aggregate principal amount
exceeding $5,000,000 or of any mortgage, indenture or other agreement
relating thereto or any other condition exists, and as a consequence of
such default or condition such Debt has become, or has been declared, or
one or more Persons are entitled to declare such Debt to be, due and
payable before its stated maturity or before its regularly scheduled
dates of payment, or (iii) as a consequence of the occurrence or
continuation of any event or condition (other than the passage of time or
the right of the holder of Debt to convert such Debt into equity
interests), (x) the Company, any Guarantor or any Restricted Subsidiary
has become obligated to purchase or repay Debt in an aggregate principal
amount exceeding $5,000,000 before its regular maturity or before its
regularly scheduled dates of payment, or (y) one or more Persons have the
right to require the Company, any Guarantor or any Restricted Subsidiary
so to purchase or repay such Debt; or

     (g) the Company, any Guarantor or any Material Subsidiary (i) is
generally not paying, or admits in writing its inability to pay, its
debts as they become due, (ii) files, or consents by answer or otherwise
to the filing against it of, a petition for relief or reorganization or
arrangement or any other petition in bankruptcy, for liquidation or to
take advantage of any bankruptcy, insolvency, reorganization, moratorium
or other similar law of any jurisdiction, (iii) makes an assignment for
the benefit of its creditors, (iv) consents to the appointment of a
custodian, receiver, trustee or other officer with similar powers with
respect to it or with respect to any substantial part of its property,
(v) is adjudicated as insolvent or to be liquidated, or (vi) takes
corporate action for the purpose of any of the foregoing; or

     (h) a court or governmental authority of competent jurisdiction
enters an order appointing, without consent by the Company, any Guarantor
or any Material Subsidiary, a custodian, receiver, trustee or other
officer with similar powers with respect to it or with respect to any
substantial part of its property, or constituting an order for relief or

29

 

approving a petition for relief or reorganization or any other
petition in bankruptcy or for liquidation or to take advantage of any
bankruptcy or insolvency law of any jurisdiction, or ordering the
dissolution, winding-up or liquidation of the Company, any Guarantor or
any Material Subsidiary, or any such petition shall be filed against the
Company, any Guarantor or any Material Subsidiary and such petition shall
not be dismissed within 60 days; or

     (i) a final judgment or judgments for the payment of money
aggregating in excess of $5,000,000 are rendered against one or more of
the Company, any Guarantor and any Restricted Subsidiaries, which
judgments are not, within 60 days after entry thereof, bonded, discharged
or stayed pending appeal, or are not discharged within 60 days after the
expiration of such stay; or

     (j) if (i) any Plan shall fail to satisfy the minimum funding
standards of ERISA or the Code for any plan year or part thereof or a
waiver of such standards or extension of any amortization period is
sought or granted under section 412 of the Code, (ii) a notice of intent
to terminate any Plan shall have been or is reasonably expected to be
filed with the PBGC or the PBGC shall have instituted proceedings under
ERISA section 4042 to terminate or appoint a trustee to administer any
Plan or the PBGC shall have notified the Parent, the Company or any other
ERISA Affiliate that a Plan may become a subject of any such proceedings,
(iii) the aggregate “amount of unfunded benefit liabilities” (within the
meaning of section 4001(a)(18) of ERISA) under all Plans determined in
accordance with Title IV of ERISA, shall exceed $5,000,000, (iv) the
Parent, the Company or any other ERISA Affiliate shall have incurred or
is reasonably expected to incur any liability pursuant to Title I or IV
of ERISA or the penalty or excise tax provisions of the Code relating to
employee benefit plans, (v) the Parent, the Company or any other ERISA
Affiliate withdraws from any Multiemployer Plan, or (vi) the Parent or
any Restricted Subsidiary, including the Company, establishes or amends
any employee welfare benefit plan that provides post-employment welfare
benefits in a manner that would increase the liability of the Parent or
any Restricted Subsidiary, including the Company, thereunder; and any
such event or events described in clauses (i) through (vi) above, either
individually or together with any other such event or events, could
reasonably be expected to have a Material Adverse Effect; or

     (k) any Guarantor defaults in the performance of or compliance with
any term contained in either of the Guaranties or either of the
Guaranties ceases to be in full force and effect, except as provided in
Section 1.2(b), or is declared to be null and void in whole or in
material part by a court or other governmental or regulatory authority
having jurisdiction or the validity or enforceability thereof shall be
contested by any of the Parent, the Company or any Subsidiary Guarantor
or any of them renounces any of the same or denies that it has any or
further liability thereunder.

As used in Section 11(j), the terms “employee benefit plan” and “employee
welfare benefit plan” shall have the respective meanings assigned to such terms
in section 3 of ERISA.

30

 

12. REMEDIES ON DEFAULT, ETC.

12.1. Acceleration.

     (a) If an Event of Default with respect to the Parent or the Company
described in paragraph (g) or (h) of Section 11 (other than an Event of
Default described in clause (i) of paragraph (g) or described in clause
(vi) of paragraph (g) by virtue of the fact that such clause encompasses
clause (i) of paragraph (g)) has occurred, all the Notes then outstanding
shall automatically become immediately due and payable.

     (b) If any other Event of Default has occurred and is continuing,
any holder or holders of more than 65% in principal amount of the Notes
at the time outstanding may at any time at its or their option, by notice
or notices to the Company, declare all the Notes then outstanding to be
immediately due and payable.

     (c) If any Event of Default described in paragraph (a) or (b) of
Section 11 has occurred and is continuing, any holder or holders of Notes
at the time outstanding affected by such Event of Default may at any
time, at its or their option, by notice or notices to the Company,
declare all the Notes held by it or them to be immediately due and
payable.

          Upon any Notes becoming due and payable under this Section 12.1, whether
automatically or by declaration, such Notes will forthwith mature and the
entire unpaid principal amount of such Notes, plus (x) all accrued and unpaid
interest thereon and (y) the Make-Whole Amount determined in respect of such
principal amount (to the full extent permitted by applicable law), shall all be
immediately due and payable, in each and every case without presentment,
demand, protest or further notice, all of which are hereby waived. The Company
acknowledges, and the parties hereto agree, that each holder of a Note has the
right to maintain its investment in the Notes free from repayment by the
Company (except as herein specifically provided for) and that the provision for
payment of a Make-Whole Amount by the Company in the event that the Notes are
prepaid or are accelerated as a result of an Event of Default, is intended to
provide compensation for the deprivation of such right under such
circumstances.

12.2. Other Remedies.

          If any Default or Event of Default has occurred and is continuing, and
irrespective of whether any Notes have become or have been declared immediately
due and payable under Section 12.1, the holder of any Note at the time
outstanding may proceed to protect and enforce the rights of such holder by an
action at law, suit in equity or other appropriate proceeding, whether for the
specific performance of any agreement contained herein or in any Note, or for
an injunction against a violation of any of the terms hereof or thereof, or in
aid of the exercise of any power granted hereby or thereby or by law or
otherwise.

31

 

12.3. Rescission.

          At any time after any Notes have been declared due and payable pursuant to
clause (b) or (c) of Section 12.1, the holders of more than 65% in principal
amount of the Notes then outstanding, by written notice to the Company, may
rescind and annul any such declaration and its consequences if (a) the Company
has paid all overdue interest on the Notes, all principal of and Make-Whole
Amount, if any, on any Notes that are due and payable and are unpaid other than
by reason of such declaration, and all interest on such overdue principal and
Make-Whole Amount, if any, and (to the extent permitted by applicable law) any
overdue interest in respect of the Notes, at the Default Rate, (b) all Events
of Default and Defaults, other than non-payment of amounts that have become due
solely by reason of such declaration, have been cured or have been waived
pursuant to Section 17, and (c) no judgment or decree has been entered for the
payment of any monies due pursuant hereto or to the Notes. No rescission and
annulment under this Section 12.3 will extend to or affect any subsequent Event
of Default or Default or impair any right consequent thereon.

12.4. No Waivers or Election of Remedies, Expenses, etc.

          No course of dealing and no delay on the part of any holder of any Note in
exercising any right, power or remedy shall operate as a waiver thereof or
otherwise prejudice such holder’s rights, powers or remedies. No right, power
or remedy conferred by this Agreement or by any Note upon any holder thereof
shall be exclusive of any other right, power or remedy referred to herein or
therein or now or hereafter available at law, in equity, by statute or
otherwise. Without limiting the obligations of the Company under Section 15,
the Company will pay to the holder of each Note on demand such further amount
as shall be sufficient to cover all reasonable costs and expenses of such
holder incurred in any enforcement or collection under this Section 12,
including reasonable attorneys’ fees, expenses and disbursements.

13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.

13.1. Registration of Notes.

          The Company shall keep at its principal executive office a register for
the registration and registration of transfers of Notes. The name and address
of each holder of one or more Notes, each transfer thereof and the name and
address of each transferee of one or more Notes shall be registered in such
register. Prior to due presentment for registration of transfer, the Person in
whose name any Note shall be registered shall be deemed and treated as the
owner and holder thereof for all purposes hereof, and the Company shall not be
affected by any notice or knowledge to the contrary. The Company shall give to
any holder of a Note that is an Institutional Investor, promptly upon request
therefor, a complete and correct copy of the names and addresses of all
registered holders of Notes.

13.2. Transfer and Exchange of Notes.

          Upon surrender of any Note at the principal executive office of the
Company for registration of transfer or exchange (and in the case of a
surrender for registration of transfer,

32

 

duly endorsed or accompanied by a written instrument of transfer duly executed
by the registered holder of such Note or his attorney duly authorized in
writing and accompanied by the address for notices of each transferee of such
Note or part thereof), the Company shall execute and deliver within five
Business Days, at the Company’s expense (except as provided below), one or more
new Notes (as requested by the holder thereof) in exchange therefor, in an
aggregate principal amount equal to the unpaid principal amount of the
surrendered Note. Each such new Note shall be payable to such Person as such
holder may request and shall be substantially in the form of Exhibit 1(a).
Each such new Note shall be dated and bear interest from the date to which
interest shall have been paid on the surrendered Note or dated the date of the
surrendered Note if no interest shall have been paid thereon. The Company may
require payment of a sum sufficient to cover any stamp tax or governmental
charge imposed in respect of any such transfer of Notes. Notes shall not be
transferred in denominations of less than $500,000, provided that if necessary
to enable the registration of transfer by a holder of its entire holding of
Notes, one Note may be in a denomination of less than $500,000. Any
transferee, by its acceptance of a Note registered in its name (or the name of
its nominee), shall be deemed to have made the representation set forth in
Section 6.2.

13.3. Restriction on Transfer to Competitor.

          So long as no Event of Default has occurred and is continuing, you and
each subsequent holder of a Note agree not to transfer all or any portion of a
Note to any Competitor of the Company. As used herein, the term “Competitor”
means any Person (including any Subsidiary or Affiliate thereof) primarily
engaged in the residential and commercial electrical copper wire industry;
provided that such term shall not include any bank, trust company, savings and
loan association or other financial institution, any pension plan, any
investment company, any insurance company, any broker or dealer, or any other
similar financial institution or entity, regardless of legal form.

13.4. Replacement of Notes.

          Upon receipt by the Company of evidence reasonably satisfactory to it of
the ownership of and the loss, theft, destruction or mutilation of any Note
(which evidence shall be, in the case of an Institutional Investor, notice from
such Institutional Investor of such ownership and such loss, theft, destruction
or mutilation), and

     (a) in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to it (provided that if the holder of such Note
is, or is a nominee for, an original Purchaser or another Institutional
Investor holder of a Note with a minimum net worth of at least
$50,000,000, such Person’s own unsecured agreement of indemnity shall be
deemed to be satisfactory), or

     (b) in the case of mutilation, upon surrender and cancellation
thereof,

the Company at its own expense shall execute and deliver within five Business
Days, in lieu thereof, a new Note, dated and bearing interest from the date to
which interest shall have been

33

 

paid on such lost, stolen, destroyed or mutilated Note or dated the date of
such lost, stolen, destroyed or mutilated Note if no interest shall have been
paid thereon.

14. PAYMENTS ON NOTES.

14.1. Place of Payment.

          Subject to Section 14.2, payments of principal, Make-Whole Amount, if any,
and interest becoming due and payable on the Notes shall be made in Chicago,
Illinois at the principal office of Bank of America, N.A. in such jurisdiction.
The Company may at any time, by notice to each holder of a Note, change the
place of payment of the Notes so long as such place of payment shall be either
the principal office of the Company in such jurisdiction or the principal
office of a bank or trust company in such jurisdiction.

14.2. Home Office Payment.

          So long as you or your nominee shall be the holder of any Note, and
notwithstanding anything contained in Section 14.1 or in such Note to the
contrary, the Company will pay all sums becoming due on such Note for
principal, Make-Whole Amount, if any, and interest by the method and at the
address specified for such purpose below your name in Schedule A, or by such
other method or at such other address as you shall have from time to time
specified to the Company in writing for such purpose, without the presentation
or surrender of such Note or the making of any notation thereon, except that
upon written request of the Company made concurrently with or reasonably
promptly after payment or prepayment in full of any Note, you shall surrender
such Note for cancellation, reasonably promptly after any such request, to the
Company at its principal executive office or at the place of payment most
recently designated by the Company pursuant to Section 14.1. Prior to any sale
or other disposition of any Note held by you or your nominee you will, at your
election, either endorse thereon the amount of principal paid thereon and the
last date to which interest has been paid thereon or surrender such Note to the
Company in exchange for a new Note or Notes pursuant to Section 13.2. The
Company will afford the benefits of this Section 14.2 to any Institutional
Investor that is the direct or indirect transferee of any Note purchased by you
under this Agreement and that has made the same agreement relating to such Note
as you have made in this Section 14.2.

