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Exhibit 10.18    
    

 
 

EQUITY PARTICIPATION FEE AGREEMENT    
    

        THIS EQUITY PARTICIPATION FEE AGREEMENT (the "Agreement") is dated
as of June    , 2004 among UNITED STATES PHARMACEUTICAL GROUP, L.L.C. d/b/a NATIONSHEALTH, a Delaware limited liability company, and  NATIONSHEALTH HOLDINGS,
L.L.C., a Florida limited liability company (jointly and severally, the  "Borrower"), and CAPITALSOURCE FINANCE LLC, a Delaware
limited liability company (the
"Lender"). 

        WHEREAS, pursuant to a certain Amended and Restated Revolving Credit and Security Agreement by and between Borrower and Lender dated as of
June    , 2004 (the "Credit Agreement"), Lender made available to Borrower certain credit facilities; and 

        WHEREAS, as part of and in consideration for the Credit Agreement, Borrower has agreed to pay Lender an equity participation fee, the
terms of which are contained herein; 

        NOW, THEREFORE, in consideration of the execution and delivery of the Credit Agreement and for other good and valuable consideration, the
receipt and adequacy of which hereby are acknowledged, Borrower and Lender hereby agree as follows: 

I.    DEFINITIONS  

        Defined terms not defined herein shall have the meanings ascribed to them in the Credit Agreement, as amended from time to time and without regard to any
termination of the Credit Agreement, which are incorporated herein and made a part hereof. In addition, the following terms shall have the meanings ascribed to them below: 

        "EBITDA" means, for the Relevant Period, the sum, without duplication, of the following for Borrower on a consolidated basis: 

        Net
Income determined in accordance with GAAP, plus: 

	(a)
	Interest
Expense;

	(b)
	taxes
on income, whether paid, payable or accrued;

	(c)
	depreciation
expense;

	(d)
	amortization
expense;

	(e)
	all
other non-cash, non-recurring charges and expenses, excluding accruals for cash expenses made in the ordinary course of business; and

	(f)
	loss
from any sale of assets, other than sales in the ordinary course of business, all of the foregoing determined in accordance with GAAP, minus (x) gains from any sale of
assets, other than sales in the ordinary course of business and (y) other extraordinary or non-recurring gains. 

        "Enterprise Value" means, as of any date of determination, a dollar amount equal to the greater of: 

	(a)
	six
(6) multiplied by EBITDA for the Relevant Period; or

	(b)
	Borrower's
consolidated net revenues for the Relevant Period. 

all
of the foregoing as determined by reference to the internally prepared monthly consolidated financial statements of Borrower and its Subsidiaries required to be furnished by Borrower to Lender
under and pursuant to Section 6.1 of the Credit Agreement. 

        "Merger Percentage" means a percentage equal to 0.15% if the Merger (as defined in the Credit Agreement on the date hereof and without any
amendment thereto for this purpose) is 

 

consummated
on or before September 1, 2004 and equal to 0.25% in all other cases (including if the Merger is not consummated). 

        "Net Income" means, the net income (or loss) determined in conformity with GAAP, provided that there shall be excluded: 

	(a)
	the
income (or loss) of any Person in which any other Person (other than any Borrower) has a joint interest, except to the extent of the amount of dividends or other distributions
actually paid to a Borrower by such Person;

	(b)
	the
income (or loss) of any Person accrued prior to the date it becomes a Borrower or is merged into or consolidated with a Borrower or that Person's assets are acquired by a
Borrower;

	(c)
	the
income of any Subsidiary of Borrower to the extent that the declaration or payment of dividends or similar distributions of that income by that Subsidiary is not at the time
permitted by operation of the terms of the charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Subsidiary;

	(d)
	compensation
expense resulting from the issuance of capital stock, stock options or stock appreciation rights issued to former or current employees, including officers, of a Borrower,
or the exercise of such options or rights, in each case to the extent the obligation (if any) associated therewith is not expected to be settled by the payment of cash by a Borrower or any affiliate
thereof; and

	(e)
	compensation
expense resulting from the repurchase of capital stock, options and rights described in clause (d) of this definition of Net Income. 

        "Overadvance Multiple" means a number (rounded up to the nearest whole number but, if greater than 2.5, capped at 2.5) equal to
(a) the aggregate dollar amount ultimately advanced to Borrower as the Initial Overadvance under the Overadvance Facility (whether in one or more advances) divided
by (b) $500,000. By way of example: 

	(a)
	if
the aggregate dollar amount ultimately advanced to Borrower as the Initial Overadvance under the Overadvance Facility was $1,000,000, the Overadvance Multiple would be 2,
determined as follows: 

$1,000,000/$500,000,
equals 2, or 

	(b)
	if
the aggregate dollar amount ultimately advanced to Borrower as the Initial Overadvance under the Overadvance Facility was $1,100,000, the Overadvance Multiple would be 2.5,
determined as follows: 

$1,100,000/$500,000,
equals 2.2, rounded up to the nearest whole number, or 3, but capped at 2.5, or 

	(c)
	if
the aggregate dollar amount ultimately advanced to Borrower as the Initial Overadvance under the Overadvance Facility was $502,000, the Overadvance Multiple would be 2, determined
as follows: 

$502,000/$500,000,
equals 1.004, rounded up to the nearest whole number, or 2. 

        "Relevant Period" means the twelve-month period of the Borrower (consisting of full months) immediately preceding the date that Enterprise
Value is being determined. 

        "Trigger Event" means a Revolver Termination, the Revolving Facility Maturity Date or any other termination of the Revolving Facility for
any reason. 

2

 

II.    Equity participation FEE  

        (a)    Fee.    Commencing upon and by reason of a Trigger Event, Lender shall be entitled to,
and Borrower, jointly and severally, shall pay to Lender on the Determination Date (as defined below), an equity participation fee (the "Fee") equal to: 

(x)
the Enterprise Value times (y) the Merger Percentage times (z) the Overadvance Multiple, 

but
subject to the limitations contained in subsection II.(c) below. 

        (b)    When Determined.    The Fee shall be determined on the date selected by Lender at any
time in its sole discretion, but which shall be no earlier than the Trigger Event and no later than the original Revolving Facility Maturity Date, as the same may be extended (the
"Determination Date"). The Fee shall be payable notwithstanding the termination of the Credit Agreement or the Revolving Facility prior to the
Determination Date, Borrower acknowledging that Lender may select the Determination Date in accordance with the foregoing sentence solely to maximize the Fee or for any other reason. No later than
fifteen (15) days prior to the Determination Date, Lender shall notify Borrower in writing that Lender has selected a Determination Date and shall specify such Determination Date. 

        (c)    Minimum/Maximum Fee.    The Fee shall be subject to a minimum and maximum amount
depending on the Determination Date and when the Merger is consummated (or is not consummated), as follows: 

	Determination Date
 
	 	Minimum Fee
	 	Maximum Fee

	on or before April 30, 2005:	 	$125,000 if the Merger is consummated on or before September 1, 2004, otherwise $250,000	 	$375,000 if the Merger is consummated on or before September 1, 2004, otherwise no maximum
	

after April 30, 2005 but on or before April 30, 2006:	
 	

$250,000 if the Merger is consummated on or before September 1, 2004, otherwise $500,000	
 	

$500,000 if the Merger is consummated on or before September 1, 2004, otherwise no maximum
	

after April 30, 2006 but on or before April 30, 2007:	
 	

$375,000 if the Merger is consummated on or before September 1, 2004, otherwise $750,000	
 	

$625,000 if the Merger is consummated on or before September 1, 2004, otherwise no maximum

        III.    INFORMATION AND OTHER RIGHTS.    For purposes of determining the Enterprise Value,
including estimating such for purposes of deciding on a Determination Date, Lender shall have the right to such information from Borrower and its public accounting firm as Lender reasonably deems
necessary or advisable to estimate EBITDA. Lender will execute any reasonable non-disclosure agreement in connection therewith. Lender shall also have the right to cause Borrower's public
accounting firm to verify EBITDA once the Determination Date has been fixed. The fees and expenses of Borrower's public accounting firm shall be at Borrower's expense. 

        IV.    MISCELLANEOUS    

        4.1    Jury Waiver    

        EACH
PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION ARISING HEREUNDER OR IN 

3

 

ANY
WAY CONNECTED WITH OR INCIDENTAL TO THE DEALINGS OF THE PARTIES WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY, WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT,
TORT OR OTHERWISE. EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN
ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENTS OF THE PARTIES TO THE WAIVER OF THEIR RESPECTIVE RIGHTS TO TRIAL BY JURY. 

        4.2    Governing Law; Jurisdiction; Service of Process; Venue    

        This
Agreement shall be governed by and construed in accordance with the internal laws of the State of Maryland without giving effect to its choice of law provisions. Any judicial
proceeding against Borrower with respect hereto may be brought in any federal or state court of competent jurisdiction located in the State of Maryland. By execution and delivery hereof, Borrower
(i) accepts the non-exclusive jurisdiction of the aforesaid courts and irrevocably agrees to be bound by any judgment rendered thereby, (ii) waives personal service of
process, (iii) agrees that service of process upon it may be made by certified or registered mail, return receipt requested, pursuant to Section 4.4 hereof, (iv) waives any
objection to jurisdiction and venue of any action instituted hereunder and agrees not to assert any defense based on lack of jurisdiction, venue or convenience, and (v) agrees that Lender has
accepted in Maryland this Agreement executed by Borrower. Nothing shall affect the right of Lender to serve process in any manner permitted by law or shall limit the right of Lender to bring
proceedings against Borrower in the courts of any other jurisdiction having jurisdiction. Any judicial proceedings against Lender involving this Agreement shall be brought only in a federal or state
court located in the State of Maryland. All parties acknowledge that they participated in the negotiation and drafting of this Agreement and that, accordingly, no party shall move or petition a court
construing this Agreement to construe it more stringently against one party than against any other. 