15. EXPENSES, ETC.

15.1. Transaction Expenses.

          Whether or not the transactions contemplated hereby are consummated, the
Parent or the Company will pay all reasonable costs and expenses (including
reasonable attorneys’ fees of a special counsel and, if reasonably required,
local or other counsel) incurred by you and each Other Purchaser or holder of a
Note in connection with such transactions and in connection with any
amendments, waivers or consents under or in respect of this Agreement, the
Notes or the Guaranties (whether or not such amendment, waiver or consent
becomes effective), including: (a) the costs and expenses incurred in enforcing
or defending (or determining whether or how to enforce or defend) any rights
under this Agreement, the Notes or the Guaranties or in responding

34

 

to any subpoena or other legal process or informal investigative demand issued
in connection with this Agreement, the Notes or the Guaranties, or by reason of
being a holder of any Note, (b) the costs and expenses, including financial
advisors’ fees, incurred in connection with the insolvency or bankruptcy of the
Parent or any Restricted Subsidiary, including the Company, or in connection
with any work-out or restructuring of the transactions contemplated hereby and
by the Notes and (c) the costs and expenses incurred in connection with the
initial filing of this Agreement and all related documents and financial
information, and all subsequent annual and interim filings of documents and
financial information related to this Agreement, with the Securities Valuation
Office of the National Association of Insurance Commissioners or any successor
organization succeeding to the authority thereof. The Parent or the Company
will pay, and will save you and each other holder of a Note harmless from, all
claims in respect of any fees, costs or expenses if any, of brokers and finders
(other than those retained by you).

15.2. Survival.

          The obligations of the Parent and the Company under this Section 15 will
survive the payment or transfer of any Note, the enforcement, amendment or
waiver of any provision of this Agreement or the Notes, and the termination of
this Agreement.

16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.

          All representations and warranties contained herein shall survive the
execution and delivery of this Agreement and the Notes, the purchase or
transfer by you of any Note or portion thereof or interest therein and the
payment of any Note, and may be relied upon by any subsequent holder of a Note,
regardless of any investigation made at any time by or on behalf of you or any
other holder of a Note. All statements contained in any certificate or other
instrument delivered by or on behalf of the Parent or the Company pursuant to
this Agreement or the Guaranties shall be deemed representations and warranties
of the Parent and the Company under this Agreement. Subject to the preceding
sentence, this Agreement, the Notes and the Guaranties embody the entire
agreement and understanding between you and the Parent and the Company and
supersede all prior agreements and understandings relating to the subject
matter hereof.

17. AMENDMENT AND WAIVER.

17.1. Requirements.

          This Agreement, the Notes, the Parent Guaranty and the Subsidiary Guaranty
may be amended, and the observance of any term hereof or of the Notes may be
waived (either retroactively or prospectively), with (and only with) the
written consent of the Parent, the Company and the Subsidiary Guarantors, if
parties thereto, and the Required Holders, except that (a) no amendment or
waiver of any of the provisions of Section 1, 2, 3, 4, 5, 6 or 21 hereof, or
any defined term (as it is used therein), will be effective as to you unless
consented to by you in writing, and (b) no such amendment or waiver may,
without the written consent of the holder of each Note at the time outstanding
affected thereby, (i) subject to the provisions of Section 12 relating to
acceleration or rescission, change the amount or time of any prepayment or
payment

35

 

of principal of, or reduce the rate or change the time of payment or method of
computation of interest or of the Make-Whole Amount on, the Notes, (ii) change
the percentage of the principal amount of the Notes the holders of which are
required to consent to any such amendment or waiver, or (iii) amend any of
Sections 8, 11(a), 11(b), 12, 17 or 20.

17.2. Solicitation of Holders of Notes.

     (a) Solicitation. The Parent and the Company will provide each
holder of the Notes (irrespective of the amount of Notes then owned by
it) with sufficient information, sufficiently far in advance of the date
a decision is required, to enable such holder to make an informed and
considered decision with respect to any proposed amendment, waiver or
consent in respect of any of the provisions hereof or of the Notes. The
Company will deliver executed or true and correct copies of each
amendment, waiver or consent effected pursuant to the provisions of this
Section 17 to each holder of outstanding Notes promptly following the
date on which it is executed and delivered by, or receives the consent or
approval of, the requisite holders of Notes.

     (b) Payment. The Parent and the Company will not directly or
indirectly pay or cause to be paid any remuneration, whether by way of
supplemental or additional interest, fee or otherwise, or grant any
security, to any holder of Notes as consideration for or as an inducement
to the entering into by any holder of Notes or any waiver or amendment of
any of the terms and provisions hereof unless such remuneration is
concurrently paid, or security is concurrently granted, on the same
terms, ratably to each holder of Notes then outstanding even if such
holder did not consent to such waiver or amendment.

17.3. Binding Effect, etc.

          Any amendment or waiver consented to as provided in this Section 17
applies equally to all holders of Notes and is binding upon them and upon each
future holder of any Note and upon the Parent, the Company and the Subsidiaries
(in each case, if a party thereto) without regard to whether such Note has been
marked to indicate such amendment or waiver. No such amendment or waiver will
extend to or affect any obligation, covenant, agreement, Default or Event of
Default not expressly amended or waived or impair any right consequent thereon.
No course of dealing between the Parent or the Company and the holder of any
Note nor any delay in exercising any rights hereunder or under any Note shall
operate as a waiver of any rights of any holder of such Note. As used herein,
the term “this Agreement” or “the Agreement” and references thereto shall mean
this Agreement as it may from time to time be amended or supplemented.

17.4. Notes held by Company, etc.

          Solely for the purpose of determining whether the holders of the requisite
percentage of the aggregate principal amount of Notes then outstanding approved
or consented to any amendment, waiver or consent to be given under this
Agreement or the Notes, or have directed the taking of any action provided
herein or in the Notes to be taken upon the direction of

36

 

the holders of a specified percentage of the aggregate principal amount of
Notes then outstanding, Notes directly or indirectly owned by the Company or
any of its Affiliates shall be deemed not to be outstanding.

18. NOTICES.

          All notices and communications provided for hereunder shall be in writing
and sent (a) by telecopy if the sender on the same day sends a confirming copy
of such notice by a recognized overnight delivery service (charges prepaid), or
(b) by registered or certified mail with return receipt requested (postage
prepaid), or (c) by a recognized overnight delivery service (with charges
prepaid). Any such notice must be sent:

     (i) if to you or your nominee, to you or it at the address
specified for such communications in Schedule A, or at such other
address as you or it shall have specified to the Company in
writing,

     (ii) if to any other holder of any Note, to such holder at
such address as such other holder shall have specified to the
Company in writing, or

     (iii) if to the Company, the Parent or any Subsidiary
Guarantor, to the Company at its address set forth at the beginning
hereof to the attention of the Chief Financial Officer, or at such
other address as the Company shall have specified to the holder of
each Note in writing.

Notices under this Section 18 will be deemed given only when actually received.

19. REPRODUCTION OF DOCUMENTS.

          This Agreement and all documents relating thereto, including (a) consents,
waivers and modifications that may hereafter be executed, (b) documents
received by you at the Closing (except the Notes themselves), and (c) financial
statements, certificates and other information previously or hereafter
furnished to you, may be reproduced by you by any photographic, photostatic,
microfilm, microcard, miniature photographic or other similar process and you
may destroy any original document so reproduced. The Company agrees and
stipulates that, to the extent permitted by applicable law, any such
reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by you in the regular
course of business) and any enlargement, facsimile or further reproduction of
such reproduction shall likewise be admissible in evidence. This Section 19
shall not prohibit the Company or any holder of Notes from contesting any such
reproduction to the same extent that it could contest the original, or from
introducing evidence to demonstrate the inaccuracy of any such reproduction.

20. CONFIDENTIAL INFORMATION.

          For the purposes of this Section 20, “Confidential Information” means
information delivered to you by or on behalf of the Parent, the Company or any
Subsidiary in

37

 

connection with the transactions contemplated by or otherwise pursuant to this
Agreement that is proprietary in nature and that was clearly marked or labeled
or otherwise adequately identified when received by you as being confidential
information of the Parent, the Company or such Subsidiary, provided that such
term does not include information that (a) was publicly known or otherwise
known to you prior to the time of such disclosure, (b) subsequently becomes
publicly known through no act or omission by you or any Person acting on your
behalf, (c) otherwise becomes known to you other than through disclosure by the
Parent, the Company or any Subsidiary, or (d) constitutes financial statements
delivered to you under Section 7.1 that are otherwise publicly available. You
will maintain the confidentiality of such Confidential Information in
accordance with procedures adopted by you in good faith to protect confidential
information of third parties delivered to you, provided that you may deliver or
disclose Confidential Information to (i) your directors, trustees, officers,
employees, agents, attorneys and Affiliates (to the extent such disclosure
reasonably relates to the administration of the investment represented by your
Notes), (ii) your financial advisors and other professional advisors who agree
to hold confidential the Confidential Information substantially in accordance
with the terms of this Section 20, (iii) any other holder of any Note, (iv) any
Institutional Investor to which you sell or offer to sell such Note or any part
thereof or any participation therein (if such Person has agreed in writing
prior to its receipt of such Confidential Information to be bound by the
provisions of this Section 20), (v) any Person from which you offer to purchase
any security of the Parent or the Company (if such Person has agreed in writing
prior to its receipt of such Confidential Information to be bound by the
provisions of this Section 20), (vi) any federal or state regulatory authority
having jurisdiction over you, (vii) the National Association of Insurance
Commissioners or any similar organization, or any nationally recognized rating
agency that requires access to information about your investment portfolio or
(viii) any other Person to which such delivery or disclosure may be necessary
or appropriate (w) to effect compliance with any law, rule, regulation or order
applicable to you, (x) in response to any subpoena or other legal process, (y)
in connection with any litigation to which you are a party or (z) if an Event
of Default has occurred and is continuing, to the extent you may reasonably
determine such delivery and disclosure to be necessary or appropriate in the
enforcement or for the protection of the rights and remedies under your Notes
and this Agreement. Each holder of a Note, by its acceptance of a Note, will
be deemed to have agreed to be bound by and to be entitled to the benefits of
this Section 20 as though it were a party to this Agreement. On reasonable
request by the Company in connection with the delivery to any holder of a Note
of information required to be delivered to such holder under this Agreement or
requested by such holder (other than a holder that is a party to this Agreement
or its nominee), such holder will enter into an agreement with the Company
embodying the provisions of this Section 20.

21. SUBSTITUTION OF PURCHASER.

          You shall have the right to substitute any one of your Affiliates as the
purchaser of the Notes that you have agreed to purchase hereunder, by written
notice to the Company, which notice shall be signed by both you and such
Affiliate, shall contain such Affiliate’s agreement to be bound by this
Agreement and shall contain a confirmation by such Affiliate of the accuracy
with respect to it of the representations set forth in Section 6. Upon receipt
of such notice, wherever the word “you” is used in this Agreement (other than
in this Section 21), such word

38

 

shall be deemed to refer to such Affiliate in lieu of you. In the event that
such Affiliate is so substituted as a purchaser hereunder and such Affiliate
thereafter transfers to you all of the Notes then held by such Affiliate, upon
receipt by the Company of notice of such transfer, wherever the word “you” is
used in this Agreement (other than in this Section 21), such word shall no
longer be deemed to refer to such Affiliate, but shall refer to you, and you
shall have all the rights of an original holder of the Notes under this
Agreement.

22. MISCELLANEOUS.

22.1. Successors and Assigns.

          All covenants and other agreements contained in this Agreement by or on
behalf of any of the parties hereto bind and inure to the benefit of their
respective successors and assigns (including any subsequent holder of a Note)
whether so expressed or not.

22.2. Payments Due on Non-Business Days.

          Anything in this Agreement or the Notes to the contrary notwithstanding,
any payment of principal of or Make-Whole Amount or interest on any Note that
is due on a date other than a Business Day shall be made on the next succeeding
Business Day without including the additional days elapsed in the computation
of the interest payable on such next succeeding Business Day.

22.3. Severability.

          Any provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall (to the full extent permitted by law) not invalidate or
render unenforceable such provision in any other jurisdiction.

22.4. Construction.

          Each covenant contained herein shall be construed (absent express
provision to the contrary) as being independent of each other covenant
contained herein, so that compliance with any one covenant shall not (absent
such an express contrary provision) be deemed to excuse compliance with any
other covenant. Where any provision herein refers to action to be taken by any
Person, or which such Person is prohibited from taking, such provision shall be
applicable whether such action is taken directly or indirectly by such Person.

22.5. Counterparts.

          This Agreement may be executed in any number of counterparts, each of
which shall be an original but all of which together shall constitute one
instrument. Each counterpart may consist of a number of copies hereof, each
signed by less than all, but together signed by all, of the parties hereto.

39

 

22.6. Governing Law.

          This Agreement shall be construed and enforced in accordance with, and the
rights of the parties shall be governed by, the law of the State of Illinois
excluding choice-of-law principles of the law of such State that would require
the application of the laws of a jurisdiction other than such State.

22.7. Limitation on Interest.

          You and the Other Purchasers, other holders of the Notes, the Company,
Parent, the Subsidiary Guarantors, and any other parties to the Note Documents
intend to contract in strict compliance with applicable usury law from time to
time in effect. In furtherance thereof such Persons stipulate and agree that
none of the terms and provisions contained herein or in the Notes shall ever be
construed to create a contract to pay, for the use, forbearance or detention of
money, interest in excess of the maximum amount of interest permitted to be
charged by applicable law from time to time in effect. Neither the Company,
nor Parent, nor the Subsidiary Guarantors nor any present or future guarantors,
endorsers, or other Persons hereafter becoming liable for payment of any
Obligation shall ever be liable for unearned interest thereon or shall ever be
required to pay interest thereon in excess of the maximum amount that may be
lawfully contracted for, charged, or received under applicable law from time to
time in effect, and the provisions of this section shall control over all other
provisions of the Note Documents which may be in conflict or apparent conflict
herewith. You and the Other Purchasers and other holders of the Notes
expressly disavow any intention to contract for, charge, or collect excessive
unearned interest or finance charges in the event the maturity of any Note is
accelerated. If (a) the maturity of any Note is accelerated for any reason,
(b) any Note is prepaid and as a result any amounts held to constitute interest
are determined to be in excess of the legal maximum, or (c) you or any Other
Purchaser or any other holder of any Note shall otherwise collect moneys that
are determined to constitute interest that would otherwise increase the
interest on any or all of the Notes to an amount in excess of that permitted to
be charged by applicable law then in effect, then all sums determined to
constitute interest in excess of such legal limit shall, without penalty, be
promptly applied to reduce the then outstanding principal of the related Notes
or, at such Purchaser’s or holder’s option, promptly returned to the Company or
other payor thereof upon such determination. In determining whether or not the
interest paid or payable, under any specific circumstance, exceeds the maximum
amount permitted under applicable law, you and the Other Purchasers, other
holders of the Notes, the Company, Parent, the Subsidiary Guarantors (and any
other payors thereof) shall to the greatest extent permitted under applicable
law, (i) characterize any non-principal payment as an expense, fee or premium
rather than as interest, (ii) exclude voluntary prepayments and the effects
thereof, and (iii) amortize, prorate, allocate, and spread the total amount of
interest throughout the entire contemplated term of the instruments evidencing
the Notes in accordance with the amounts outstanding from time to time
thereunder and the maximum legal rate of interest from time to time in effect
under applicable law in order to lawfully contract for, charge, or receive the
maximum amount of interest permitted under applicable law. In the event
applicable law provides for an interest ceiling under Chapter 303 of the Texas
Finance Code (the “Texas Finance Code”) as amended, to the extent that the
Texas Finance Code is mandatorily applicable to you or any Other Purchaser or
any other

40

 

holder of any Note, for that day, the ceiling shall be the “weekly ceiling” as
defined in the Texas Finance Code, provided that if any applicable law permits
greater interest, the law permitting the greatest interest shall apply.

22.8. Submission to Jurisdiction.

          Any litigation based hereon, or arising out of, under or in connection
with this Agreement or the Notes, may be brought and maintained in the courts
of the State of Illinois or in the United States District Court for the
Northern District of Illinois. Each of the Company and the Parent expressly
and irrevocably submits to the jurisdiction of the courts of the State of
Illinois and of the United States District Court for the Northern District of
Illinois for the purpose of any such litigation as set forth above. Each of
the Company and the Parent further irrevocably consents to the service of
process by registered mail, postage prepaid, to the address specified in
Section 18 or by personal service within or without the State of Illinois.
Each of the Company and the Parent expressly and irrevocably waives, to the
fullest extent permitted by law, any objection that it may now or hereafter
have to the laying of venue of any such litigation brought in any such court
referred to above and any claim that any such litigation has been brought in an
inconvenient forum.

22.9. Waiver of Jury Trial.

          Each of the Company and the Parent waives any right to a trial by jury in
any action or proceeding to enforce or defend any rights under this Agreement
or under any amendment, instrument, document or Agreement delivered or that may
in the future be delivered in connection herewith and agrees that any such
action or proceeding shall be tried before a court and not before a jury.

* * * * *

41

 

          If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to
the Company, whereupon the foregoing shall become a binding agreement between
you, the Company and the Parent.

	 	 	 
	

	 	Very truly yours,
	 
	 	 
	

	 	ENCORE WIRE LIMITED
	

	 	By its General Partner, EWC GP CORP.
	 
	 	 
	

	 	By: /s/ DANIEL L. JONES
	

	 	Name: Daniel L. Jones
	

	 	Title: President
	 
	 	 
	

	 	ENCORE WIRE CORPORATION
	 
	 	 
	

	 	By: /s/ DANIEL L. JONES
	

	 	Name: Daniel L. Jones
	

	 	Title: President

S-1

 

The foregoing is agreed to as of the date thereof.

HARTFORD LIFE INSURANCE COMPANY

By: Hartford Investment Services, Inc.

Its Agent and Attorney-in-Fact

By: /s/ RONALD A. MENDEL

Name: Ronald A. Mendel

Title: Managing Director

S-2

 

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

By: /s/ TAD ANDERSON

Name: Tad Anderson

Title: Manager, Investments

By: /s/ J.G. LOWERY

Name: J.G. Lowery

Title: Assistant Vice President, Investments

LONDON LIFE INSURANCE COMPANY

By: /s/ B.R. ALLISON

Name: B.R. Allison

Title: Senior Vice-President

By: /s/ D.B.E. AYERS

Name: D.B.E. Ayers

Title: Manager

LONDON LIFE AND CASULATY REINSURANCE CORPORATION

By: Orchard Capital Management, LLC as Investment Advisor

By: /s/ TAD ANDERSON

Name: Tad Anderson

Title: Manager, Investments

By: /s/ J.G. LOWERY

Name: J.G. Lowery

Title: Assistant Vice President, Investments

S-3

 

SCHEDULE A

INFORMATION RELATING TO PURCHASERS

	 	 	 	 	 
	 	 	Principal Amount of
	Name of Purchaser
	 	Notes to be Purchased

	Hartford Life Insurance Company
	 	$	5,000,000	 
	 
	 	$	5,000,000	 

Register Notes in name of: Hartford Life Insurance Company

(1) Payment shall be made by bank wire transfer of immediately available
federal funds, providing sufficient information to identify the source of the
transfer, the amount of interest and/or principal and the series of Notes, to:

JP Morgan Chase

4 New York Plaza

New York, New York 10004

Bank ABA No. 021000021

Chase NYC/Cust

A/C # 900-9-000200 for F/C/T G06609-LCA

Attn: Bond Interest/Principal — Encore Wire Ltd.

5.27% Senior Notes Series 2004-A due August 27, 2011

PPN # 29263@ AA 7 Prin $                    Int $                   

(2) All notices with respect to confirmation of payments on account of the
Notes shall be delivered or mailed to:

Hartford Investment Management Company

c/o Portfolio Support

P.O. Box 1744

Hartford, Connecticut 06144-1744

Telefacsimile: (860) 297-8875/8876

(3) All other communications shall be delivered or mailed to:

Hartford Investment Management Company

c/o Investment Department-Private Placements

P.O. Box 1744

Hartford, Connecticut 06144-1744

Telefacsimile: (860) 297-8884

Schedule A

 

 

(4) Notes are to be delivered to:

JP Morgan Chase

North America Insurance

3 Chase MetroTech Center- 5th Floor South

Brooklyn, New York 11245

Attn: Bettye Carrera

Custody Account Number: G06609-LCA must appear on outside of envelope

Tax ID No. 06-0974148

Schedule A

2

 

INFORMATION RELATING TO PURCHASERS

	 	 	 	 	 
	 	 	Principal Amount of
	Name of Purchaser
	 	Notes to be Purchased

	Hartford Life Insurance Company
	 	$	5,000,000	 
	 
	 	$	5,000,000	 
	 
	 	$	5,000,000	 

Register Notes in name of: Hartford Life Insurance Company

(1) Payment shall be made by bank wire transfer of immediately available
federal funds, providing sufficient information to identify the source of the
transfer, the amount of interest and/or principal and the series of Notes, to:

JP Morgan Chase

4 New York Plaza

New York, New York 10004

Bank ABA No. 021000021

Chase NYC/Cust

A/C # 900-9-000200 for F/C/T G06610-LFA

Attn: Bond Interest/Principal — Encore Wire Ltd.

5.27% Senior Notes Series 2004-A due August 27, 2011

PPN # 29263@ AA 7 Prin $__________ Int $____________

(2) All notices with respect to confirmation of payments on account of the
Notes shall be delivered or mailed to:

Hartford Investment Management Company

c/o Portfolio Support

P.O. Box 1744

Hartford, Connecticut 06144-1744

Telefacsimile: (860) 297-8875/8876

(3) All other communications shall be delivered or mailed to:

Hartford Investment Management Company

c/o Investment Department-Private Placements

P.O. Box 1744

Hartford, Connecticut 06144-1744

Telefacsimile: (860) 297-8884

Schedule A

3

 

(4) Notes are to be delivered to:

JP Morgan Chase

North America Insurance

3 Chase MetroTech Center- 5th Floor South

Brooklyn, New York 11245

Attn: Bettye Carrera

Custody Account Number: G06610-LFA must appear on outside of envelope

Tax ID No. 06-0974148

Schedule A

4

 

INFORMATION RELATING TO PURCHASERS

	 	 	 	 	 
	 	 	Principal Amount of
	Name of Purchaser
	 	Notes to be Purchased

	Great-West Life & Annuity Insurance Company
	 	$	4,000,000	 

Register Notes in name of: Great-West Life & Annuity Insurance Company

(1) Payment shall be made by bank wire transfer of immediately available
federal funds, providing sufficient information to identify the source of the
transfer, the amount of interest and/or principal and the series of Notes, to:

	 	 	 	 	 
	 	 	ABA #021-000-018 BKofNYC/CTR/BBK=IOC566
	 	 	P&I Department — GWL #640935
	 
	 	 	 	 
	

	 	Special Instructions:
	 	1) security description (PPN# 29263@ AA 7),
	

	 	 	 	2) allocation of payment between principal and interest, and
	

	 	 	 	3) confirmation of principal balance.

(2) All notices with respect to confirmation of payments on account of the
Notes shall be delivered or mailed to:

The Bank of New York

Institutional Custody Department, 14th Floor

One Wall Street

New York, New York 10286

Telecopier: (212) 635-8844

(3) All other communications shall be delivered or mailed to:

Great-West Life & Annuity Insurance Company

Attention: Investments Division

8515 East Orchard Road, 3T2

Greenwood Village, Colorado 80111

Telecopier: (303) 737-6193

Schedule A

5

 

(4) Notes are to be delivered to:

The Bank of New York

3rd Floor, Window A

One Wall Street

New York, New York 10286

Attention: Receive/Deliver Department — GWL #640935

Tax ID No. 84-0467907

Schedule A

6

 

INFORMATION RELATING TO PURCHASERS

	 	 	 	 	 
	 	 	Principal Amount of
	Name of Purchaser
	 	Notes to be Purchased

	Great-West Life & Annuity Insurance Company
	 	$	6,000,000	 

Register Notes in name of: Great-West Life & Annuity Insurance Company

(1) Payment shall be made by bank wire transfer of immediately available
federal funds, providing sufficient information to identify the source of the
transfer, the amount of interest and/or principal and the series of Notes, to:

	 	 	 	 	 
	 	 	ABA #021-000-018 BKofNYC/CTR/BBK=IOC566
	 	 	P&I Department — GWL #140677
	 	 	GWLA HEALTH ACCOUNT #140677
	 
	 	 	 	 
	

	 	Special Instructions:
	 	1) security description (PPN# 29263@ AA 7),
	

	 	 	 	2) allocation of payment between principal and interest, and
	

	 	 	 	3) confirmation of principal balance.

(2) All notices with respect to confirmation of payments on account of the
Notes shall be delivered or mailed to:

The Bank of New York

Attention: GWL&A Administrator

Institutional Custody Department, 14th Floor

One Wall Street

New York, New York 10286

Telecopier: (212) 635-8844

(3) All other communications shall be delivered or mailed to:

Great-West Life & Annuity Insurance Company

Attention: Investments Division

8515 East Orchard Road, 3T2

Greenwood Village, Colorado 80111

Facsimile: (303) 737-6193

Schedule A

7

 

(4) Notes are to be delivered to:

The Bank of New York

3rd Floor, Window A

One Wall Street

New York, New York 10286

Attention: Receive/Deliver Department — GWLA #140677

Tax ID No. 84-0467907

Schedule A

8

 

INFORMATION RELATING TO PURCHASERS

	 	 	 	 	 
	 	 	Principal Amount of
	Name of Purchaser
	 	Notes to be Purchased

	London Life Insurance Company
	 	$	7,000,000	 

Register Notes in name of: London Life Insurance Company

(1) Payment shall be made by bank wire transfer of immediately available
federal funds, providing sufficient information to identify the source of the
transfer, the amount of interest and/or principal and the series of Notes, to:

	 	 	 	 	 
	

	 	Pay Through:
	 	Wachovia Bank NA
	

	 	 	 	New York
	

	 	 	 	SWIFT Code: PNBPUS3NNYC
	

	 	 	 	Fed Routing: 026005092
	

	 	 	 	 
	

	 	Intermediary Institution:
	 	Bank of Montreal
	

	 	 	 	SWIFT BIC Address: BOFMCAT2FXM
	

	 	 	 	ACCOUNT No.: 2000192009836
	

	 	 	 	CHIPS UID: 192531
	

	 	 	 	 
	

	 	Account with Institution:
	 	Bank of Montreal
	

	 	 	 	335 Main Street, Winnipeg, Manitoba, Canada R3C 2R6
	

	 	 	 	Canadian Direct Payment Routing Number: 000105797
	

	 	 	 	Bank of Montreal: 0001
	

	 	 	 	Branch Transit Number: 05797
	

	 	 	 	 
	

	 	Beneficiary:
	 	Transit No. & Account No.: 05794700026
	

	 	 	 	London Life Insurance Company
	

	 	 	 	100 Osborne Street North
	

	 	 	 	Winnipeg, Manitoba, Canada R3C 3A5
	

	 	 	 	 
	

	 	Special Instructions:
	 	1) security description (PPN# 29263@ AA 7),
	

	 	 	 	2) allocation of payment between principal and interest, and
	

	 	 	 	3) confirmation of principal balance.

Schedule A

9

 

(2) All notices with respect to confirmation of payments on account of the
Notes shall be delivered or mailed to:

Bank of Montreal

335 Main Street

Winnipeg, Manitoba

Canada R3C 2R6

Facsimile: (204) 985-2123

(3) All other communications shall be delivered or mailed to:

London Life Insurance Company

Great-West Life Centre

100 Osborne Street North

Winnipeg, Manitoba

Canada R3C 3A5

Attention: Securities Administration -2C

Facsimile: (204) 946-8395

		
	pc: 	Great-West Life & Annuity Insurance Company

Attention: Investments Division

8515 E. Orchard Road, 3T2

Greenwood Village, Colorado 80111

Facsimile: (303) 737-6193

(4) Notes are to be delivered to:

London Life Insurance Company

Great-West Life Centre

100 Osborne Street North

Winnipeg, Manitoba

Canada R3C 3A5

Attention: Securities Administration -2C

Schedule A

10

 

INFORMATION RELATING TO PURCHASERS

	 	 	 	 	 
	 	 	Principal Amount of
	Name of Purchaser
	 	Notes to be Purchased

	London Life and Casualty Reinsurance Corporation
	 	$	3,000,000	 

Register Notes in name of: London Life and Casualty Reinsurance Corporation

(1) Payment shall be made by bank wire transfer of immediately available
federal funds, providing sufficient information to identify the source of the
transfer, the amount of interest and/or principal and the series of Notes, to:

ABA #011500010 Fleet Inv Services/A/C 050031338100101/

FBO LLCRC Life/0008843610

	 	 	 	 	 
	

	 	Special Instructions:
	 	1) security description (PPN# 29263@ AA 7),
	

	 	 	 	2) allocation of payment between principal and interest, and
	

	 	 	 	3) confirmation of principal balance.