        4.3    Incorporation by Reference    

        With
respect to this Agreement and the rights and obligations hereunder, Lender shall be entitled to the benefits of and Borrower shall be subject to the obligations under, Sections 10.1
(Waivers), 10.4 (Cooperation in Litigation), 12.2 (Successors and Assigns), 12.7 (Expenses), 12.9 (Approvals) and 12.12 (Agent) of the Credit Agreement, all as if such provisions were fully contained
herein and related to this Agreement and the subject matter herein. 

        4.4    Notices    

        Any
notice hereunder shall be given to any party to this Agreement in accordance with the provisions of Section 12.5 of the Credit Agreement (notwithstanding any termination of
the Credit Agreement). 

        4.5    Captions; Counterparts; Facsimile Signatures    

        The
captions herein are intended for convenience and reference only and shall not affect the meaning or interpretation of this Agreement. This Agreement may be executed in one or more
counterparts (which taken together, as applicable, shall constitute one and the same instrument) and by facsimile transmission, which facsimile signatures shall be considered original executed
counterparts. Each party to this Agreement agrees that it will be bound by its own facsimile signature and that it accepts the facsimile signature of each other party. 

        [INTENTIONALLY
LEFT BLANK—SIGNATURE PAGE FOLLOWS] 

4

 
[signature
page to Equity Participation Fee Agreement] 

        IN WITNESS WHEREOF, each of the parties has duly executed this Agreement as of the date first written above. 

	

 	
 	
UNITED STATES PHARMACEUTICAL GROUP, L.L.C.

d/b/a NATIONSHEALTH
	

 	
 	

By:	

 
	 	 	 	

	 	 	Name:	 
	 	 	 	

	 	 	Its:	 
	 	 	 	

	

 	
 	
NATIONSHEALTH HOLDINGS, L.L.C.
	

 	
 	
By:	

 
	 	 	 	

	 	 	Name:	 
	 	 	 	

	 	 	Its:	 
	 	 	 	

	

 	
 	
CAPITALSOURCE FINANCE LLC
	

 	
 	
By:	

 
	 	 	 	

	 	 	Name:	 
	 	 	 	

	 	 	Its:	 
	 	 	 	

5

QuickLinks

Exhibit 10.18

EQUITY PARTICIPATION FEE AGREEMENTExhibit 10.8

 

AMENDED
AND RESTATED CREDIT AGREEMENT

 

 

by and among

 

 

LANCER PARTNERSHIP, LTD. and

LANCER DE MEXICO, S.A. de
C.V., 

 

as BORROWERS

 

 

LANCER CORPORATION,

LANCER CAPITAL CORPORATION,

LANCER INTERNATIONAL SALES,
INC.,

ADVANCED BEVERAGE SOLUTIONS,
LLC,

SERVICIOS LANCERMEX, S.A. de
C.V.,

INDUSTRIAS LANCERMEX, S.A.
de C.V., 

 

as GUARANTORS

 

 

THE FROST NATIONAL BANK, 

 

as Agent

 

 

JUNE
30, 2004

 

 

AMENDED AND RESTATED CREDIT AGREEMENT

 

TABLE OF CONTENTS

 

	
  ARTICLE
  1

  	
  DEFINITIONAL PROVISIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 1.1

  	
  Certain Definitions of Terms

  	
   

  
	
  SECTION 1.2

  	
  General Definitional Provisions.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  2

  	
  THE
  CREDITS

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 2.1

  	
  Commitments to Lend.

  	
   

  
	
  SECTION 2.2

  	
  Method of Borrowing.

  	
   

  
	
  SECTION 2.3

  	
  Notes.

  	
   

  
	
  SECTION 2.4

  	
  Interest Rates and Payment.

  	
   

  
	
  SECTION 2.5

  	
  LIBOR
  Loans.

  	
   

  
	
  SECTION 2.6

  	
  Commitment and Other Fees

  	
   

  
	
  SECTION 2.7

  	
  Termination of Commitments.

  	
   

  
	
  SECTION 2.8

  	
  Mandatory Prepayments.

  	
   

  
	
  SECTION 2.9

  	
  Principal Payments on Loans.

  	
   

  
	
  SECTION 2.10

  	
  Optional Prepayments.

  	
   

  
	
  SECTION 2.11

  	
  General Provisions as to Payments

  	
   

  
	
  SECTION 2.12

  	
  Funding
  Losses

  	
   

  
	
  SECTION 2.13

  	
  Sharing of Payments, etc

  	
   

  
	
  SECTION 2.14

  	
  Taxes.

  	
   

  
	
  SECTION 2.15

  	
  Pro Rata Treatment

  	
   

  
	
  SECTION 2.16

  	
  Proceeds
  of Loans

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  3

  	
  CONDITIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 3.1

  	
  Initial Loans on the Closing Date

  	
   

  
	
  SECTION 3.2

  	
  All
  Loans

  	
   

  
	
  SECTION 3.3

  	
  Intentionally Omitted.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  4

  	
  REPRESENTATIONS
  AND WARRANTIES

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 4.1

  	
  Entity
  Status; Power and Authority

  	
   

  
	
  SECTION 4.2

  	
  Authorization; Consents

  	
   

  
	
  SECTION 4.3

  	
  No
  Conflicts

  	
   

  
	
  SECTION 4.4

  	
  Enforceable Obligations

  	
   

  
	
  SECTION 4.5

  	
  Title to Properties

  	
   

  
	
  SECTION 4.6

  	
  Financial Condition.

  	
   

  
	
  SECTION 4.7

  	
  Full
  Disclosure

  	
   

  
	
  SECTION 4.8

  	
  No Default or Adverse Condition

  	
   

  
	
  SECTION 4.9

  	
  Material Agreements; Insurance

  	
   

  
	
  SECTION 4.10

  	
  No-Litigation

  	
   

  
				

 

i

 

	
  SECTION 4.11

  	
  Use of Proceeds: Margin Stock

  	
   

  
	
  SECTION 4.12

  	
  No Financing of Regulated Corporate
  Takeovers

  	
   

  
	
  SECTION 4.13

  	
  Taxes

  	
   

  
	
  SECTION 4.14

  	
  Principal Office; Names; Primary Business

  	
   

  
	
  SECTION 4.15

  	
  Subsidiaries

  	
   

  
	
  SECTION 4.16

  	
  ERISA

  	
   

  
	
  SECTION 4.17

  	
  Compliance with Law

  	
   

  
	
  SECTION 4.18

  	
  Government Regulation

  	
   

  
	
  SECTION 4.19

  	
  Insider

  	
   

  
	
  SECTION 4.20

  	
  Certain Environmental Matters

  	
   

  
	
  SECTION 4.21

  	
  Insurance; Certifications

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  5

  	
  AFFIRMATIVE-COVENANTS

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 5.1

  	
  Financial Statements, Reports and Documents

  	
   

  
	
  SECTION 5.2

  	
  Payment of Taxes and Other Liabilities

  	
   

  
	
  SECTION 5.3

  	
  Maintenance of Existence and Rights:
  Conduct of Business

  	
   

  
	
  SECTION 5.4

  	
  Notice
  of Default

  	
   

  
	
  SECTION 5.5

  	
  Other
  Notices

  	
   

  
	
  SECTION 5.6

  	
  Compliance
  with Loan Documents

  	
   

  
	
  SECTION 5.7

  	
  Compliance
  with Agreements

  	
   

  
	
  SECTION 5.8

  	
  Access;
  Books and Records

  	
   

  
	
  SECTION 5.9

  	
  Compliance
  with Law

  	
   

  
	
  SECTION 5.10

  	
  Insurance

  	
   

  
	
  SECTION 5.11

  	
  ERISA
  Compliance.

  	
   

  
	
  SECTION 5.12

  	
  Further
  Assurances

  	
   

  
	
  SECTION 5.13

  	
  Maintenance
  of Corporate Identity

  	
   

  
	
  SECTION 5.14

  	
  Primary
  Business

  	
   

  
	
  SECTION 5.15

  	
  Subordination
  of Affiliate Obligations

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  6

  	
  NEGATIVE
  COVENANTS

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 6.1

  	
  Certain
  Financial Matters

  	
   

  
	
  SECTION 6.2

  	
  Limitation
  on Indebtedness

  	
   

  
	
  SECTION 6.3

  	
  Limitation
  on Property

  	
   

  
	
  SECTION 6.4

  	
  Restricted
  Payments

  	
   

  
	
  SECTION 6.5

  	
  Limitation
  on Investments

  	
   

  
	
  SECTION 6.6

  	
  Affiliate
  Transactions

  	
   

  
	
  SECTION 6.7

  	
  Limitation
  on Sale of Property

  	
   

  
	
  SECTION 6.8

  	
  Accounting
  Method

  	
   

  
	
  SECTION 6.9

  	
  Internal
  Governance Documents; Name and Principal Place of Business

  	
   

  
	
  SECTION 6.10

  	
  Certain
  Environmental Matters

  	
   

  
	
  SECTION 6.11

  	
  Mergers,
  Acquisitions and Dissolutions

  	
   

  
	
  SECTION 6.12

  	
  Subsidiaries

  	
   

  
				

 

ii

 

	
  SECTION 6.13

  	
  Sale
  of Receivables

  	
   

  
	
  SECTION 6.14

  	
  Sale
  of Certain Interests

  	
   

  
	
  SECTION 6.15

  	
  Negative
  Pledge

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  7

  	
  EVENTS
  OF DEFAULT

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 7.1

  	
  Events
  of Default

  	
   

  
	
  SECTION 7.2

  	
  Remedies
  Upon Event of Default

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  8

  	
  THE
  AGENT AND BANKS

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 8.1

  	
  Appointment
  of the Agent

  	
   

  
	
  SECTION 8.2

  	
  Exculpation:
  Agent’s Reliance

  	
   

  
	
  SECTION 8.3

  	
  Defaults

  	
   

  
	
  SECTION 8.4

  	
  Rights
  as a Bank

  	
   

  
	
  SECTION 8.5

  	
  Indemnification

  	
   

  
	
  SECTION 8.6

  	
  Bank’s
  Credit Decision and Non-Reliance

  	
   

  
	
  SECTION 8.7

  	
  Deferral
  of Distributions; Investments

  	
   

  
	
  SECTION 8.8

  	
  Nature
  of Article 8

  	
   

  
	
  SECTION 8.9

  	
  Resignation
  and Removal by Agent

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  9

  	
  CHANGED
  CIRCUMSTANCES

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 9.1

  	
  Intentionally
  omitted.