(2) All notices with respect to confirmation of payments on account of the
Notes shall be delivered or mailed to:

Fleet Bank

One Federal Street

Mail Code 10305A

Boston, Massachusetts 02210

Attention: Carol Carbone

Facsimile: (401) 278-3792

(3) All other communications shall be delivered or mailed to:

London Life and Casualty Reinsurance Corporation

c/o Orchard Capital Management, LLC

Attention: Investments Division

8515 East Orchard Road, 3T2

Greenwood Village, Colorado 80111

Facsimile: (303) 737-6193

Schedule A

11

 

(4) Notes are to be delivered to:

Fleet Bank

159 East Main Street

Mail Code NYUT37403D

Rochester, New York 14692

Attention: Mary Jo Didia

Tax ID No. 98-0107585

Schedule A

12

 

SCHEDULE B

DEFINED TERMS

          As used herein, the following terms have the respective meanings set forth
below or set forth in the Section hereof following such term:

          “Affiliate” means, at any time, and with respect to any Person, (a) any
other Person that at such time directly or indirectly through one or more
intermediaries Controls, or is Controlled by, or is under common Control with,
such first Person, and (b) any Person beneficially owning or holding, directly
or indirectly, 15% or more of any class of voting or equity interests of the
Company or any Subsidiary or any corporation of which the Company and its
Subsidiaries beneficially own or hold, in the aggregate, directly or
indirectly, 15% or more of any class of voting or equity interests. As used in
this definition, “Control” means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise. Unless the context otherwise clearly requires, any reference to an
“Affiliate” is a reference to an Affiliate of the Parent or the Company.

          “Anti-Terrorism Order” means Executive Order 13224 of September 23, 2001
Blocking Property and Prohibiting Transactions With Persons Who Commit,
Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)).

          “Business Day” means (a) for the purposes of Section 8.6 only, any day
other than a Saturday, a Sunday or a day on which commercial banks in New York
City are required or authorized to be closed, and (b) for the purposes of any
other provision of this Agreement, any day other than a Saturday, a Sunday or a
day on which commercial banks in Chicago, Illinois or New York City are
required or authorized to be closed.

          “Capital Lease” means, at any time, a lease with respect to which the
lessee is required concurrently to recognize the acquisition of an asset and
the incurrence of a liability in accordance with GAAP.

          “Closing” is defined in Section 3.

          “Code” means the Internal Revenue Code of 1986, as amended from time to
time, and the rules and regulations promulgated thereunder from time to time.

          “Company” means Encore Wire Limited, a Texas limited partnership.

          “Confidential Information” is defined in Section 20.

          “Consolidated Debt” means, as of any date, outstanding Debt of the Parent
and its Restricted Subsidiaries, including the Company, as of such date,
determined on a consolidated basis in accordance with GAAP.

Schedule B

 

 

          “Consolidated EBIT” means, for any period, the sum of Consolidated Net
Income for such period, plus, to the extent deducted in determining such
Consolidated Net Income, (i) Consolidated Interest Expense, (ii) federal,
state, local and foreign income, franchise, value added and similar taxes, and
(iii) other non-cash charges, except depreciation and amortization expense.

          “Consolidated EBITDA” means, for any period, the sum of Consolidated Net
Income for such period, plus, to the extent deducted in determining such
Consolidated Net Income, (i) Consolidated Interest Expense, (ii) federal,
state, local and foreign income, franchise, value added and similar taxes,
(iii) depreciation and amortization expense and (iv) other non-cash charges.
If, during the period for which Consolidated EBITDA is being calculated, the
Parent or a Restricted Subsidiary, including the Company, has acquired one or
more Persons (or the assets thereof) or divested one or more Restricted
Subsidiaries (or the assets thereof), Consolidated EBITDA shall be calculated
on a pro forma basis as if all of such acquisitions (other than acquisitions by
or resulting in Unrestricted Subsidiaries) and divestitures had occurred on the
first day of such period.

          “Consolidated Interest Expense” means, for any period, the consolidated
interest expense of the Parent and its Restricted Subsidiaries, including the
Company, for such period determined in accordance with GAAP.

          “Consolidated Net Income” means, for any period, the net income or loss of
the Parent and its Restricted Subsidiaries, including the Company, for such
period determined on a consolidated basis in accordance with GAAP.

          “Consolidated Net Worth” means, as of any date, the consolidated
stockholders’ equity of the Parent and its Restricted Subsidiaries, including
the Company, as of such date, determined in accordance with GAAP, less minority
interests.

          “Consolidated Total Assets” means, as of any date, the assets and
properties of the Parent and its Restricted Subsidiaries, including the
Company, as of such date, determined on a consolidated basis in accordance with
GAAP.

          “Credit Agreement” means the Credit Agreement dated as of August 27, 2004
by and among the Company, Bank of America, N.A., as agent, and Wells Fargo
Bank, N.A., as a lender and the other lenders party thereto, as such agreement
may be hereafter amended, modified, restated, supplemented, refinanced,
increased or reduced from time to time, and any successor credit agreement or
similar facilities.

          “Debt” with respect to any Person means, at any time, without duplication,

     (a) its liabilities for borrowed money;

Schedule B

2

 

     (b) its liabilities for the deferred purchase price of property
acquired by such Person (excluding accounts payable and other accrued
liabilities arising in the ordinary course of business but including all
liabilities created or arising under any conditional sale or other title
retention agreement with respect to any such property);

     (c) all liabilities appearing on its balance sheet in accordance
with GAAP in respect of Capital Leases;

     (d) all liabilities for borrowed money secured by any Lien with
respect to any property owned by such Person (whether or not it has
assumed or otherwise become liable for such liabilities);

     (e) its redemption liabilities under mandatorily redeemable
preferred stock, to the extent such obligations arise prior to the stated
maturity of the Notes; and

     (f) any Guaranty of such Person with respect to liabilities of a
type described in any of clauses (a) through (e) hereof.

          “Default” means an event or condition the occurrence or existence of which
would, with the lapse of time or the giving of notice or both, become an Event
of Default.

          “Default Rate” means that rate of interest that is the greater of (i) 2%
per annum above the rate of interest stated in clause (a) of the first
paragraph of the Notes or (ii) 2% over the rate of interest publicly announced
by Bank of America, N.A. as its “base” or “prime” rate.

          “Disposition” is defined in Section 10.6

          “Environmental Laws” means any and all federal, state, local, and foreign
statutes, laws, regulations, ordinances, rules, judgments, orders, decrees,
permits, concessions, grants, franchises, licenses, agreements or governmental
restrictions relating to pollution and the protection of the environment or the
release of any materials into the environment, including but not limited to
those related to hazardous substances or wastes, air emissions and discharges
to waste or public systems.

          “ERISA” means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the rules and regulations promulgated thereunder
from time to time in effect.

          “ERISA Affiliate” means any trade or business (whether or not
incorporated) that is treated as a single employer together with the Company
under section 414 of the Code.

          “Event of Default” is defined in Section 11.

          ”Exchange Act” means the Securities Exchange Act of 1934, as amended.

Schedule B

3

 

          “GAAP” means generally accepted accounting principles as in effect from
time to time in the United States of America.

          “Governmental Authority” means

     (a) the government of

               (i) the United States of America or any state or other
political subdivision thereof, or

               (ii) any jurisdiction in which the Company or any Subsidiary
conducts all or any part of its business, or which asserts
jurisdiction over any properties of the Company or any Subsidiary,
or

     (b) any entity exercising executive, legislative, judicial,
regulatory or administrative functions of, or pertaining to, any such
government.

          “Guaranty” means, with respect to any Person, any obligation (except the
endorsement in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing
any debt, dividend or other obligation of any other Person in any manner,
whether directly or indirectly, including obligations incurred through an
agreement, contingent or otherwise, by such Person:

     (a) to purchase such debt or obligation or any property constituting
security therefor;

     (b) to advance or supply funds (i) for the purchase or payment of
such debt or obligation, or (ii) to maintain any working capital or other
balance sheet condition or any income statement condition of any other
Person or otherwise to advance or make available funds for the purchase
or payment of such debt or obligation;

     (c) to lease properties or to purchase properties or services
primarily for the purpose of assuring the owner of such debt or
obligation of the ability of any other Person to make payment of the debt
or obligation; or

     (d) otherwise to assure the owner of such debt or obligation against
loss in respect thereof.

In any computation of the debt or other liabilities of the obligor under any
Guaranty, the debt or other obligations that are the subject of such Guaranty
shall be assumed to be direct obligations of such obligor.

          “Guaranties” is defined in Section 1.2(a).

Schedule B

4

 

          “Hazardous Material” means any and all pollutants, toxic or hazardous
wastes or any other substances that might pose a hazard to health or safety,
the removal of which may be required or the generation, manufacture, refining,
production, processing, treatment, storage, handling, transportation, transfer,
use, disposal, release, discharge, spillage, seepage, or filtration of which is
or shall be restricted, prohibited or penalized by any applicable law
(including, asbestos, urea formaldehyde foam insulation and polycholorinated
biphenyls).

          “holder” means, with respect to any Note, the Person in whose name such
Note is registered in the register maintained by the Company pursuant to
Section 13.1.

          “INHAM Exemption” is defined in Section 6.2(e).

          “Institutional Investor” means (a) any original purchaser of a Note, (b)
any holder of $5,000,000 or more in aggregate principal amount of the Notes and
(c) any bank, trust company, savings and loan association or other financial
institution, any pension plan, any investment company, any insurance company,
any broker or dealer, or any other similar financial institution or entity,
regardless of legal form.

          “Lien” means, with respect to any Person, any mortgage, lien, pledge,
charge, security interest or other encumbrance, or any interest or title of any
vendor, lessor, lender or other secured party to or of such Person under any
conditional sale or other title retention agreement or Capital Lease, upon or
with respect to any property or asset of such Person (including in the case of
stock, stockholder agreements, voting trust agreements and all similar
arrangements).

          “Make-Whole Amount” is defined in Section 8.6.

          “Material” means material in relation to the business, operations,
affairs, financial condition, assets or properties of the Parent and its
Subsidiaries, including the Company, taken as a whole.

          “Material Adverse Effect” means a material adverse effect on (a) the
business, operations, affairs, financial condition, assets or properties of the
Parent and its Subsidiaries, including the Company, taken as a whole, (b) the
ability of the Company to perform its obligations under this Agreement and the
Notes, (c) the ability of the Parent to perform its obligations under this
Agreement or the Parent Guaranty, (d) the ability of any Subsidiary Guarantor
to perform its obligations under the Subsidiary Guaranty, or (e) the validity
or enforceability of this Agreement, the Notes, the Parent Guaranty or the
Subsidiary Guaranty.

          “Material Subsidiary” means, at any time, any Restricted Subsidiary that
would at such time account for more than 10% of (i) Consolidated Total Assets
as of the end of the most recently completed fiscal quarter or (ii)
consolidated revenue of the Parent and its

Schedule B

5

 

Restricted Subsidiaries, including the Company, for the four fiscal quarters
ending as of the end of the most recently completed fiscal quarter.

          “Memorandum” is defined in Section 5.3.

          “Multiemployer Plan” means any Plan that is a “multiemployer plan” (as
such term is defined in section 4001(a)(3) of ERISA).

          “Notes” is defined in Section 1.1.

          “Officer’s Certificate” means a certificate of a Senior Financial Officer
or of any other officer of the Parent whose responsibilities extend to the
subject matter of such certificate.

          “Other Purchasers” is defined in Section 2.

          “PBGC” means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA or any successor thereto.

          “Parent” means Encore Wire Corporation, a Delaware corporation.

          “Parent Guaranty” is defined in Section 1.2(a).

          “Person” means an individual, partnership, corporation, limited liability
company, association, trust, unincorporated organization, or a government or
agency or political subdivision thereof.

          “Plan” means an “employee benefit plan” (as defined in section 3(3) of
ERISA) that is or, within the preceding five years, has been established or
maintained, or to which contributions are or, within the preceding five years,
have been made or required to be made, by the Company or any ERISA Affiliate or
with respect to which the Company or any ERISA Affiliate may have any
liability.

          “Priority Debt” means, as of any date, the sum (without duplication) of
(a) Debt of the Parent or a Restricted Subsidiary, including the Company,
secured by Liens not otherwise permitted by Sections 10.4(a) through (g), and
(b) unsecured Debt of a Restricted Subsidiary other than (i) the Notes, (ii)
Debt owed to the Parent or any other Restricted Subsidiary, including the
Company, (iii) any guarantee of the Notes pursuant to the Subsidiary Guaranty,
(iv) Debt of a Person (other than an Unrestricted Subsidiary) outstanding at
the time such Person became a Restricted Subsidiary, provided that such Debt
was not incurred in contemplation of such Person becoming a Restricted
Subsidiary and (v) Debt of the Company under the Credit Agreement.

          “property” or “properties” means, unless otherwise specifically limited,
real or personal property of any kind, tangible or intangible, choate or
inchoate.

Schedule B

6

 

          “Purchaser” means each purchaser listed in Schedule A.

          “QPAM Exemption” is defined in Section 6.2(d).

          “Required Holders” means, at any time, the holders of more than 65% in
principal amount of the Notes at the time outstanding (exclusive of Notes then
owned by the Company or any of its Affiliates).

          “Responsible Officer” means any Senior Financial Officer and any other
officer of the Parent with responsibility for the administration of the
relevant portion of this agreement.