  	
   

  
	
  SECTION 9.2

  	
  Illegality

  	
   

  
	
  SECTION 9.3

  	
  Increased
  Cost And Reduced Return.

  	
   

  
	
  SECTION 9.4

  	
  Intentionally
  omitted.

  	
   

  
	
  SECTION 9.5

  	
  Alternate
  Lending Office Designation

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  10

  	
  MISCELLANEOUS

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 10.1

  	
  Notices

  	
   

  
	
  SECTION 10.2

  	
  No
  Waivers

  	
   

  
	
  SECTION 10.3

  	
  Payment
  of Costs and Expenses; Professionals and Consultants.

  	
   

  
	
  SECTION 10.4

  	
  Indemnification

  	
   

  
	
  SECTION 10.5

  	
  Sharing
  of Set-Offs

  	
   

  
	
  SECTION 10.6

  	
  Amendments
  and Waivers

  	
   

  
	
  SECTION 10.7

  	
  Successors
  and Assigns; Participations; Assignments.

  	
   

  
	
  SECTION 10.8

  	
  Maximum
  Interest Rate

  	
   

  
	
  SECTION 10.9

  	
  Governing
  Law; Submission to Jurisdiction

  	
   

  
	
  SECTION 10.10

  	
  Counterparts;
  Effectiveness

  	
   

  
	
  SECTION 10.11

  	
  Independence
  of Covenants

  	
   

  
	
  SECTION 10.12

  	
  Survival

  	
   

  
	
  SECTION 10.13

  	
  Severability

  	
   

  
	
  SECTION 10.14

  	
  Governmental
  Regulation

  	
   

  
				

 

iii

 

	
  SECTION 10.15

  	
  No
  Control

  	
   

  
	
  SECTION 10.16

  	
  Renewals,
  Extensions, Rearrangements, Termination, Etc

  	
   

  
	
  SECTION 10.17

  	
  Conflicts

  	
   

  
	
  SECTION 10.18

  	
  Confidentiality

  	
   

  
	
  SECTION 10.19

  	
  Payments
  Set Aside

  	
   

  
	
  SECTION 10.20

  	
  Release;
  Limitation Of Liability; Commencement Of Actions

  	
   

  
	
  SECTION 10.21

  	
  Amendment
  and Restatement

  	
   

  
	
  SECTION 10.22

  	
  Review

  	
   

  
	
  SECTION 10.23

  	
  This
  Agreement

  	
   

  

 

iv

 

AMENDED
AND RESTATED CREDIT AGREEMENT 

 

THIS AMENDED
AND RESTATED CREDIT AGREEMENT ( this “Agreement”) is made and entered
into as of the 30th day of June, 2004, among LANCER PARTNERSHIP, LTD., a
Texas limited partnership (“Operating Subsidiary”), and LANCER DE
MEXICO, S.A. de C.V., formerly known as NUEVA DISTRIBUIDORA
LANCERMEX, S.A. de C.V., a sociedad anónima de capital variable
organized under the laws of the United Mexican States (“Mexico Subsidiary”)
(Operating Subsidiary and Mexico Subsidiary are hereinafter referred to
individually as a “Borrower” and collectively as “Borrowers”);
LANCER
CORPORATION, a Texas corporation (“Parent Company”), LANCER
CAPITAL CORPORATION, a Delaware corporation (“Lancer Capital”), LANCER
INTERNATIONAL SALES, INC., a Texas corporation, (“Lancer
International”), ADVANCED BEVERAGE SOLUTIONS, LLC, an
Illinois limited liability company (“ABS”), SERVICIOS LANCERMEX, S.A. de C.V.,
a sociedad
anónima de capital variable organized under the laws of the United
Mexican States (“Servicios Lancermex”), INDUSTRIAS
LANCERMEX, S.A. de C.V., a sociedad anónima de capital variable
organized under the laws of the United Mexican States (“Industrias Lancermex”)
(Parent Company, Lancer Capital, Lancer International, ABS, Servicios
Lancermex, Industrias Lancermex and Operating Subsidiary, individually, a “Guarantor”
and collectively, the “Guarantors”); and THE FROST NATIONAL BANK (“Frost”),
a national banking association, individually and as agent for the Banks acting
in the manner and to the extent provided in Article 8 (in such capacity,
the “Agent”),
HARRIS
TRUST AND SAVINGS BANK, an Illinois banking corporation (“Harris”),
individually, and WHITNEY NATIONAL BANK, a national banking
association (“Whitney”), individually, and each of the lenders which
becomes a party hereto as provided in Section 10.7 below (individually,
a “Bank”
and collectively, the “Banks”).  

 

Background Information

 

I.              Original Agreement

 

Borrowers, Parent Company, Agent and The Boatmen’s National Bank of St.
Louis, a national banking association (“Boatmen’s”) entered into that
certain Credit Agreement dated as of July 15, 1996 (as amended from time to
time, the “Original Agreement”), and Operating Subsidiary, Parent
Company, Lancer Capital, Lancer International, Servicios Lancermex, and
Industrias Lancermex each guaranteed Borrowers’ obligations under the Original
Agreement.

 

Pursuant to
the Original Agreement, the Banks provided (i) to Operating Subsidiary a
revolving credit facility, a term loan facility and an acquisition facility;
and (ii) to Mexico Subsidiary a term loan facility, for the purposes provided
in the Original Agreement.  

 

Pursuant to
those certain Assignment and Acceptances dated August 16, 1999 in accordance
with the terms of the Original Agreement, BANK OF AMERICA, N.A.,
successor to NationsBank, N.A., successor to Boatmen’s assigned thirty-three
and three-tenths percent (33.3%) of its Commitments to Whitney and sixty-six
and seven-tenths percent (66.7%) of its Commitments to Harris.

 

1

 

II.            Restated Agreement

 

Borrower,
Parent Company, Lancer Capital, Lancer International, Servicios Lancermex,
Industrias Lancermex, Agent, Harris and Whitney entered into that certain
Seventh Amendment and Restated Credit Agreement, dated effective as of June 30,
2000 (as amended from time to time, the “Restated Agreement”).  

 

Pursuant to
the Restated Agreement, the Banks renewed and extended the term of the Term
Loans and the Revolving Loan and refinanced the Acquisition Loan as part of the
Term A Loan.  

 

Recitals and Waiver

 

A.            Certain Defaults and Events of
Default (as such terms are defined under the Restated Credit Agreement) have occurred
and are continuing under the terms of the Restated Agreement and are defined in
Annex D-1 hereto as the “Listed Defaults”.  

 

B.            Borrower desires that Banks amend
and restate the credit facilities under the Restated Agreement (i) to waive the
Listed Defaults, (ii) to reduce the Revolving Commitments, (iii) to change the
maturity date of the Revolving Loan to January, 31, 2005, and (iv) to make
certain other modifications to the terms and conditions of the credit
facilities.

 

C.            The Banks, severally, are willing to
so amend and restate the credit facilities subject to the conditions herein
provided.  

 

D.            Subject to the terms and conditions set forth
in this Agreement, effective as of the date of this Agreement the Banks hereby
waive each Listed Default to the extent it is currently in existence and to the
extent it is set forth in the “Listed Default(s)” section for one
or more Items in Annex D-1.  The foregoing
waiver does not apply to (i) any Default or Event of Default under this
Agreement, other than a Listed Default, whether similar in nature to a Listed
Default or otherwise; or (ii) to Defaults or Events of Default (as defined in
the Restated Agreement) in existence under the Restated Agreement that are not
set forth in the “Listed Default(s)” section for one or more
Items
in Annex D-1 (if any), which, to the extent they exist, shall be Defaults or
Events of Defaults, respectively, under this Agreement.  The foregoing waiver is effective solely in
the manner and to the extent expressly described in this Recital D, and nothing
in this Recital or elsewhere in this Agreement shall be deemed to (a)
constitute a waiver of any other term, provision or condition of this Agreement
or any other Loan Document; or (b) prejudice any right or remedy that any Bank
may now have (after giving effect to the foregoing waiver) or may have in the
future under or in connection with this Agreement or any other Loan Document.

 

NOW THEREFORE,
for and in consideration of the premises and the promises herein, and for other
good and valuable considerations, the receipt, adequacy and reasonable
equivalency of which are hereby acknowledged by each party hereto, Operating
Subsidiary, Mexico Subsidiary, Parent Company, Lancer Capital, Lancer
International, ABS, Servicios Lancermex, Industrias Lancermex and each Bank and
the Agent agree as follows:

 

2

 

ARTICLE 1

 

DEFINITIONAL
PROVISIONS

 

SECTION 1.1         Certain Definitions of Terms.  For purposes of this Agreement, unless
otherwise defined herein or the context otherwise requires, capitalized terms
used in this Agreement shall have the respective meanings assigned to them in Annex
B hereto.  