          “Restricted Subsidiary” means any Subsidiary (a) of which at least a
majority of the voting securities are owned by the Parent and/or one or more
Restricted Subsidiaries and (b) that the Parent has not designated an
Unrestricted Subsidiary by notice in writing given to the holders of the Notes
pursuant to Section 10.7.

          “Securities Act” means the Securities Act of 1933, as amended from time to
time.

          “Senior Debt” means, at any time, all Consolidated Debt other than
Subordinated Debt.

          “Senior Financial Officer” means the chief financial officer, principal
accounting officer, treasurer or comptroller of the Parent.

          “Source” is defined in Section 6.2.

          “Subordinated Debt” means any Debt that is in any manner subordinated in
right of payment or security in any respect to Debt evidenced by the Notes

          “Subsidiary” means, as to any Person, any corporation, association or
other business entity in which such Person or one or more of its Subsidiaries
or such Person and one or more of its Subsidiaries owns sufficient equity or
voting interests to enable it or them (as a group) ordinarily, in the absence
of contingencies, to elect a majority of the directors (or Persons performing
similar functions) of such entity, and any partnership, joint venture or
limited liability company if more than a 50% interest in the profits or capital
thereof is owned by such Person or one or more of its Subsidiaries or such
Person and one or more of its Subsidiaries (unless such partnership or limited
liability company can and does ordinarily take major business actions without
the prior approval of such Person or one or more of its Subsidiaries). Unless
the context otherwise clearly requires, any reference to a “Subsidiary” is a
reference to a Subsidiary of the Parent.

          “Subsidiary Guarantor” means EWC GP Corp., EWC LP Corp., EWC Aviation
Corp. and any other Subsidiary that hereafter becomes a party to the Subsidiary
Guaranty.

Schedule B

7

 

          “Subsidiary Guaranty” is defined in Section 1.2(a).

          “this Agreement” or “the Agreement” is defined in Section 17.3.

          “Unrestricted Subsidiary” means any Subsidiary of the Parent, other than
the Company, that has been so designated by notice in writing given by the
Parent to the holders of the Notes.

          “USA Patriot Act” means Public Law 107-56 of the United States of America,
United and Strengthening America by Providing Tools Required to Intercept and
Obstruct Terrorism (USA PATRIOT) Act of 2001.

          “Wholly Owned Restricted Subsidiary” means, at any time, any Restricted
Subsidiary 100% of all of the equity interests (except directors’ qualifying
shares) and voting interests of which are owned by any one or more of the
Parent and the Parent’s other Wholly Owned Restricted Subsidiaries, including
the Company, at such time.

Schedule B

8

 

SCHEDULE 5.4

SUBSIDIARIES AND OWNERSHIP OF SUBSIDIARY STOCK

Subsidiaries

EWC GP Corp., a Delaware corporation

100% of outstanding shares owned by Parent

EWC LP Corp., a Texas corporation

100% of outstanding shares owned by Parent

ENCORE WIRE LIMITED, a Texas limited partnership

1% general partnership interest owned by EWC GP Corp.

99% limited partnership interest owned by EWC LP Corp.

EWC AVIATION Corp., a Texas corporation

100% of outstanding shares owned by Parent

Affiliates

Capital Southwest Corporation

(beneficial owner of more than 15% of outstanding capital stock of Parent)

Directors and Officers of Parent and the Company

Directors of Parent:

Vincent A Rego, Donald E. Courtney, Daniel L. Jones, Scott D. Weaver,

William R. Thomas, John H. Wilson, Joseph M. Brito, Thomas L. Cunningham

Senior Officers of Parent:

Vincent A. Rego, Chairman of the Board and CEO

Daniel L. Jones, President and COO

Frank J. Bilban, Vice President-Finance, CFO, Treasurer and Secretary

David K. Smith, Vice President-Operations

Directors of EWC GP Corp., general partner of the Company:

Vincent A. Rego, Daniel L. Jones, Frank J. Bilban

Senior Officers of EWC GP Corp., general partner of the Company:

Vincent A. Rego, Chairman of the Board and CEO

Daniel L. Jones, President and COO

Schedule 5.4

 

 

Frank J. Bilban, Vice President-Finance, CFO, Treasurer and Secretary

David K. Smith, Vice President-Operations

Schedule 5.4

 

 

SCHEDULE 5.5

FINANCIAL STATEMENTS

Consolidated financial statements of the Parent contained in Parent’s Form 10-K
for the year ended December 31, 2003.

Consolidated financial statements of the Parent contained in Parent’s Form 10-Q
for the quarter ended March 31, 2004.

Consolidated financial statements of the Parent contained in Parent’s Form 10-Q
for the quarter ended June 30, 2004.

Financial statements of the Parent and its Subsidiaries contained in the
Offering Memorandum dated July 2004.

Schedule 5.11

 

 

SCHEDULE 5.14

USE OF PROCEEDS

The Company will apply all proceeds of the sale of the Notes to repay
outstanding Debt under that certain Financing Agreement dated August 31, 1999
among the Company, Bank of America, N.A., as administrative agent, and the
lenders named therein, as amended.

Schedule 5.14

 

 

SCHEDULE 5.15

DEBT

As of June 30, 2004:

$72,500,000 of outstanding principal Debt under Financing Agreement dated
August 31, 1999 among the Company, Bank of America, N.A., as administrative
agent, and the lenders named therein, as amended, maturing 5/31/97, LIBOR plus.

As of closing (after giving effect to application of proceeds of the Notes):

Approximately $21,450,000 of outstanding principal Debt under the Credit
Agreement, maturing 8/31/2009, LIBOR plus.

Schedule 5.15

 

 

EXHIBIT 1.1

[FORM OF SERIES 2004-A SENIOR NOTE]

ENCORE WIRE LIMITED

5.27% Senior Note, Series 2004-A

due August 27, 2011

			
	No. AR-[                   ]

$[                   ]
	 	[Date]

PPN: 29263@ AA 7

          FOR VALUE RECEIVED, the undersigned, ENCORE WIRE LIMITED (herein called
the “Company”), a limited partnership organized and existing under the laws of
the State of Texas, promises to pay to
[                  ], or registered assigns, the
principal sum of
$[                      ] on August 27, 2011, with interest (computed
on the basis of a 360-day year of twelve 30-day months) (a) on the unpaid
balance thereof at the rate of 5.27% per annum from the date hereof, payable
semiannually, on February 27 and August 27 in each year, commencing with the
February 27 or August 27 next succeeding the date hereof, until the principal
hereof shall have become due and payable, and (b) to the extent permitted by
law on any overdue payment (including any overdue prepayment) of principal, any
overdue payment of interest and any overdue payment of any Make-Whole Amount
(as defined in the Note Purchase Agreement referred to below), payable
semiannually as aforesaid (or, at the option of the registered holder hereof,
on demand), at a rate per annum from time to time equal to the greater of (i)
7.27% or (ii) 2% over the rate of interest publicly announced by Bank of
America, N.A. from time to time in Chicago, Illinois as its “base” or “prime”
rate.

          Payments of principal of, interest on and any Make-Whole Amount with
respect to this Note are to be made in lawful money of the United States of
America at the principal office of Bank of America, N.A. in Chicago, Illinois
or at such other place as the Company shall have designated by written notice
to the holder of this Note as provided in the Note Purchase Agreement referred
to below.

          This Note is one of Senior Notes (herein called the “Notes”) issued
pursuant to a Note Purchase Agreement dated as of August 1, 2004 (as from time
to time amended, the “Note Purchase Agreement”), between the Company, Encore
Wire Corporation and the respective Purchasers named therein and is entitled to
the benefits thereof. Each holder of this Note will be deemed, by its
acceptance hereof, (i) to have agreed to the confidentiality provisions set
forth in Section 20 of the Note Purchase Agreement, (ii) to have made the
representation set forth in Section 6.2 of the Note Purchase Agreement and
(iii) to have agreed to the restriction on transfer of this Note set forth in
Section 13.3 of the Note Purchase Agreement.

Exhibit 1.1

 

 

          This Note is a registered Note and, as provided in the Note Purchase
Agreement, upon surrender of this Note for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed, by
the registered holder hereof or such holder’s attorney duly authorized in
writing, a new Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Company will not be affected by any notice to
the contrary.

          This Note is subject to optional prepayment, in whole or from time to time
in part, at the times and on the terms specified in the Note Purchase Agreement
but not otherwise.

          If an Event of Default, as defined in the Note Purchase Agreement, occurs
and is continuing, the principal of this Note may be declared or otherwise
become due and payable in the manner, at the price (including any applicable
Make-Whole Amount) and with the effect provided in the Note Purchase Agreement.

          Payment of the principal of, and interest and Make-Whole Amount, if any,
on this Note, and all other amounts due under the Note Purchase Agreement, is
guaranteed pursuant to the terms of Guaranties dated as of August 1, 2004 of
the Parent and certain Subsidiaries of the Company.*

          This Note shall be construed and enforced in accordance with, and the
rights of the parties shall be governed by, the law of the State of Illinois
excluding choice-of-law principles of the law of such State that would require
the application of the laws of a jurisdiction other than such State.

	 	 	 	 	 
	 	 	ENCORE WIRE LIMITED
	 	 	By its General Partner,
	 	 	GWC GP, Inc.
	 
	 	 	 	 
	

	 	By:	 	 
	

	 	 	 	
 
	

	 	Name:	 	 
	

	 	 	 	
 
	

	 	Title:	 	 
	

	 	 	 	
 

	*	 	This paragraph must be modified at such time as there are no Subsidiary
Guarantors.

Exhibit 1.1

2

 

EXHIBIT 1.2(a)

PARENT GUARANTY

     THIS GUARANTY (this “Guaranty”) dated as of August 1, 2004 is made by
Encore Wire Corporation, a Delaware corporation (the “Guarantor”), in favor of
the holders from time to time of the Notes hereinafter referred to, including
each purchaser named in the Note Purchase Agreement hereinafter referred to,
and their respective successors and assigns (collectively, the “Holders” and
each individually, a “Holder”).

W I T N E S S E T H:

     WHEREAS, Encore Wire Limited, a Texas limited partnership (the “Company”),
the Guarantor and the initial Holders have entered into a Note Purchase
Agreement dated as of August 1, 2004 (the Note Purchase Agreement as amended,
supplemented, restated or otherwise modified from time to time in accordance
with its terms and in effect, the “Note Purchase Agreement”);

     WHEREAS, the Note Purchase Agreement provides for the issuance by the
Company of $45,000,000 aggregate principal amount of Notes (as defined in the
Note Purchase Agreement) in series;

     WHEREAS, the Company is a Wholly Owned Restricted Subsidiary of the
Guarantor and the Guarantor will derive substantial benefits from the purchase
by the Holders of the Company’s Notes;

     WHEREAS, it is a condition precedent to the obligation of the Holders to
purchase the Notes that the Guarantor shall have executed and delivered this
Guaranty to the Holders; and

     WHEREAS, the Guarantor desires to execute and deliver this Guaranty to
satisfy the conditions described in the preceding paragraph;

     NOW, THEREFORE, in consideration of the premises and other benefits to the
Guarantor, and of the purchase of the Company’s Notes by the Holders, and for
other good and valuable consideration, the receipt and sufficiency of which are
acknowledged, the Guarantor makes this Guaranty as follows:

     SECTION 1. Definitions. Any capitalized terms not otherwise herein
defined shall have the meanings ascribed to them in the Note Purchase
Agreement.

     SECTION 2. Guaranty. The Guarantor unconditionally and irrevocably
guarantees to the Holders the due, prompt and complete payment by the Company
of the principal of, Make-Whole Amount, if any, and interest on, and each other
amount due under, the Notes or the Note

Exhibit 1.2(a)

 

 

Purchase Agreement, when and as the same shall become due and payable (whether
at stated maturity or by required or optional prepayment or by declaration or
otherwise) in accordance with the terms of the Notes and the Note Purchase
Agreement (the Notes and the Note Purchase Agreement being sometimes
hereinafter collectively referred to as the “Note Documents” and the amounts
payable by the Company under the Note Documents, and all other monetary
obligations of the Company thereunder (including any reasonable attorneys’ fees
and expenses), being sometimes collectively hereinafter referred to as the
“Obligations”). This Guaranty is a guaranty of payment and not just of
collectibility and is in no way conditioned or contingent upon any attempt to
collect from the Company or upon any other event, contingency or circumstance
whatsoever. If for any reason whatsoever the Company shall fail or be unable
duly, punctually and fully to pay such amounts as and when the same shall
become due and payable, the Guarantor, without demand, presentment, protest or
notice of any kind, will forthwith pay or cause to be paid such amounts to the
Holders under the terms of such Note Documents, in lawful money of the United
States, at the place specified in the Note Purchase Agreement, or perform or
comply with the same or cause the same to be performed or complied with,
together with interest (to the extent provided for under such Note Documents)
on any amount due and owing from the Company. The Guarantor, promptly after
demand, will pay to the Holders the reasonable costs and expenses of collecting
such amounts or otherwise enforcing this Guaranty, including, without
limitation, the reasonable fees and expenses of counsel.