 

SECTION 1.2         General
Definitional Provisions.  

 

(a)           All terms defined in this Agreement
shall have their defined meanings when used in each Loan Document and in each
certificate, exhibit, schedule, annex or other instrument related thereto,
unless in any case the context states or implies otherwise; and when required
by the context, each term shall include the plural as well as the singular, and
vice versa.  Furthermore, in each Loan
Document: (i) the word “or” is not exclusive, and the word “including” (in its
various forms) means “including without limitation”; and (ii) references to any
gender shall be construed to include any gender.  

 

(b)           Definitions of each Person
specifically defined herein or in each other Loan Document shall mean and
include herein and therein, unless otherwise expressly provided to the
contrary, the successors, assigns, heirs and legal representatives of each such
Person.  

 

(c)           Unless the context otherwise requires
or unless otherwise expressly provided, references to this Agreement and each
other Loan Document shall include all amendments, modifications, supplements,
restatements, ratifications, renewals, increases, extensions, replacements,
substitutions and rearrangements thereof or thereto, as applicable, and as in
effect from time to time; provided, however, nothing contained in this
sentence shall be construed to authorize any Person to execute or enter into
any such amendments, modifications, supplements, restatements, ratifications,
renewals, increases, extensions or rearrangements to a Loan Document to which
it is a party, unless entered into and executed pursuant to the applicable
provisions of the respective Loan Documents. 

 

(d)           All accounting terms not specifically
defined in a Loan Document shall be construed, and all accounting procedures,
calculations and reporting required or provided for in any Loan Document shall
be performed or prepared, as applicable, in accordance with GAAP consistently
applied.  

 

(e)           The term “Section” refers to
Sections of this Agreement, and the terms “Annex”, “Exhibit” and
“Schedule” refer to Annexes, Exhibits and Schedules attached hereto,
reference to which is hereby made for incorporation herein for all intents and
purposes, unless in any case the context states or implies otherwise.  The table of contents and headings in each
Loan Document are inserted for convenience of reference only and shall be
ignored when construing any such Loan Document.  

 

(f)            Loans hereunder are distinguished by
“Class” and by “Type”.  The “Class” of a
Loan (or of a Commitment to make such a Loan or of a Borrowing comprised of
such Loans) refers to the determination whether such Loan is a Term A Loan, a
Term B Loan, or a Revolving Loan, each of which constitutes a Class.  The “Type” of a Loan refers to the
determination

 

3

 

whether such Loan is a Base Rate Loan or a
LIBOR Loan.  Loans may be identified by
both Class and Type (e.g., a “Term A Base Rate Loan” is a Loan which is both a
Term A Loan and a Base Rate Loan).  

 

(g)           The Recitals and Waiver section of
this Agreement shall be construed as part of this Agreement.

 

ARTICLE 2

THE CREDITS

 

SECTION 2.1         Commitments
to Lend.  

 

(a)           (1)           Term
A Loans.  Pursuant to the Restated
Agreement each Bank severally agreed to renew term loans (each a “Term A
Loan”) to Operating Subsidiary in an amount not exceeding such Bank’s Term
A Loan Commitment.  Such Term A Loans
are subject to the terms and conditions set forth in this Agreement.  Each Bank’s Term A Loan Commitment shall
include the sum of the principal balance now outstanding of all Term A Loans
from such Bank to Operating Subsidiary, and the Term A Loan Commitments shall
not exceed $8,261,750 in the aggregate for all Banks.  Any Term A Loan that is repaid or prepaid may not be
reborrowed.  

 

(2)           Term B Loans.  Pursuant to the Restated Agreement each Bank
severally agreed to renew term loans (each a “Term B Loan”) to Mexico
Subsidiary in an amount not exceeding such Bank’s Term B Loan Commitment.  Such Term B Loans are subject to the terms
and conditions set forth in this Agreement. 
Each Bank’s Term B Loan Commitment shall include the sum of the
principal balance now outstanding of all Term B Loans from such Bank to Mexico
Subsidiary, and the Term B Loans shall not exceed $775,000 in the aggregate for
all Banks.  Any Term B Loan that is
repaid or prepaid may not be reborrowed. 

 

(b)           Revolving Loans.  From time to time during the Revolving
Availability Period, each Bank severally agrees to make revolving loans (each a
“Revolving Loan”) to Operating Subsidiary, on and subject to the terms and
conditions set forth in this Agreement, in an aggregate principal amount at any
one time outstanding up to but not exceeding such Bank’s Revolving Commitment; provided,
however, at no time shall the aggregate principal amount of all Revolving
Loans outstanding exceed the lesser of (i) the Consolidated Borrowing Base then
in effect; and (ii) the Revolving Commitments of all Banks as shown on Annex
A.  Subject to the terms and
conditions of this Agreement, Revolving Loans may be borrowed, repaid and
reborrowed at any time during the Revolving Availability Period without premium
or penalty.  

 

(c)           Intentionally omitted.

 

(d)           Amount of Borrowings: Borrowings
Ratable.  Each Borrowing requested
by Operating Subsidiary as a Revolving Loan shall be in a minimum principal
amount of $100,000 or a multiple thereof, or if a lesser amount, the amount of
the remaining unadvanced aggregate Revolving Commitments of all Banks.  All Borrowings hereunder shall be made from
the Banks ratably in proportion to their respective Commitments of the relevant
Class.  

 

4

 

(e)           Types.  All Loans, other than the LIBOR Loans
permitted under Section 2.5, shall be Base Rate Loans.

 

SECTION 2.2         Method
of Borrowing.  

 

(a)           Operating Subsidiary shall give the
Agent notice in the form attached hereto as Exhibit A (each, a “Notice
of Borrowing”), not later than 11:00 A.M. (San Antonio, Texas time) on the
Business Day of each Borrowing under the Revolving Commitments, specifying (i)
the date of such Borrowing, which shall be a Business Day; (ii) the aggregate
amount of such Borrowing under the Revolving Loan; and (iii) the deposit
account of the Agent’s Domestic Lending Office into which such Borrowing is
requested to be deposited or complete wiring instructions for any other account
of such Borrower to which such Borrowing is requested to be wired.  

 

(b)           By 12:00 P.M. (San Antonio, Texas
time) on the date of receipt of the applicable Notice of Borrowing from a
Borrower, the Agent shall notify each Bank of the contents thereof and of such
Bank’s ratable share of such Borrowing. 
Such Notice of Borrowing shall not be revocable by such Borrower.  

 

(c)           Not later than 1:00 P.M. (San
Antonio, Texas time) on the date of each Borrowing, each Bank shall make
available its ratable share of such Borrowing, in immediately available funds,
to the Agent at the account number of the Agent set forth in Annex A.  Unless the Agent determines that any
applicable condition precedent has not been satisfied, the Agent will make the
funds so received from each Bank available to the applicable Borrower in its
deposit account designated in the applicable Notice of Borrowing, unless
otherwise directed in writing by such Borrower and accepted by the Agent.  

 

(d)           Unless the Agent has received notice
from a Bank, prior to any proposed Borrowing, that such Bank does not intend to
fund its Loan requested to be made on such date, the Agent may assume that such
Bank has funded its Loan and is depositing the proceeds thereof with the Agent
on such date, and the Agent in its sole discretion may, but shall not be
obligated to, disburse a corresponding amount to the applicable Borrower on
such date.  If Loan proceeds
corresponding to that amount are not in fact deposited with the Agent by such
Bank on or prior to the funding date of such Loan, such Bank agrees to pay, and
in the event such Bank fails to immediately pay, such Borrower agrees to repay,
to the Agent forthwith on demand such corresponding amount, together with
interest on the balance thereof from time to time outstanding for each day from
the date such amount is disbursed to such Borrower until the date such amount
is paid or repaid to the Agent, (i) in the case of such Borrower, at the
interest rate applicable to such Borrowing; and (ii) in the case of such Bank,
at the Federal Funds Rate.  If such Bank
shall pay to the Agent such corresponding amount, the amount so paid shall
constitute such Bank’s Loan as part of such Borrowing for the purposes of this
Agreement.  If both such Bank and such
Borrower shall repay such corresponding amount, the Agent shall promptly refund
to such Borrower such corresponding amount (together with any interest paid
thereon by such Borrower).  This Section
2.2(d) does not relieve any Bank of its obligation to make its Loans on any
funding date therefor.  The obligations
of each Bank hereunder are several, AND NEITHER ANY BANK NOR THE AGENT SHALL BE
RESPONSIBLE FOR THE OBLIGATION OF ANY OTHER PERSON HEREUNDER (OR SUCH OTHER
PERSON’S

 

5

 

DEFAULT IN THE PERFORMANCE THEREOF), nor will
the failure by the Agent or any Bank to perform any of its respective
obligations hereunder relieve the Agent or any other Bank from the performance
of its respective obligations hereunder. 

 

(e)           Unless otherwise directed in writing
by the applicable Borrower and accepted by the Agent, all Borrowings made
hereunder shall be disbursed by credit to the deposit account maintained by
such Borrower at the Agent’s Domestic Lending Office that is designated in the
applicable Notice of Borrowing.  

 

SECTION 2.3         Notes.  

 

(a)           The Term A Loans of each Bank shall
be evidenced by a Term A Note, the Term B Loans of each Bank shall be evidenced
by a Term B Note, and the Revolving Loans of each Bank shall be evidenced by a
Revolving Note.  

 

(b)           Each reference in this Agreement to
the “Note” of such Bank shall be deemed to refer to and include any or
all of the Notes referred to in the preceding clause (a), as the context
may require.  

 

(c)           Upon receipt of each Bank’s Notes
pursuant to this Section 2.3, the Agent shall promptly mail or deliver
such Notes to such Bank.  Each Bank
shall record on its books, and prior to any transfer of its Notes shall endorse
on the schedule forming a part thereof appropriate notations to evidence the
date, amount and maturity of each Loan made by it and the date and amount of
each payment of principal made by the applicable Borrower with respect thereto;
provided that the failure of any Bank to make any such recordation or
endorsement shall not affect the obligations of any Borrower or any Bank
hereunder or under any other Loan Document. 
Each Bank is hereby irrevocably authorized by each Borrower to so
endorse its Notes and to attach to and make a part of its Notes a continuation
of any such schedule as and when required. 

 

SECTION 2.4         Interest
Rates and Payment.  

 

(a)           Each Base Rate Loan shall bear
interest on the outstanding principal amount thereof, for each day from the
date such Loan is made until it becomes due and payable, at a rate per annum
equal to the lesser of (i) the sum of the Base Rate as in effect for each such
day plus the Applicable Margin and (ii) the Maximum Rate.  Accrued, unpaid interest on the outstanding
principal of the Base Rate Loans shall be due and payable on each Quarterly
Date.  Any principal of and, to the
extent permitted by Law, accrued and unpaid interest on any Base Rate Loan
which has become due and payable shall bear interest on the unpaid portion
thereof, payable on demand, for each day from such due date and until paid, at
the Default Rate.  

 

(b)           Each LIBOR Loan shall bear interest
on the outstanding principal amount thereof, for the Interest Period applicable
thereto, at a rate per annum equal to the lesser of (i) the sum of the
Applicable Margin plus the applicable Adjusted London Interbank Offered Rate
and (ii) the Maximum Rate.  Accrued,
unpaid interest on the outstanding principal of each LIBOR Loan shall be due
and payable for each Interest Period (i) on the last day thereof for each LIBOR
Loan having an Interest Period equal to one month or three months and (ii) on
each Quarterly Date during the Interest Period and on the last day thereof for
each LIBOR Loan having an Interest

 

6

 

Period equal to six months.  Any principal of and, to the extent
permitted by Law, interest on any LIBOR Loan which has become due and payable
shall bear interest on the unpaid portion thereof, payable on demand, for each
day from such due date and until paid, at the Default Rate.  

 

(c)           The Agent shall determine each
interest rate applicable to the Loans hereunder and each fee hereunder.  Interest for all Base Rate Loans and all
fees shall be computed on the basis of a year of 360 days, in each case for the
actual number of days elapsed (including the first day but excluding the last
day), except that, if use of a 360-day year would result in a rate in excess of
the Maximum Rate, such computation will be made on the basis of a year
consisting of 365 or 366 days, as appropriate. 
Each determination by the Agent of an interest rate or fee hereunder
shall be conclusive and binding in the absence of manifest error.  

 

(d)           Notwithstanding the foregoing, if at
any time the applicable contractual rate of interest provided for herein
(without reference to the Maximum Rate limitation) exceeds the Maximum Rate,
then the rate of interest on any Loan or other Obligation shall be limited to
the Maximum Rate during such time, and at all times thereafter (including
periods during which any or all of such applicable contractual rates of
interest have fallen below the Maximum Rate), the interest rate on any Loan or
other Obligation shall be the Maximum Rate, or if there is no Maximum Rate in
effect, the Agreed Maximum Rate, until the total amount of interest accrued on
such Loan or other Obligation equals the amount of interest which would have
accrued thereon if the applicable contractual rate of interest (without
reference to the Maximum Rate limitation) had at all times been in effect; but in
no event shall the aggregate interest payable or paid during the period
beginning on the date the initial Loan is made until the Obligations are paid
in full exceed an amount equal to interest at the Maximum Rate so long as the
Maximum Rate shall be applicable to this Agreement and the transactions
contemplated hereby.  If at maturity or
final payment of any Note or other Obligations, as applicable, the total amount
of interest paid or accrued on such Note or other Obligations under the
foregoing provisions is less than the total amount of interest which would have
been paid or accrued if the applicable contractual rate of interest provided
for herein had at all times been in effect, then each Borrower agrees, to the
fullest extent permitted by Law, to pay an amount equal to the difference
between (i) the lesser of (A) the amount of interest which would have been paid
or accrued on such Note or other Obligations, as applicable, if the Maximum
Rate had at all times been in effect; and (B) the amount of interest which
would have been paid or accrued on such Note or other Obligations, as
applicable, if a rate per annum equal to the applicable contractual rate of
interest provided for herein had at all times been in effect; and (ii) the
amount of interest paid or accrued in accordance with the other provisions of
such Note or other Obligations, as applicable. 

 

(e)           The payment of interest (or any
amount deemed to be interest) on any Note and on any other Obligation shall, in
all respects regarding each Loan Document, be subject to the provisions of Section
10.8.  

 

SECTION 2.5         LIBOR
Loans.  

 

Any LIBOR Loan outstanding as of the date of
this Agreement shall be permitted to continue as the same Type of Loan for the
duration of the current Interest Period set forth in the
Continuation/Conversion Notice or Notice of Borrowing, as applicable, delivered
to the Agent

 

7

 

prior to May 1, 2004, with respect to such
LIBOR Loan.  Each outstanding LIBOR Loan
shall automatically convert into a Base Rate Loan on the last day of the
applicable Interest Period. 

 

SECTION 2.6         Commitment
and Other Fees.  Subject to Section
10.8:

 

(a)           Operating Subsidiary shall pay to the
Agent, for the ratable account of the Banks, the following fees: (i) 1/5 of 1%
per annum on the total unused portion of the Revolving Commitments of all Banks
during the Revolving Availability Period. 
Such fees shall be payable quarterly in arrears on each Quarterly Date
during the Revolving Availability Period and on the Revolving Commitment
Termination Date.  

 

SECTION 2.7         Termination
of Commitments.  

 

(a)           No further advances shall be made on
the Term A Loans or the Term B Loans.  

 

(b)           During the Revolving Availability
Period, Operating Subsidiary may, upon at least five Business Days’ prior
notice to the Agent, receipt of which notice Agent shall promptly notify the
Banks, terminate at any time, or permanently reduce from time to time by an
aggregate amount of $500,000 or any integral multiple thereof, the unused portion
of the Revolving Commitments of all Banks. 

 

(c)           Each termination or reduction of any
Commitment pursuant to the provisions hereof shall apply proportionately to the
respective Commitment of each Bank, and each such termination or permanent
reduction, once terminated or so reduced, may not be reinstated.  If any Commitment is terminated in its
entirety, all accrued commitment fees with respect thereto shall be due and
payable on the effective day of such termination.  

 

(d)           To the extent not theretofore
terminated or permanently reduced, as applicable, pursuant to other provisions
of this Agreement, the Revolving Commitments of all Banks shall terminate on
January 31, 2005.  

 

SECTION 2.8         Mandatory
Prepayments.  

 

(a)           If at any time (whether as a result
of a temporary or permanent reduction in Commitments pursuant to Section 2.7,
a change in the Consolidated Borrowing Base or otherwise), (i) the aggregate
principal amount of all Revolving Loans outstanding exceeds the lesser of (x)
the Consolidated Borrowing Base then in effect; and (y) the aggregate amount of
the Revolving Commitments of all Banks, Operating Subsidiary shall immediately
prepay the Revolving Loans in an amount at least equal to such excess; or (ii)
the aggregate principal amount of all Term A Loans outstanding exceeds the
aggregate amount of the Term A Commitments of all Banks, Operating Subsidiary
shall immediately prepay the Term A Loans in an amount at least equal to such
excess; or (iii) the aggregate principal amount of all Term B Loans outstanding
exceeds the aggregate amount of the Term B Commitments of all Banks, Mexico
Subsidiary shall immediately prepay the Term B Loans in an amount at least
equal to such excess.  All such
mandatory prepayments shall be accompanied by, and such Borrower shall pay,
interest thereon which has accrued until the date of payment thereof.  

 

8

 

(b)           By 11:00 A.M. (San Antonio, Texas
time) on the date that a mandatory prepayment is required under Section 2.8(a),
such Borrower shall select which outstanding Loans (indicating the Class and
Type) are to be prepaid and shall notify the Agent thereof.  Such notice shall not be revocable by such
Borrower.  By 12:00 P.M. (San Antonio,
Texas time) on the date of receipt of such notice, the Agent shall notify each
Bank of the contents thereof and of such Bank’s ratable share of such
prepayment.  Each such prepayment shall
be applied to prepay ratably the respective Loans so selected.  

 

(c)           As provided in Section 2.2(d),
such Borrower shall immediately prepay the principal of, and accrued interest
on, portions of Borrowings funded by the Agent as to which and to the extent a
Bank has not funded its pro rata portion. 

 

(d)           If at any time, Parent Company issues
or sells any Indebtedness permitted under Section 6.2(vi), Operating
Subsidiary shall immediately prepay the Term A Loans in amounts equal to, in
the aggregate, the net cash proceeds received for such issuance or sale.  Such prepayment shall be applied to the payment
of principal of the Term A Notes.  Each
such prepayment with respect of the Term A Loans shall be applied, to the
unpaid scheduled principal installments of such Loans in the inverse order of
maturity thereof.  

 

SECTION 2.9         Principal
Payments on Loans.  

 

(a)           On each Quarterly Date commencing
June 30, 2004 and continuing consecutively until the payment of the Term A
Loans in full, there shall be due and payable by Operating Subsidiary a
principal installment in respect of outstanding Term A Loans in an aggregate
principal amount of $275,000; PROVIDED, HOWEVER, the aggregate unpaid principal
balance of the Term A Loans, together with accrued, unpaid interest thereon
shall (unless the maturity thereof is sooner accelerated or otherwise becomes
due and payable in accordance with the terms hereof or any other Loan Document)
be due and payable in full by Operating Subsidiary on July 15, 2005.