     SECTION 3. Guarantor’s Obligations Unconditional. The obligations of the
Guarantor under this Guaranty shall be primary, absolute and unconditional
obligations of the Guarantor, shall not be subject to any counterclaim,
set-off, deduction, diminution, abatement, recoupment, suspension, deferment,
reduction or defense based upon any claim the Guarantor or any other person may
have against the Company or any other person, and to the full extent permitted
by applicable law shall remain in full force and effect without regard to, and
shall not be released, discharged or in any way affected by, any circumstance
or condition whatsoever (whether or not the Guarantor or the Company shall have
any knowledge or notice thereof), including:

     (a) any termination, amendment or modification of or deletion from
or addition or supplement to or other change in any of the Note Documents
or any other instrument or agreement applicable to any of the parties to
any of the Note Documents;

     (b) any furnishing or acceptance of any security, or any release of
any security, for the Obligations, or the failure of any security or the
failure of any person to perfect any interest in any collateral;

     (c) any failure, omission or delay on the part of the Company to
conform or comply with any term of any of the Note Documents or any other
instrument or agreement referred to in paragraph (a) above, including,
without limitation, failure to give notice to the Guarantor of the
occurrence of a “Default” or an “Event of Default” under any Note
Document;

Exhibit 1.2(a)

2

 

     (d) any waiver of the payment, performance or observance of any of
the obligations, conditions, covenants or agreements contained in any
Note Document, or any other waiver, consent, extension, indulgence,
compromise, settlement, release or other action or inaction under or in
respect of any of the Note Documents or any other instrument or agreement
referred to in paragraph (a) above or any obligation or liability of the
Company, or any exercise or non-exercise of any right, remedy, power or
privilege under or in respect of any such instrument or agreement or any
such obligation or liability;

     (e) any failure, omission or delay on the part of any of the Holders
to enforce, assert or exercise any right, power or remedy conferred on
such Holder in this Guaranty, or any such failure, omission or delay on
the part of such Holder in connection with any Note Document, or any
other action on the part of such Holder;

     (f) any voluntary or involuntary bankruptcy, insolvency,
reorganization, arrangement, readjustment, assignment for the benefit of
creditors, composition, receivership, conservatorship, custodianship,
liquidation, marshaling of assets and liabilities or similar proceedings
with respect to the Company, the Guarantor or to any other person or any
of their respective properties or creditors, or any action taken by any
trustee or receiver or by any court in any such proceeding;

     (g) any discharge, termination, cancellation, frustration,
irregularity, invalidity or unenforceability, in whole or in part, of any
of the Note Documents or any other agreement or instrument referred to in
paragraph (a) above or any term hereof;

     (h) any merger or consolidation of the Company or the Guarantor into
or with any other corporation, or any sale, lease or transfer of any of
the assets of the Company or the Guarantor to any other person;

     (i) any change in the ownership of any shares of capital stock of
the Company or any change in the corporate relationship between the
Company and the Guarantor, or any termination of such relationship;

     (j) any release or discharge, by operation of law, of any other
guarantor from the performance or observance of any obligation, covenant
or agreement contained in any other guarantee of the Note Documents or
the Obligations; or

     (k) any other occurrence, circumstance, happening or event
whatsoever, whether similar or dissimilar to the foregoing, whether
foreseen or unforeseen, and any other circumstance which might otherwise
constitute a legal or equitable defense or discharge of the liabilities
of a guarantor or surety or which might otherwise limit recourse against
the Guarantor.

Exhibit 1.2(a)

3

 

     SECTION 4. Full Recourse Obligations. The obligations of the Guarantor
set forth herein constitute the full recourse obligations of the Guarantor
enforceable against it to the full extent of all its assets and properties.

     SECTION 5. Waiver. The Guarantor unconditionally waives, to the extent
permitted by applicable law, (a) notice of any of the matters referred to in
Section 3, (b) notice to the Guarantor of the incurrence of any of the
Obligations, notice to the Guarantor or the Company of any breach or default by
the Company with respect to any of the Obligations or any other notice that may
be required, by statute, rule of law or otherwise, to preserve any rights of
the Holders against the Guarantor, (c) presentment to or demand of payment from
the Company or the Guarantor with respect to any amount due under any Note
Document or protest for nonpayment or dishonor, (d) any right to the
enforcement, assertion or exercise by any of the Holders of any right, power,
privilege or remedy conferred in the Note Purchase Agreement or any other Note
Document or otherwise, (e) any requirement of diligence on the part of any of
the Holders, (f) any requirement to exhaust any remedies or to mitigate the
damages resulting from any default under any Note Document, (g) any notice of
any sale, transfer or other disposition by any of the Holders of any right,
title to or interest in the Note Purchase Agreement or in any other Note
Document and (h) any other circumstance whatsoever which might otherwise
constitute a legal or equitable discharge, release or defense of a guarantor or
surety or which might otherwise limit recourse against the Guarantor.

     SECTION 6. Subrogation, Contribution, Reimbursement or Indemnity. Until
one year and one day after all Obligations have been paid in full, the
Guarantor agrees not to take any action pursuant to any rights which may have
arisen in connection with this Guaranty to be subrogated to any of the rights
(whether contractual, under the United States Bankruptcy Code, as amended,
including section 509 thereof, under common law or otherwise) of any of the
Holders against the Company or against any collateral security or guaranty or
right of offset held by the Holders for the payment of the Obligations. Until
one year and one day after all Obligations have been paid in full, the
Guarantor agrees not to take any action pursuant to any contractual, common
law, statutory or other rights of reimbursement, contribution, exoneration or
indemnity (or any similar right) from or against the Company which may have
arisen in connection with this Guaranty. So long as the Obligations remain, if
any amount shall be paid by or on behalf of the Company to the Guarantor on
account of any of the rights waived in this paragraph, such amount shall be
held by the Guarantor in trust, segregated from other funds of the Guarantor,
and shall, forthwith upon receipt by the Guarantor, be turned over to the
Holders (duly endorsed by the Guarantor to the Holders, if required), to be
applied against the Obligations, whether matured or unmatured, in such order as
the Holders may determine. The provisions of this paragraph shall survive the
term of this Guaranty and the payment in full of the Obligations.

     SECTION 7. Effect of Bankruptcy Proceedings, etc. This Guaranty shall
continue to be effective or be automatically reinstated, as the case may be, if
at any time payment, in whole or in part, of any of the sums due to any of the
Holders pursuant to the terms of the Note Purchase Agreement or any other Note
Document is rescinded or must otherwise be restored or returned by

Exhibit 1.2(a)

4

 

the Holder upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of the Company or any other person, or upon or as a result of
the appointment of a custodian, receiver, trustee or other officer with similar
powers with respect to the Company or other person or any substantial part of
its property, or otherwise, all as though such payment had not been made. If
an event permitting the acceleration of the maturity of the principal amount of
the Notes shall at any time have occurred and be continuing, and such
acceleration shall at such time be prevented by reason of the pendency against
the Company or any other person of a case or proceeding under a bankruptcy or
insolvency law, the Guarantor agrees that, for purposes of this Guaranty and
its obligations hereunder, the maturity of the principal amount of the Notes
and all other Obligations shall be deemed to have been accelerated with the
same effect as if any Holder had accelerated the same in accordance with the
terms of the Note Purchase Agreement or other applicable Note Document, and the
Guarantor shall forthwith pay such principal amount, Make-Whole Amount, if any,
and interest thereon and any other amounts guaranteed hereunder without further
notice or demand.

     SECTION 8. Term of Agreement. This Guaranty and all guaranties,
covenants and agreements of the Guarantor contained herein shall continue in
full force and effect and shall not be discharged until such time as all of the
Obligations shall be paid and performed in full and all of the agreements of
the Guarantor hereunder shall be duly paid and performed in full.

     SECTION 9. Notices. All notices and communications provided for
hereunder shall be in writing and sent by telecopy if the sender on the same
day sends a confirming copy of such notice by a recognized overnight delivery
service (charges prepaid), or by registered or certified mail with return
receipt requested (postage prepaid), or by a recognized overnight delivery
service (with charges prepaid) (a) if to the Company or any Holder at the
address set forth in the Note Purchase Agreement or (b) if to the Guarantor, in
care of the Company at the Company’s address set forth in the Note Purchase
Agreement, or in each case at such other address as the Company, any Holder or
such Guarantor shall from time to time designate in writing to the other
parties. Any notice so addressed shall be deemed to be given when actually
received.

     SECTION 10. Survival. All warranties, representations and covenants made
by the Guarantor herein or in any certificate or other instrument delivered by
it or on its behalf hereunder shall be considered to have been relied upon by
the Holders and shall survive the execution and delivery of this Guaranty,
regardless of any investigation made by any of the Holders. All statements in
any such certificate or other instrument shall constitute warranties and
representations by such Guarantor hereunder.

     SECTION 11. Submission to Jurisdiction. Any litigation based hereon, or
arising out of, under or in connection with this Guaranty, may be brought and
maintained in the courts of the State of Illinois or in the United States
District Court for the Northern District of Illinois. The Guarantor expressly
and irrevocably submits to the jurisdiction of the courts of the State of
Illinois and of the United States District Court for the Northern District of
Illinois for the purpose of any such litigation as set forth above. The
Guarantor further irrevocably consents to the service of process by registered
mail, postage prepaid,

Exhibit 1.2(a)

5

 

to the address specified in Section 9 or by personal service within or without
the State of Illinois. The Guarantor expressly and irrevocably waives, to the
fullest extent permitted by law, any objection that it may now or hereafter
have to the laying of venue of any such litigation brought in any such court
referred to above and any claim that any such litigation has been brought in an
inconvenient forum.

     SECTION 12. Waiver of Jury Trial. The Guarantor waives any right to a
trial by jury in any action or proceeding to enforce or defend any rights under
this Guaranty or under any amendment, instrument, document or agreement
delivered or that may in the future be delivered in connection herewith and
agrees that any such action or proceeding shall be tried before a court and not
before a jury.

     SECTION 13. Miscellaneous. Any provision of this Guaranty that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent
permitted by applicable law, the Guarantor hereby waives any provision of law
that renders any provisions hereof prohibited or unenforceable in any respect.
The terms of this Guaranty shall be binding upon, and inure to the benefit of,
the Guarantor and the Holders and their respective successors and assigns. No
term or provision of this Guaranty may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the Guarantor
and the Required Holders. The section and paragraph headings in this Guaranty
and the table of contents are for convenience of reference only and shall not
modify, define, expand or limit any of the terms or provisions hereof, and all
references herein to numbered sections, unless otherwise indicated, are to
sections in this Guaranty. This Guaranty shall in all respects be governed by,
and construed in accordance with, the laws of the State of Illinois excluding
choice-of-law principles of the law of such State that would require the
application of the laws of a jurisdiction other than such State.

Exhibit 1.2(a)

6

 

          IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly
executed as of the day and year first above written.

	 	 	 	 	 
	 	 	ENCORE WIRE CORPORATION
	 
	 	 	 	 
	

	 	By:	 	 
	

	 	 	 	
 
	

	 	Name:	 	 
	

	 	 	 	
 
	

	 	Title:	 	 
	

	 	 	 	
 

Exhibit 1.2(a)

7

 

EXHIBIT 1.2(b)

[FORM OF SUBSIDIARY GUARANTY]

     THIS GUARANTY (this “Guaranty”) dated as of August 1, 2004 is made by the
undersigned (each, a “Guarantor”), in favor of the holders from time to time of
the Notes hereinafter referred to, including each purchaser named in the Note
Purchase Agreement hereinafter referred to, and their respective successors and
assigns (collectively, the “Holders” and each individually, a “Holder”).

W I T N E S S E T H:

     WHEREAS, Encore Wire Limited, a Texas limited partnership (the “Company”),
Encore Wire Corporation, a Delaware corporation (the “Parent”), and the initial
Holders have entered into a Note Purchase Agreement dated as of August 1, 2004
(the Note Purchase Agreement as amended, supplemented, restated or otherwise
modified from time to time in accordance with its terms and in effect, the
“Note Purchase Agreement”);

     WHEREAS, the Note Purchase Agreement provides for the issuance by the
Company of $45,000,000 aggregate principal amount of Notes (as defined in the
Note Purchase Agreement);

     WHEREAS, the Parent owns, directly or indirectly, all of the issued and
outstanding capital stock or partnership interests of each Guarantor and, by
virtue of such ownership and otherwise, each Guarantor will derive substantial
benefits from the purchase by the Holders of the Company’s Notes;

     WHEREAS, it is a condition precedent to the obligation of the Holders to
purchase the Notes that each Guarantor shall have executed and delivered this
Guaranty to the Holders; and

     WHEREAS, each Guarantor desires to execute and deliver this Guaranty to
satisfy the conditions described in the preceding paragraph;

     NOW, THEREFORE, in consideration of the premises and other benefits to
each Guarantor, and of the purchase of the Company’s Notes by the Holders, and
for other good and valuable consideration, the receipt and sufficiency of which
are acknowledged, each Guarantor makes this Guaranty as follows:

     SECTION 1. Definitions. Any capitalized terms not otherwise herein
defined shall have the meanings attributed to them in the Note Purchase
Agreement.

     SECTION 2. Guaranty. Each Guarantor, jointly and severally with each
other Guarantor, unconditionally and irrevocably guarantees to the Holders the
due, prompt and complete payment by the Company of the principal of, Make-Whole
Amount, if any, and interest on, and each other amount due under, the Notes or
the Note Purchase Agreement, when and as the same shall become due and payable
(whether at stated maturity or by required or optional prepayment or by

Exhibit 1.2(b)

 

 

declaration or otherwise) in accordance with the terms of the Notes and the
Note Purchase Agreement (the Notes and the Note Purchase Agreement being
sometimes hereinafter collectively referred to as the “Note Documents” and the
amounts payable by the Company under the Note Documents, and all other monetary
obligations of the Company thereunder (including reasonable attorneys’ fees and
expenses), being sometimes collectively hereinafter referred to as the
“Obligations”). This Guaranty is a guaranty of payment and not just of
collectibility and is in no way conditioned or contingent upon any attempt to
collect from the Company or upon any other event, contingency or circumstance
whatsoever. If for any reason whatsoever the Company shall fail or be unable
duly, punctually and fully to pay such amounts as and when the same shall
become due and payable, each Guarantor, without demand, presentment, protest or
notice of any kind, will forthwith pay or cause to be paid such amounts to the
Holders under the terms of such Note Documents, in lawful money of the United
States, at the place specified in the Note Purchase Agreement, or perform or
comply with the same or cause the same to be performed or complied with,
together with interest (to the extent provided for under such Note Documents)
on any amount due and owing from the Company. Each Guarantor, promptly after
demand, will pay to the Holders the reasonable costs and expenses of collecting
such amounts or otherwise enforcing this Guaranty, including, without
limitation, the reasonable fees and expenses of counsel. Notwithstanding the
foregoing, the right of recovery against each Guarantor under this Guaranty is
limited to the extent it is judicially determined with respect to any Guarantor
that entering into this Guaranty would violate Section 548 of the United States
Bankruptcy Code or any comparable provisions of any state law, in which case
such Guarantor shall be liable under this Guaranty only for amounts aggregating
up to the largest amount that would not render such Guarantor’s obligations
hereunder subject to avoidance under Section 548 of the United States
Bankruptcy Code or any comparable provisions of any state law.