 

(b)           On each Quarterly Date commencing
June 30, 2004 and continuing consecutively until the payment of the Term B Loans
in full, there shall be due and payable by Mexico Subsidiary a principal
installment in respect of outstanding Term B Loans in an aggregate principal
amount of $75,000; PROVIDED, HOWEVER, the aggregate unpaid principal balance of
the Term B Loans, together with accrued, unpaid interest thereon shall (unless
the maturity thereof is sooner accelerated or otherwise becomes due and payable
in accordance with the terms hereof or any other Loan Document) be due and
payable in full by Mexico Subsidiary on July 15, 2005.

 

(c)           Intentionally omitted.

 

(d)           By 11:00 A.M. (San Antonio, Texas
time) on the date that a payment is required in respect of Loans under this Section
2.9, Operating Subsidiary or Mexico Subsidiary, as the case may be, shall
select which outstanding Loans that are either (i) Base Rate Loans; or (ii)
LIBOR Loans whose last day of its Interest Period corresponds to the applicable
Quarterly Date (and so indicating the Type) are to be paid and shall notify the
Agent thereof.  Such notice shall not be
revocable by the applicable Borrower. 
By 12:00 P.M. (San Antonio, Texas time) on the

 

9

 

date of receipt of such notice, the Agent
shall notify each Bank of the contents thereof and of such Bank’s ratable share
of such payment.  Each such payment
shall be applied to pay ratably the Loans so selected, or if the applicable
Borrower has not timely notified and identified to the Agent (as herein
provided) Loans for application, such payment shall be applied, ratably, by the
Agent as it determines in its sole discretion. 

 

(e)           The aggregate unpaid principal
balance of the Revolving Loans, together with accrued, unpaid interest thereon
shall (unless the maturity thereof is sooner accelerated or otherwise becomes due
and payable by Operating Subsidiary in accordance with the terms hereof or any
other Loan Document) mature and be due and payable by Operating Subsidiary on
the Revolving Commitment Termination Date. 

 

SECTION 2.10       Optional
Prepayments.  

 

(a)           Each Borrower may, upon notice to the
Agent given not later than 12:00 P.M. (San Antonio, Texas time) on (i) the
Business Day of prepayment of any Base Rate Loan; and (ii) the
LIBOR-Business-Day prior to the date of prepayment of any LIBOR Loan, prepay
(without premium or penalty, other than any funding losses as provided in Section
2.12) any Loan in whole at any time, or from time to time in part, in
minimum principal amounts of $100,000 or any integral multiple thereof; provided
however, LIBOR Loans may be prepaid only on the last day of the Interest
Period for such Loan.  Such notice shall
specify the date and amount of prepayment and the Loan or Loans (indicating the
corresponding Class or Type) applicable to such prepayment and shall not be
revocable by such Borrower.  The payment
amount specified in such notice shall be due and payable on the date specified
therein, together with accrued interest thereon and other fees and expenses due
and owing by such Borrower to the date of prepayment.  Any such prepayment of Term Loans shall be applied ratably, to
the unpaid scheduled principal installments of such Loans in the inverse order
of maturity thereof.  

 

(b)           Upon receipt of a notice of
prepayment pursuant to this Section 2.10, the Agent shall promptly
notify each Bank of the contents thereof and of such Bank’s ratable share, if
any, of such prepayment.  

 

SECTION 2.11       General
Provisions as to Payments.  (i)
Operating Subsidiary shall make each payment of principal of and interest on
the Term A Loans, and the Revolving Loans; (ii) Mexico Subsidiary shall make
each payment of principal of and interest on the Term B Loans; and (iii) each
Borrower shall make each payment of fees or any other Obligations of such
Borrower, in U.S. dollars, not later than 12:00 P.M. (San Antonio, Texas time)
on the date when due (it being understood that interest shall accrue and be
payable for such date on any amounts which are paid after 12:00 P.M. (San
Antonio, Texas time)), in immediately available funds, without deduction,
set-off or counterclaim to the Agent or any Bank at the account of the Agent
set forth in Annex A.  By 1:00
P.M. (San Antonio time) on the date of receipt, the Agent will distribute to
each Bank (as applicable), in accordance with the terms of this Agreement, its
ratable share of each such payment. 
Whenever any payment of principal of or interest on the LIBOR Loans
shall be due on a day which is not a LIBOR-Business-Day, the date for payment
thereof shall be extended to the next succeeding LIBOR-Business-Day unless such
LIBOR-Business-Day falls in another calendar month, in which case the date for
payment thereof shall be the immediately preceding LIBOR-Business-Day.  Whenever any payment of any other

 

10

 

Obligations shall
be due on a day which is not a Business Day, the date for payment thereof shall
be extended to the next succeeding Business Day.  If the date for any payment of principal is extended as provided
above or by operation of law or otherwise, interest thereon shall be payable
for such extended time.  Unless the
Agent has received notice from any Borrower prior to the date on which any
payment is due to each Bank or the Agent hereunder that such Borrower will not
make such payment in full, the Agent may assume that such Borrower has made
such payment in full to the Agent on such date, and the Agent may, in reliance
upon such assumption, cause to be distributed to each Bank on such due date an
amount equal to the amount then due such Bank. 
If and to the extent such Borrower has not made such payment in full to
the Agent, each Bank shall repay to the Agent forthwith on demand such amount
distributed to such Bank, together with interest thereon, for each day from the
date such amount is distributed to such Bank until the date such Bank repays
such amount to the Agent, at a rate per annum equal to the Federal Funds
Rate.  In the event any payment received
by the Agent and so paid to Banks is rescinded or must otherwise be returned by
the Agent, each Bank shall, upon the request of the Agent, repay to the Agent
the amount of such payment paid to such Bank, together with interest thereon,
for each day from the date such amount is distributed to such Bank until the
date such Bank repays such amount to the Agent, at a rate per annum equal to
the Federal Funds Rate.  

 

SECTION 2.12       Funding
Losses.  If any Borrower (i) makes
any payment or prepayment of principal with respect to any LIBOR Loan, pursuant
to Article 2 or otherwise, on any day other than the last day of the Interest
Period applicable thereto; or (ii) fails to pay or prepay any LIBOR Loans after
notice has been given to any Bank in accordance with Section 2.2(b) or 2.10(b),
then such Borrower shall, subject to Section 10.8, indemnify and
reimburse Agent and/or each Bank, as applicable, on demand for any loss or
expense incurred or sustained by it as a consequence of any thereof, including
any loss incurred or sustained in obtaining, liquidating, employing or
redeploying deposits from third parties, and including loss of Applicable
Margin, for the period after any such payment through the end of such Interest
Period; provided that the Agent and/or such Bank shall have delivered to such
Borrower a certificate as to the amount of such loss or expense which certificate
shall be conclusive and binding against such Borrower, absent calculational
error.  

 

SECTION 2.13       Sharing
of Payments, etc.  Each of the Agent
and the Banks agrees that if it shall, whether through the exercise of rights
under any Loan Document or rights of banker’s lien, set-off, counterclaim or
otherwise against any Borrower or otherwise, obtain payment of a portion of the
aggregate Obligations owed to it by such Borrower which, taking into account
all distributions made by the Agent under this Agreement causes the Agent or
such Bank to have received more than it would have received had such payment
been received by the Agent and distributed pursuant to this Agreement, then (i)
it shall notify the Agent and each of the other Banks; (ii) it shall be deemed
to have simultaneously purchased and shall be obligated to purchase interests
in the Obligations as necessary to cause the Agent and all Banks to share all
payments as provided for herein; and (iii) such other adjustments shall be made
from time to time as shall be equitable to ensure that the Agent and all Banks
share all payments of Obligations as provided for herein; provided, however,
nothing contained herein shall in any way affect the right of the Agent or any
Bank to obtain payment (whether by exercise of rights of banker’s lien,
set-off, counterclaim or otherwise) of indebtedness other than the
Obligations.  Each Borrower expressly
consents to the foregoing arrangements and agrees that any holder of any such
interest or other participation in the Obligations, whether or not acquired
pursuant to

 

11

 

the foregoing
arrangements, may to the fullest extent permitted by law exercise any and all
rights of banker’s lien, set-off or counterclaim as fully as if such holder
were a holder of the Obligations in the amount of such interest or other
participation.  If all or any part of
any funds transferred pursuant to this Section 2.13 is thereafter
recovered from the seller under this Section 2.13 which received the
same, the purchase provided for in this Section 2.13 shall be deemed to
have been rescinded and the purchase price restored to the extent of such
recovery, together with interest if interest is required pursuant to court
order to be paid on account of the possession of such funds prior to such
recovery.  

 

SECTION 2.14       Taxes.  

 

(a)           No Deduction for Certain Taxes.  Any and all payments by each Borrower shall
be made, in accordance with Sections 2.4 and 2.6, free and clear of and
without deduction for any and all present or future Taxes.  If any Borrower shall be required by law to
deduct any Taxes from or in respect of any sum payable to any Bank or the
Agent, (i) the sum payable shall be increased as may be necessary so that,
after making all required deductions (including deductions applicable to
additional sums payable under this Section 2.14), such Bank or the
Agent, as the case may be, receives an amount equal to the sum it would have
received had no such deductions been made; (ii) the Borrower shall make such
deductions; and (iii) the Borrower shall pay the full amount deducted to the
relevant taxation authority or other authority in accordance with applicable
law.  

 

(b)           Other Taxes.  In addition, the Borrowers agree to pay any
present or future stamp or documentary taxes or any other excise or property
taxes, charges or similar levies which arise from any payment made or from the
execution, delivery or registration of, or otherwise with respect to, this
Agreement, the Notes, or the other Credit Documents (hereinafter referred to as
“Other Taxes”).  

 

(c)           Indemnification.  EACH
BORROWER INDEMNIFIES EACH BANK AND THE AGENT FOR THE FULL AMOUNT OF TAXES OR
OTHER TAXES (INCLUDING, WITHOUT LIMITATION, ANY TAXES OR OTHER TAXES IMPOSED BY
ANY JURISDICTION ON AMOUNTS PAYABLE UNDER THIS SECTION 2.14) PAID BY
SUCH BANK OR THE AGENT, AS THE CASE MAY BE, AND ANY LIABILITY (INCLUDING
INTEREST AND EXPENSES) ARISING THEREFROM OR WITH RESPECT THERETO, WHETHER OR
NOT SUCH TAXES OR OTHER TAXES WERE CORRECTLY OR LEGALLY ASSERTED.  EACH PAYMENT REQUIRED TO BE MADE BY ANY
BORROWER IN RESPECT OF THIS INDEMNIFICATION SHALL BE MADE TO THE AGENT FOR THE
BENEFIT OF ANY PARTY CLAIMING SUCH INDEMNIFICATION WITHIN 30 DAYS FROM THE DAY
THE BORROWER RECEIVES WRITTEN DEMAND DETAILING THE CALCULATION OF SUCH AMOUNTS
THEREFOR FROM THE AGENT ON BEHALF OF ITSELF AS AGENT OR ANY SUCH BANK.  IF ANY BANK OR THE AGENT RECEIVES A REFUND
IN RESPECT OF ANY TAXES PAID BY ANY BORROWER, UNDER THIS SECTION 2.14(c),
SUCH BANK OR THE AGENT, AS THE CASE MAY BE, SHALL PROMPTLY PAY TO SUCH BORROWER
ITS SHARE OF SUCH REFUND.  

 

12

 

(d)           Evidence of Tax Payments.  Each Borrower will pay prior to delinquency
all Taxes payable in respect of any payment due hereunder.  Within 30 days after the date of any payment
of such Taxes, each Borrower will furnish to the Agent, at its address referred
to in Annex A, the original or a certified copy of a receipt evidencing
payment of such Taxes.  

 

SECTION 2.15       Pro
Rata Treatment.  Except as required
under Section 2.8(c), Section 2.8(d), Section 2.12, and Article
9, each Borrowing, each payment or pre-payment of principal of any
Borrowing, each payment of interest on the Loans, each payment of the fees,
each termination or reduction of the Commitments, and each refinancing of any
Borrowing, shall be allocated ratably and pro rata among the Banks in
accordance with their respective Commitments. 
Each Bank agrees that in computing such Bank’s portion of any Borrowing
to be made hereunder, the Agent may, in its discretion, round each Bank’s
portion of such Borrowing to the next higher or lower whole dollar amount.  

 

SECTION 2.16       Proceeds
of Loans.  The proceeds of the Term
A Loans shall be used by Operating Subsidiary solely to (i) refinance the
unpaid principal balance of indebtedness used for the expansion of Operating
Subsidiary’s manufacturing facility in San Antonio, Texas; (ii) refinance the
unpaid principal balance of existing loans which financed the purchase of
equipment of Operating Subsidiary; and (iii) refinance the balance of the
Acquisition Loans.  The proceeds of the
Term B Loans shall be used to refinance the principal balance of indebtedness
used by Mexico Subsidiary solely to (i) finance the expansion of Mexico Subsidiary’s
maquiladora plant in Mexico; and (ii) to refinance the unpaid principal balance
of existing loans which financed the purchase of such maquiladora plant.  The proceeds of the Revolving Loans shall be
used by Operating Subsidiary (i) to provide working capital for Operating
Subsidiary, its Affiliates that are Loan Parties and Australian Subsidiary;
(ii) to finance capital expenditures; and (iii) for general corporate purposes
for Operating Subsidiary, its Affiliates that are Loan Parties and Australian
Subsidiary.  

 

ARTICLE 3

CONDITIONS

 

SECTION 3.1         Initial
Loans on the Closing Date.  The
obligations of the Banks to make the initial Revolving Loan on or after the
Closing Date are subject to the conditions precedent that on or before the
Closing Date, the Agent shall have received, there shall have been performed
and there shall exist, the documents, actions and other matters set forth in Annex
C hereto, each in form, scope and substance, and (as applicable) dated as
of a date, satisfactory to the Agent and its counsel.  

 

SECTION 3.2         All
Loans.  The obligations of the Banks
to make each Revolving Loan are subject to the satisfaction of the Agent as to
the following conditions precedent:

 

(a)           Representations True and No
Defaults.  (i) The representations
and warranties contained and referred to in Article 4 (other than those
representations and warranties limited by their terms to a specific date) shall
be true, complete and accurate in all material respects on and as of the date
of the Credit Event as though made on and as of such date; (ii) no event shall
have occurred since the date of the most recent financial statements delivered
pursuant to Section 5.1

 

13

 

(or in the case of a Credit Event prior to
the delivery of such statements, since the date of this Agreement), that has
caused a Material Adverse Effect; and (iii) no Event of Default or Default
shall have occurred and be continuing.  

 

(b)           No Material Adverse Change.  As of the date of the Credit Event, (i) no
change or event that might cause a Material Adverse Effect shall have occurred
since the date of this Agreement; and (ii) no Current Material Adverse Event
shall have occurred, including any Current Material Adverse Event related to,
connected with, resulting from, implied by or flowing from any matters
described in Annex D-1 and/or Annex D-2 hereto.  

 

(c)           Borrowing Documents.  The Agent shall have received (i) a
certificate signed by an Authorized Officer of the requesting Borrower dated as
of such date to the effects set forth in Section 3.2(a); (ii) a Notice
of Borrowing delivered in accordance with Section 2.2(a); and (iii) such
other documents and certificates relating to the transactions herein
contemplated as the Banks (through the Agent) may reasonably require.  

 

SECTION 3.3         Intentionally
Omitted.  

 

ARTICLE 4

 

REPRESENTATIONS
AND WARRANTIES

 

To induce each
of the Agent and the Banks to enter into and perform its agreements pursuant to
this Agreement, each Borrower and Parent Company (i) make and reaffirm to each
of the Agent and the Banks each of the representations and warranties contained
in each Loan Document; and (ii) without duplication, represent and warrant to
each of the Agent and the Banks that, at the time of execution hereof and the
transactions contemplated hereby and as of each of the dates of each of the
financial statements required to be delivered, from time to time, pursuant to Section
5.1:

 

SECTION 4.1         Entity
Status; Power and Authority.  Each
Company is a corporation or limited partnership duly organized and validly
existing in good standing under the laws of the State of incorporation or
organization and is duly qualified as a foreign corporation and in good
standing in all jurisdictions in which the failure to be so qualified could
have a Material Adverse Effect, all of which jurisdictions are set forth in Schedule
4.1 hereto.  Each Company has the
corporate power and authority and all Legal Rights which are necessary (i) to
own, lease, use and operate its respective Property and to transact its
business as now being and as proposed to be conducted; and (ii) to execute and
deliver each Loan Document, perform and comply with all obligations and
agreements thereunder and consummate the transactions contemplated thereby.

 

SECTION 4.2         Authorization;
Consents.  The execution, delivery
and performance by each Company of each Loan Document to which it is a party,
and the consummation of the transactions contemplated thereby, have been duly
authorized by all necessary corporate and other action by, on behalf of, and
with respect to, each Company, and no consent, approval, authorization,
declaration, filing, order or other action by, on behalf of, or with respect
to, any Company is required of, or from, any Governmental Authority or other
Person in connection with any of such execution, delivery or performance, or
the validity or enforceability of any

 

14

 

Loan Document
against each Company which is a party thereto or any Property covered thereby
which has not been obtained and is final and in full force and effect.  

 

SECTION 4.3         No
Conflicts.  Neither the execution or
delivery of any Loan Document, nor the consummation of any transaction
contemplated therein, nor the performance of, or compliance with, any of the
terms and provisions thereof, does or will (i) conflict with, or result in or
constitute a breach, violation or default of, or require a consent under, (A)
any provision of Law to which any Company or any of its Property is subject or
bound; (B) any judgment or Legal Right applicable to any Company or any of its
Property; (C) any lease, indenture, loan agreement, note, purchase or
acquisition agreement, mortgage, deed of trust or other agreement or instrument
to which any Company is a party or by which it or any of its Property may be
bound or subject; or (D) any provision of the charter or bylaws of any Company;
or (E) result in the creation or imposition of any Lien or Negative Pledge upon
any Company or any of its Property, except for the benefit of the Agent and the
Banks.  

 

SECTION 4.4         Enforceable
Obligations.  Each Loan Document has
been duly executed and delivered by each Company which is a party thereto and
constitutes the legal, valid and binding obligations of each Company,
enforceable against each Company in accordance with its respective terms.  

 

SECTION 4.5         Title
to Properties.  Each Company has
good and indefeasible title to, or valid leasehold interests in, as applicable,
all of its Property, free and clear of all Liens (except Permitted Liens),
Negative Pledges and any other adverse claims of any nature, except any of the
foregoing which are for the benefit of the Agent and the Banks.  Except as set forth in Schedule 4.5
there are no financing statements, lien instruments, abstracts of judgment,
levies, executions or other filings of record in any jurisdiction naming any
Company as “debtor”, “mortgagor”, “obligor” or the like, or covering any
Property of any Company, except those evidencing Permitted Liens.  

 

SECTION 4.6         Financial
Condition.  