     SECTION 3. Guarantor’s Obligations Unconditional. The obligations of
each Guarantor under this Guaranty shall be primary, absolute and unconditional
obligations of each Guarantor, shall not be subject to any counterclaim,
set-off, deduction, diminution, abatement, recoupment, suspension, deferment,
reduction or defense based upon any claim each Guarantor or any other person
may have against the Company or any other person, and to the full extent
permitted by applicable law shall remain in full force and effect without
regard to, and shall not be released, discharged or in any way affected by, any
circumstance or condition whatsoever (whether or not each Guarantor or the
Company shall have any knowledge or notice thereof), including:

     (a) any termination, amendment or modification of or deletion from
or addition or supplement to or other change in any of the Note Documents
or any other instrument or agreement applicable to any of the parties to
any of the Note Documents;

     (b) any furnishing or acceptance of any security, or any release of
any security, for the Obligations, or the failure of any security or the
failure of any person to perfect any interest in any collateral;

     (c) any failure, omission or delay on the part of the Company or the
Parent to conform or comply with any term of any of the Note Documents or
any other instrument

Exhibit 1.2(b)

2

 

or agreement referred to in paragraph (a) above, including, without
limitation, failure to give notice to any Guarantor of the occurrence of
a “Default” or an “Event of Default” under any Note Document;

     (d) any waiver of the payment, performance or observance of any of
the obligations, conditions, covenants or agreements contained in any
Note Document, or any other waiver, consent, extension, indulgence,
compromise, settlement, release or other action or inaction under or in
respect of any of the Note Documents or any other instrument or agreement
referred to in paragraph (a) above or any obligation or liability of the
Company or the Parent, or any exercise or non-exercise of any right,
remedy, power or privilege under or in respect of any such instrument or
agreement or any such obligation or liability;

     (e) any failure, omission or delay on the part of any of the Holders
to enforce, assert or exercise any right, power or remedy conferred on
such Holder in this Guaranty, or any such failure, omission or delay on
the part of such Holder in connection with any Note Document, or any
other action on the part of such Holder;

     (f) any voluntary or involuntary bankruptcy, insolvency,
reorganization, arrangement, readjustment, assignment for the benefit of
creditors, composition, receivership, conservatorship, custodianship,
liquidation, marshaling of assets and liabilities or similar proceedings
with respect to the Company, the Parent, any Guarantor or to any other
person or any of their respective properties or creditors, or any action
taken by any trustee or receiver or by any court in any such proceeding;

     (g) any discharge, termination, cancellation, frustration,
irregularity, invalidity or unenforceability, in whole or in part, of any
of the Note Documents or any other agreement or instrument referred to in
paragraph (a) above or any term hereof;

     (h) any merger or consolidation of the Company or the Parent or any
Guarantor into or with any other corporation, or any sale, lease or
transfer of any of the assets of the Company or the Parent or any
Guarantor to any other person;

     (i) any change in the ownership of any shares of capital stock of
the Company or the Parent or any change in the corporate relationship
between the Company or the Parent and any Guarantor, or any termination
of such relationship;

     (j) any release or discharge, by operation of law, of any other
Guarantor from the performance or observance of any obligation, covenant
or agreement contained in this Guaranty; or

     (k) any other occurrence, circumstance, happening or event
whatsoever, whether similar or dissimilar to the foregoing, whether
foreseen or unforeseen, and any other circumstance which might otherwise
constitute a legal or equitable defense or

Exhibit 1.2(b)

3

 

discharge of the liabilities of a guarantor or surety or which might
otherwise limit recourse against any Guarantor.

     SECTION 4. Full Recourse Obligations. The obligations of each Guarantor
set forth herein constitute the full recourse obligations of such Guarantor
enforceable against it to the full extent of all its assets and properties.

     SECTION 5. Waiver. Each Guarantor unconditionally waives, to the extent
permitted by applicable law, (a) notice of any of the matters referred to in
Section 3, (b) notice to such Guarantor of the incurrence of any of the
Obligations, notice to such Guarantor or the Company of any breach or default
by such Company with respect to any of the Obligations or any other notice that
may be required, by statute, rule of law or otherwise, to preserve any rights
of the Holders against such Guarantor, (c) presentment to or demand of payment
from the Company or the Guarantor with respect to any amount due under any Note
Document or protest for nonpayment or dishonor, (d) any right to the
enforcement, assertion or exercise by any of the Holders of any right, power,
privilege or remedy conferred in the Note Purchase Agreement or any other Note
Document or otherwise, (e) any requirement of diligence on the part of any of
the Holders, (f) any requirement to exhaust any remedies or to mitigate the
damages resulting from any default under any Note Document, (g) any notice of
any sale, transfer or other disposition by any of the Holders of any right,
title to or interest in the Note Purchase Agreement or in any other Note
Document and (h) any other circumstance whatsoever which might otherwise
constitute a legal or equitable discharge, release or defense of a guarantor or
surety or which might otherwise limit recourse against such Guarantor.

     SECTION 6. Subrogation, Contribution, Reimbursement or Indemnity. Until
one year and one day after all Obligations have been paid in full, each
Guarantor agrees not to take any action pursuant to any rights which may have
arisen in connection with this Guaranty to be subrogated to any of the rights
(whether contractual, under the United States Bankruptcy Code, as amended,
including Section 509 thereof, under common law or otherwise) of any of the
Holders against the Company or against any collateral security or guaranty or
right of offset held by the Holders for the payment of the Obligations. Until
one year and one day after all Obligations have been paid in full, each
Guarantor agrees not to take any action pursuant to any contractual, common
law, statutory or other rights of reimbursement, contribution, exoneration or
indemnity (or any similar right) from or against the Company which may have
arisen in connection with this Guaranty. So long as the Obligations remain, if
any amount shall be paid by or on behalf of the Company to any Guarantor on
account of any of the rights waived in this paragraph, such amount shall be
held by such Guarantor in trust, segregated from other funds of such Guarantor,
and shall, forthwith upon receipt by such Guarantor, be turned over to the
Holders (duly endorsed by such Guarantor to the Holders, if required), to be
applied against the Obligations, whether matured or unmatured, in such order as
the Holders may determine. The provisions of this paragraph shall survive the
term of this Guaranty and the payment in full of the Obligations.

Exhibit 1.2(b)

4

 

     SECTION 7. Effect of Bankruptcy Proceedings, etc. This Guaranty shall
continue to be effective or be automatically reinstated, as the case may be, if
at any time payment, in whole or in part, of any of the sums due to any of the
Holders pursuant to the terms of the Note Purchase Agreement or any other Note
Document is rescinded or must otherwise be restored or returned by such Holder
upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of
the Company or any other person, or upon or as a result of the appointment of a
custodian, receiver, trustee or other officer with similar powers with respect
to the Company or other person or any substantial part of its property, or
otherwise, all as though such payment had not been made. If an event
permitting the acceleration of the maturity of the principal amount of the
Notes shall at any time have occurred and be continuing, and such acceleration
shall at such time be prevented by reason of the pendency against the Company
or any other person of a case or proceeding under a bankruptcy or insolvency
law, each Guarantor agrees that, for purposes of this Guaranty and its
obligations hereunder, the maturity of the principal amount of the Notes and
all other Obligations shall be deemed to have been accelerated with the same
effect as if any Holder had accelerated the same in accordance with the terms
of the Note Purchase Agreement or other applicable Note Document, and such
Guarantor shall forthwith pay such principal amount, Make-Whole Amount, if any,
and interest thereon and any other amounts guaranteed hereunder without further
notice or demand.

     SECTION 8. Term of Agreement. This Guaranty and all guaranties,
covenants and agreements of each Guarantor contained herein shall continue in
full force and effect and shall not be discharged until the earlier to occur of
(i) such time as all of the Obligations shall be paid and performed in full and
all of the agreements of such Guarantor hereunder shall be duly paid and
performed in full and (ii) such Guarantor is released by the Holders pursuant
to Section 1.2(b) of the Note Purchase Agreement.

     SECTION 9. Representations and Warranties. Each Guarantor represents and
warrants to each Holder that:

     (a) such Guarantor is duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization and has the
power and authority to own or hold under lease the properties it purports
to own or hold under lease and to transact the business it transacts and
proposes to transact,;

     (b) such Guarantor has the power and authority to execute and
deliver this Guaranty and to perform the provisions hereof, and this
Guaranty has been duly authorized by all necessary action on the part of
such Guarantor;

     (c) this Guaranty constitutes the legal, valid and binding
obligation of such Guarantor enforceable against such Guarantor in
accordance with its terms, except as such enforceability may be limited
by (i) applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or other similar laws affecting the
enforcement of creditors’ rights generally and (ii) general principles of
equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law);

Exhibit 1.2(b)

5

 

     (d) the execution, delivery and performance of this Guaranty will
not (i) contravene, result in any breach of, or constitute a default
under, or result in the creation of any Lien in respect of any property
of such Guarantor under, any agreement, or corporate charter or by-laws
to which such Guarantor is bound or by which such Guarantor or any of its
properties may be bound or affected, (ii) conflict with or result in a
breach of any of the terms, conditions or provisions of any order,
judgment, decree, or ruling of any court, arbitrator or Governmental
Authority applicable to such Subsidiary Guarantor or (iii) violate any
provision of any statute or other rule or regulation of any Governmental
Authority applicable to such Guarantor;

     (e) except as disclosed in Section 5.7 to the Note Purchase
Agreement, no consent, approval or authorization of, or registration,
filing or declaration with, any Governmental Authority is required in
connection with the execution, delivery or performance by such Guarantor
of this Guaranty, and all such consents, approvals, authorizations,
registrations, filings or declarations listed in Schedule 5.7 have been
obtained or made;

     (f) except as disclosed in Section 5.8 of the Note Purchase
Agreement, there are no actions, suits or proceedings pending or, to the
knowledge of such Guarantor, threatened against or affecting such
Guarantor, or any property of such Guarantor, in any court or before any
arbitrator of any kind or before or by any Governmental Authority that,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect;

     (g) after giving effect to the transactions contemplated in the Note
Purchase Agreement and after giving due consideration to any rights of
contribution (i) such Guarantor has received fair consideration and
reasonably equivalent value for the incurrence of its obligations
hereunder, (ii) the fair value of the assets of such Guarantor (both at
fair valuation and at present fair saleable value) exceeds its
liabilities, (iii) such Guarantor is able to and expects to be able to
pay its debts as they mature, and (iv) such Guarantor has capital
sufficient to carry on its business as conducted and as proposed to be
conducted.

     SECTION 10. Notices. All notices and communications provided for
hereunder shall be in writing and sent by telecopy if the sender on the same
day sends a confirming copy of such notice by a recognized overnight delivery
service (charges prepaid), or by registered or certified mail with return
receipt requested (postage prepaid), or by a recognized overnight delivery
service (with charges prepaid) (a) if to the Company or any Holder at the
address set forth in the Note Purchase Agreement or (b) if to a Guarantor, in
care of the Company at the Company’s address set forth in the Note Purchase
Agreement, or in each case at such other address as the Company, any Holder or
such Guarantor shall from time to time designate in writing to the other
parties. Any notice so addressed shall be deemed to be given when actually
received.

Exhibit 1.2(b)

6

 

     SECTION 11. Survival. All warranties, representations and covenants made
by each Guarantor herein or in any certificate or other instrument delivered by
it or on its behalf hereunder shall be considered to have been relied upon by
the Holders and shall survive the execution and delivery of this Guaranty,
regardless of any investigation made by any of the Holders. All statements in
any such certificate or other instrument shall constitute warranties and
representations by such Guarantor hereunder.

     SECTION 12. Submission to Jurisdiction. Any litigation based hereon, or
arising out of, under or in connection with this Guaranty, may be brought and
maintained in the courts of the State of Illinois or in the United States
District Court for the Northern District of Illinois. Each Guarantor expressly
and irrevocably submits to the jurisdiction of the courts of the State of
Illinois and of the United States District Court for the Northern District of
Illinois for the purpose of any such litigation as set forth above. Each
Guarantor further irrevocably consents to the service of process by registered
mail, postage prepaid, to the address specified in Section 9 or by personal
service within or without the State of Illinois. Each Guarantor expressly and
irrevocably waives, to the fullest extent permitted by law, any objection that
it may now or hereafter have to the laying of venue of any such litigation
brought in any such court referred to above and any claim that any such
litigation has been brought in an inconvenient forum.

     SECTON 13. Waiver of Jury Trial. Each Guarantor waives any right to a
trial by jury in any action or proceeding to enforce or defend any rights under
this Guaranty or under any amendment, instrument, document or agreement
delivered or that may in the future be delivered in connection herewith and
agrees that any such action or proceeding shall be tried before a court and not
before a jury.

     SECTION 14. Miscellaneous. Any provision of this Guaranty which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent
permitted by applicable law, each Guarantor hereby waives any provision of law
that renders any provisions hereof prohibited or unenforceable in any respect.
The terms of this Guaranty shall be binding upon, and inure to the benefit of,
each Guarantor and the Holders and their respective successors and assigns. No
term or provision of this Guaranty may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by each
Guarantor and the Required Holders. The section and paragraph headings in this
Guaranty are for convenience of reference only and shall not modify, define,
expand or limit any of the terms or provisions hereof, and all references
herein to numbered sections, unless otherwise indicated, are to sections in
this Guaranty. This Guaranty shall in all respects be governed by, and
construed in accordance with, the laws of the State of Illinois, excluding
choice-of-law principles of the law of such State that would require the
application of the laws of a jurisdiction other than such State.

Exhibit 1.2(b)

7

 

          IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be duly
executed as of the day and year first above written.

	 	 	 	 	 
	 	 	EWC GP Corp.
	 
	 	 	 	 
	

	 	By:	 	 
	

	 	 	 	
 
	

	 	Name:	 	 
	

	 	 	 	
 
	

	 	Title:	 	 
	

	 	 	 	
 
	 
	 	 	 	 
	 	 	EWC LP Corp.
	 
	 	 	 	 
	

	 	By:	 	 
	

	 	 	 	
 
	

	 	Name:	 	 
	

	 	 	 	
 
	

	 	Title:	 	 
	

	 	 	 	
 
	 
	 	 	 	 
	 	 	EWC AVIATION Corp.
	 
	 	 	 	 
	

	 	By:	 	 
	

	 	 	 	
 
	

	 	Name:	 	 
	

	 	 	 	
 
	

	 	Title:	 	 
	

	 	 	 	
 

Exhibit 1.2(b)

8

 

FORM OF JOINDER TO SUBSIDIARY GUARANTY

          The undersigned (the “Guarantor”), joins in the Subsidiary Guaranty dated
as of August 1, 2004 from the Guarantors named therein in favor of the Holders,
as defined therein, and agrees to be bound by all of the terms thereof and
represents and warrants to the Holders that:

     (a) such Guarantor is duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization and has the
power and authority to own or hold under lease the properties it purports
to own or hold under lease and to transact the business it transacts and
proposes to transact,;

     (b) such Guarantor has the power and authority to execute and
deliver this Guaranty and to perform the provisions hereof, and this
Guaranty has been duly authorized by all necessary action on the part of
such Guarantor;

     (c) this Guaranty constitutes the legal, valid and binding
obligation of such Guarantor enforceable against such Guarantor in
accordance with its terms, except as such enforceability may be limited
by (i) applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or other similar laws affecting the
enforcement of creditors’ rights generally and (ii) general principles of
equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law);

     (d) the execution, delivery and performance of this Guaranty will
not (i) contravene, result in any breach of, or constitute a default
under, or result in the creation of any Lien in respect of any property
of such Guarantor under, any agreement, or corporate charter or by-laws
to which such Guarantor is bound or by which such Guarantor or any of its
properties may be bound or affected, (ii) conflict with or result in a
breach of any of the terms, conditions or provisions of any order,
judgment, decree, or ruling of any court, arbitrator or Governmental
Authority applicable to such Subsidiary Guarantor or (iii) violate any
provision of any statute or other rule or regulation of any Governmental
Authority applicable to such Guarantor;

     (e) except as disclosed in Section 5.7 to the Note Purchase
Agreement, no consent, approval or authorization of, or registration,
filing or declaration with, any Governmental Authority is required in
connection with the execution, delivery or performance by such Guarantor
of this Guaranty, and all such consents, approvals, authorizations,
registrations, filings or declarations listed in Schedule 5.7 have been
obtained or made;

     (f) except as disclosed in Section 5.8 of the Note Purchase
Agreement, there are no actions, suits or proceedings pending or, to the
knowledge of such Guarantor, threatened against or affecting such
Guarantor, or any property of such Guarantor, in any

Exhibit 1.2(b)

9

 

court or before any arbitrator of any kind or before or by any
Governmental Authority that, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect;

     (g) after giving effect to the transactions contemplated by the
giving of this Joinder and giving due consideration to any rights of
contribution (i) such Guarantor has received fair consideration and
reasonably equivalent value for the incurrence of its obligations
hereunder, (ii) the fair value of the assets of such Guarantor (both at
fair valuation and at present fair saleable value) exceeds its
liabilities, (iii) such Guarantor is able to and expects to be able to
pay its debts as they mature, and (iv) such Guarantor has capital
sufficient to carry on its business as conducted and as proposed to be
conducted.

Capitalized Terms used but not defined herein have the meanings ascribed in the
Subsidiary Guaranty.

          IN WITNESS WHEREOF, the undersigned has caused this Joinder to Subsidiary
Guaranty to be duly executed as of                    ,                    .

	 	 	 	 	 
	 	 	[Name of Guarantor]
	 
	 	 	 	 
	

	 	By:	 	 
	

	 	 	 	
 
	

	 	Name:	 	 
	

	 	 	 	
 
	

	 	Title:	 	 
	

	 	 	 	
 

Exhibit 1.2(b)

10

 

EXHIBIT 4.4(a)

FORM OF OPINION OF COUNSEL

FOR THE COMPANY

     The opinion of Thompson & Knight LLP, counsel for the Parent, the Company
and the Subsidiary Guarantors, shall be to the effect that:

     1. The Company is a limited partnership validly existing and in good
standing under the laws of the State of Texas. Each of the Parent, EWC GP
Corp. and EWC LP Corp. is a corporation validly existing and in good standing
under the laws of the State of Delaware. EWC Aviation Corp. is a corporation
validly existing and in good standing under the laws of the State of Texas.

     2. Each of the Company, the Parent and each Subsidiary Guarantor has the
corporate or partnership power to execute and deliver the Agreement, the Notes
and the Guaranty (the “Note Documents”), in each case to which it is a party,
and to perform its obligations thereunder. The execution, delivery and
performance of each Note Document has been duly authorized by all necessary
corporate or partnership proceedings on the part of each Client a party
thereto. Each Client has duly executed and delivered each Note Document to
which it is a party.

     3. If, notwithstanding the choice of Illinois law contained in the Note
Documents, Texas law were applied to such instruments, each Note Document would
constitute the legal, valid and binding obligation of the Company, the Parent
and each Subsidiary Guarantor (to the extent a party thereto) under Texas law,
enforceable against each in accordance with its terms.

     4. The execution, delivery and performance by each of the Company, the
Parent and each Subsidiary Guarantor of the Note Documents to which it is a
party, and the consummation of the transactions contemplated thereby, will not:

     (a) violate any provision of its organizational documents, or

     (b) breach or result in a default under or result in the maturing of
any of indebtedness, or create any lien, security interest or other
encumbrance, on any of its property pursuant to, the agreements and
instruments listed on Schedule C hereto, which have been identified by it
as all indentures, mortgages, deeds of trust and other Material
agreements and instruments to which it is a party; or

     (c) result in a violation of any federal or state law, rule or
regulation or, to our knowledge, any judgment, order, decree,
determination or award of any federal or state court or governmental
authority which is now in effect and applicable to such it or any of its
properties.

     5. To the knowledge of such counsel, no consent, approval, waiver,
license, authorization or action by or filing with or notice to any federal or
state court or governmental

Exhibit 4.4(a)

 

 

authority or any third party is required for the execution and delivery by any
of the Company, the Parent or any Subsidiary Guarantor of any Note Document to
which it is a party or the consummation of the transactions contemplated
thereby.

     6. Assuming the accuracy of the representations and warranties made by the
Company in Paragraph 5.14 of the Agreement, the extension of credit to the
Company pursuant to the Agreement, and the use of the proceeds therefrom by the
Company as represented and warranted by the Company in such Paragraph 5.14 of
the Agreement, do not violate Regulations T, U or X promulgated by the Board of
Governors of the Federal Reserve System..

     7. None of the Company, the Parent or any Subsidiary is (a) an “investment
company” or a company “controlled” by an “investment company” within the
meaning of the Investment Company Act of 1940, as amended, (b) a “public
utility” within the meaning of the Federal Power Act, as amended, or (c) a
“holding company” or a “subsidiary company” of a “holding company” or an
“affiliate” of a “holding company” within the meaning of the Public Utility
Holding Company Act of 1935, as amended.

     8. Assuming (a) the accuracy of the representations and warranties made by
the Company and the Parent in Section 5.13 of the Agreement and by each
Purchaser in Section 6.1 of the Agreement, (b) the due performance by the
Company and the Parent of the covenants set forth in Section 5.13 of the
Agreement (and that no one acting on their behalf has taken any action
prohibited therein), and (c) each Purchaser’s compliance with the offering
procedures and restrictions described in the Private Placement Memorandum dated
July, 2004 relating to the offering of the Notes, it is not necessary in
connection with the offering, issuance, sale and delivery of the Notes under
the circumstances contemplated by the Agreement to register the Notes under the
Securities Act of 1933, as amended, or to qualify an indenture with respect to
the Notes under the Trust Indenture Act of 1939, as amended. Such counsel need
not opine as to when or under what circumstances any Notes initially sold to
the Purchasers may be reoffered or resold.

The opinion of Thompson & Knight LLP, shall cover such other matters relating
to the sale of the Notes as the Purchasers may reasonably request. With
respect to matters of fact on which such opinion is based, such counsel shall
be entitled to rely on appropriate certificates of public officials and
officers of the Company and with respect to matters governed by the laws of any
jurisdiction other than the United States of America, the laws of the State of
Texas or the Delaware General Corporation Law, such counsel may rely upon the
opinions of counsel deemed (and stated in their opinion to be deemed) by them
to be competent and reliable. The opinions shall state that subsequent
transferees and assignees of the Notes may rely thereon.

Exhibit 4.4(a)

 2

 

 

EXHIBIT 4.4(b)

FORM OF OPINION OF SPECIAL COUNSEL

TO THE PURCHASERS

     The opinion of Gardner Carton & Douglas LLP, special counsel to the
Purchasers, shall be to the effect that:

     1. The Agreement and the Notes constitute the legal, valid and binding
agreements of the Company and the Parent, as the case may be, enforceable in
accordance with their terms, except to the extent that enforcement thereof may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws of general application relating to or affecting the enforcement of
the rights of creditors or by equitable principles, regardless of whether
enforcement is sought in a proceeding in equity or at law.

     2. The Guaranties constitute the legal, valid and binding obligation of
the Parent and each Subsidiary Guarantor, enforceable in accordance with their
terms, except to the extent the enforcement thereof may be limited by
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or similar laws of general application relating to or affecting the
enforcement of the rights of creditors or by equitable principles, regardless
of whether enforcement is sought in a proceeding in equity or at law.

     3. Based upon the representations set forth in the Agreement, the
offering, sale and delivery of the Notes and the execution and delivery of the
Guaranties do not require the registration of the Notes or the Guaranties under
the Securities Act of 1933, as amended, nor the qualification of an indenture
under the Trust Indenture Act of 1939, as amended.

     4. No approval, consent or withholding of objection on the part of, or
filing, registration or qualification with, any governmental body, Federal or
state, is necessary in connection with the execution and delivery of the
Agreement or the Notes.

Gardner Carton & Douglas LLP may rely upon the opinion of Thompson & Knight LLP
(i) as to the due authorization, execution and delivery by the Parent, the
Company and the Subsidiary Guarantors of Agreement, the Notes and the
Guaranties to which they are parties, and (ii) as to all matters of Texas law.
The opinion of Gardner Carton & Douglas LLP shall state that the opinion of
Thompson & Knight LLP is satisfactory in form and scope to Gardner Carton &
Douglas, and, in its opinion, the Purchasers and it are justified in relying
thereon. The opinion shall state that subsequent transferees and assignees of
the Notes may rely thereon and shall cover such other matters relating to the
sale of the Notes as the Purchasers may reasonably request.

Exhibit 4.4(b)<PAGE>

                                                                   EXHIBIT 10.10

                  AGREEMENT REGARDING CLOSING OF ESCROW ACCOUNT

      THIS AGREEMENT REGARDING CLOSING OF ESCROW ACCOUNT is made and entered
into as of September 2, 2004, by and among HEALTH FITNESS CORPORATION ("HFC"),
JOHNSON & JOHNSON HEALTH CARE SYSTEMS INC. ("J&J Health"), WELLS FARGO BANK,
NATIONAL ASSOCIATION, as lender ("Lender"), and WELLS FARGO BANK MINNESOTA,
NATIONAL ASSOCIATION, as escrow agent ("Escrow Agent").

                                   WITNESSETH:

      WHEREAS, HFC and J&J Health are parties to that certain Asset Purchase
Agreement dated as of August 25, 2003 (the "Asset Purchase Agreement"), pursuant
to which HFC agreed to acquire certain assets (the "Acquired Assets") of the
Health & Fitness Services division of J&J Health;

      WHEREAS, Section 7(a) of the Asset Purchase Agreement provides that, in
connection with the purchase of the Acquired Assets, the sum of Five Million Two
Hundred Fifty Thousand Dollars ($5,250,000.00) (the "Escrow Contribution") was
to have been deposited with the Escrow Agent and held by the Escrow Agent in an
escrow account (the "Escrow Account") established pursuant to the terms of that
certain Escrow Agreement dated as of August 25, 2003 (the "Escrow Agreement"),
and subsequently disbursed in accordance with the terms of the Escrow Agreement;

      WHEREAS, on August 25, 2003, the Escrow Contribution was deposited in the
Escrow Account;

      WHEREAS, on September 2, 2004, HFC made direct payment to J&J Health of
the balance of the Purchase Price due J&J Health for the Acquired Assets
pursuant to Section 7(a) of the Asset Purchase Agreement; and

      WHEREAS, under the terms of the Escrow Agreement, HFC, J&J Health and
Lender desire to close the Escrow Account and have the Escrow Agent disburse all
remaining funds.

      NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, the parties hereto agree as follows:

                                   AGREEMENT:

      1.) In accordance with Section 4.1 and Section 7.1 of the Escrow
Agreement, HFC, J&J Health and Lender hereby request that all remaining amounts
in the Escrow Account be distributed to Lender, that the Escrow Account be
closed and that the Escrow Agreement be terminated.

<PAGE>

      IN WITNESS WHEREOF, the parties have executed this Agreement Regarding
Closing of Escrow Account as of the date first above written.

HEALTH FITNESS CORPORATION            JOHNSON & JOHNSON HEALTH CARE SYSTEMS INC.

By: /s/  Wesley W. Winnekins          By: /s/ JD Danile
Name:    Wesley W. Winnekins          Name:   JD Danile
Title:   Chief Financial Officer      Title:  Financial Controller

WELLS FARGO BANK, NATIONAL ASSOCIATION, AS LENDER

By: /s/ Kent Paulson
Name:   Kent Paulson
Title:  Vice President

Acknowledged and agreed to this 7th day of September, 2004, by:

WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, AS ESCROW AGENT

By: /s/  Steven Gubrud
Name:    Steven Gubrud
Title:   Asst. Vice President

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