 

(a)           Financial Statements.  Each Borrower has delivered to the Agent
copies of the (i) audited consolidated balance sheet of the Companies as of
each of December 31, 1999, 2000, 2001 and 2002, and the related audited consolidated
statements of income, stockholders’ equity and cash flows for the years ended
on such dates; (ii) copies of the unaudited consolidated balance sheet of the
Companies as of 2003, and the related unaudited consolidated statements of
income, stockholders’ equity and cash flows for 2003; and (iii) copies of the
unaudited consolidated balance sheet of the Companies as of March 31, 2004 and
the related unaudited consolidated statements of income and cash flows for the
quarter ended on such date.  Such
financial statements (together with related schedules and notes, the “Financial
Statements”) are true, complete and accurate, fairly present the financial
condition of the Companies as of the respective dates thereof and have been
prepared in accordance with GAAP applied throughout the periods covered thereby
on a basis consistent with that of prior periods, subject to normal year-end
audit adjustments. Without limiting the representation set forth in this
Section, the Borrowers and the Parent Company wish to advise the Agent and the
Banks that on February 4, 2004, the Company’s former independent auditor, KPMG
Peat Marwick, LLP notified the Parent Company that their auditors’ report dated
February 26, 2003 for the consolidated financial

 

15

 

statements of Parent Company dated as of
December 31, 2002 and 2001 and for the three years ended December 31, 2002,
2001 and 2000 should no longer be relied upon. 
As of the date hereof, no Company has any (i) obligations, liabilities
or other Indebtedness (including Guarantees); or (ii) Investments in any Person
which are (separately or in the aggregate) not reflected in such Financial
Statements; and there has been no Material Adverse Effect since the date of the
Financial Statements, except events and circumstances specifically listed and
specifically described on Annex D-1 and/or Annex D-2 to the extent they are
currently in existence as of the date this Agreement is made and entered into,
but not including in such exception any events and circumstances not
specifically described on Annex D-1 and/or Annex D-2 even if they could be
construed as being implied by, relating to, arising out of, resulting from or
flowing from, or otherwise connected with, events and circumstances
specifically listed and specifically described on Annex D-1 and/or Annex D-2;
and no Current Material Adverse Event has occurred, including any Current
Material Adverse Event related to, connected with, resulting from, implied by
or flowing from any matters described in Annex D-1 and/or Annex D-2
hereto.  

 

(b)           Solvency.  Upon giving effect to the issuance of each
Note (and the incurrence of the Indebtedness thereunder), the execution,
delivery and performance of each Loan Document by each Company which is a party
thereto, and the consummation of the transactions contemplated thereby, the
following are and will be true, complete and accurate in all material respects
as to each Company: 

 

(i)            the fair saleable
value of the assets of each Company exceeds the amount that will be required to
be paid on or in respect of the existing debts and other liabilities (including
contingent liabilities) of such Company, as they mature; 

 

(ii)           the assets of each
Company do not constitute unreasonably small capital for such Company to carry
out its business as now conducted and as proposed by it to be conducted;

 

(iii)          no Company intends
to incur debts beyond its ability to pay such debts as they mature (taking into
account the timing and amounts of cash to be received by such Company, and of
amounts to be payable on or in respect of debt of such Company); and

 

(iv)          no Company intends,
nor believes, that final judgments against it in actions for money damages will
be rendered at a time when, or in an amount such that, it will be unable to
satisfy any such judgments promptly in accordance with their terms (taking into
account the maximum reasonable amount of such judgments in any such actions and
the earliest reasonable time at which such judgments might be rendered).  

 

SECTION 4.7         Full
Disclosure.  There is no fact that
any Company has not disclosed to the Banks which might reasonably be expected
to have a Material Adverse Effect. 
Neither the financial information referenced in Section 4.6(a)
nor any certificate, report, exhibit, schedule, statement, disclosure letter or
other information furnished to the Agent or any Bank by, or on behalf of, any
Company, whether heretofore or herewith, in connection with the negotiation,
preparation, execution, delivery or consummation of this Agreement and the
other Loan Documents, or included therein or delivered pursuant thereto,
contains any untrue statement of a

 

16

 

material fact
or omits or omitted to state any material fact necessary to make and keep the
statements contained herein or therein from being misleading.  All information furnished after the date
hereof by or on behalf of any Company shall be true, complete and accurate in
all material respects.  

 

SECTION 4.8         No
Default or Adverse Condition.  No
event has occurred and is continuing which constitutes a Default or an Event of
Default that has not been waived pursuant to the Limited Waiver, and
other than as specifically disclosed in Annex D-1 and/or Annex D-2, there
exists no event, circumstance, condition or casualty (whether or not covered by
insurance) which could have a Material Adverse Effect; provided, however,
that such exception with respect to matters disclosed in Annex D-1 and/or Annex
D-2 does not include any events or circumstances not specifically described on
Annex D-1 and/or Annex D-2 even if they could be construed as being implied by,
relating to, arising out of, resulting from or flowing from, or otherwise
connected with, events and circumstances specifically listed and specifically
described on Annex D-1 and/or Annex D-2. 
No Current Material Adverse Event has occurred, including any Current
Material Adverse Event related to, connected with, resulting from, implied by or
flowing from any matters described in Annex D-1 and/or Annex D-2 hereto.  The Borrowers and Parent Company do not know
that any event, circumstance or condition disclosed in Annex D-1 and/or Annex
D-2 will in fact have a Material Adverse Effect.

 

SECTION 4.9         Material
Agreements; Insurance.  Except as
disclosed in Schedule 4.9A, no Company is in default under, or in
violation or breach of (nor has any event or circumstance occurred which, but
for the passage of time or the giving of notice, or both, would constitute a
default under, or a violation or breach of), (i) its charter, bylaws or other
internal governance document; (ii) any Judgment affecting it or any of its
Property; or (iii) any partnership agreement or any material indenture
promissory note, contract, lease, purchase or acquisition agreement, loan
agreement, mortgage, deed of trust, security agreement, license, permit,
franchise or other material agreement or obligation to which it is a party or
by which it or any of its Property is bound. 
Attached hereto as Schedule 4.9B is a complete and correct list
of all of each Company’s material patents, trademarks, trade names, copyrights
and service marks and all applications, registrations and licenses relating
thereto.  Each Company maintains
insurance in compliance with Section 5.10.  

 

SECTION 4.10       No
Litigation.  Except as set forth on Schedule
4.10 (and therein designating which of the following clauses (i)
through (v) is applicable thereto), as of the date hereof, there is no
Litigation or Judgment pending, or to the knowledge of any Company threatened,
against, affecting or challenging (as applicable) (i) any Property of any
Company, including, without limitation, each Company’s sole legal and
beneficial title therein and all Legal Rights with respect thereto; (ii) the
validity or enforceability of any Loan Document; (iii) the ability of each
Company to enter into, execute, deliver and perform its obligations under each
Loan Document to which it is a party as provided therein, and otherwise to
consummate the actions and transactions contemplated thereby; (iv) any Company
which, if adversely determined, could reasonably be expected to result in a
Judgment, individually or when aggregated with all other Judgments, (A) for the
payment of money in excess of $1 million (regardless of insurance coverage); or
(B) for the forfeiture of any Legal Rights of any Company (other than of a
trivial or non-consequential nature), or (v) any Company, or any of its
respective Property or Legal Rights, which might otherwise have a Material
Adverse Effect.  

 

17

 

SECTION 4.11       Use
of Proceeds: Margin Stock.  The
proceeds of the Loans will be used solely as provided in Section 2.16,
and none of such proceeds will be used (i) for the purpose of purchasing or
carrying any “margin stock” as defined in Regulations G, T, U or X; (ii) for
the purpose of maintaining, reducing or retiring any Indebtedness which was
originally incurred to purchase or carry a “margin stock”; or (iii) for any
other purpose which might constitute this transaction a “purpose credit” within
the meaning of Regulations G, T, U or X. 
No Company nor any Person acting on behalf of any Company is engaged in
the business of extending credit for the purpose, whether immediate, incidental
or ultimate, of buying or carrying “margin stock”.  No Company nor any Person acting on behalf of any Company has
taken or will take any action which might cause any of the Loan Documents to
violate Regulations G, T, U or X, or any other regulations of the Board of
Governors of the Federal Reserve System or to violate the Exchange or any rule
or regulation thereunder, in each case as now in effect or as the same may
hereafter be in effect.  

 

SECTION 4.12       No
Financing of Regulated Corporate Takeovers.  No proceeds of the Loans will be used to acquire any security in
any transaction which is subject to Sections 13 or 14 of the Exchange Act,
including particularly Sections 13(d) and 14(d) thereof.  

 

SECTION 4.13       Taxes.  All Tax returns, reports, statements and
filings required to be filed by each Company in any jurisdiction have been
timely and correctly filed, and all Taxes upon each Company or any of its
Property have been paid prior to the time that such Taxes could give rise to a
Lien thereon, except for Contested Claims.  No tax or similar Lien has been filed on, or is being enforced
against, any Company or any of its Property, and no United States Federal
income tax returns of any Company have ever been and are not now being, examined
or audited.  There is no proposed Tax
assessment against any Company or any of its Property, and there is no basis
for any such assessment.  

 

SECTION 4.14       Principal
Office; Names; Primary Business. 
The actual and anticipated principal place of business of each Company,
or if it has more than one such place, its chief executive office, is shown in Schedule
4.14, and each Company intends to maintain its principal records and books
at such office.  Schedule 4.14
also lists the address of each location at which each Company operates or
conducts its business or maintains or stores any of its equipment, inventory or
other Property.  No Company (i) is not
now conducting, nor does it currently plan hereafter to conduct, any business
or operations, or owned or is owning or operated or is operating, or currently
plans hereafter to own or operate, any Property, in any name, other than set
forth on Schedule 4.14; and (ii) has not heretofore merged into,
consolidated with, or acquired, and has no current plans to merge into,
consolidate with or acquire, any Person other than as set forth on Schedule
4.14.  The primary business of each
Company is the designing, engineering, manufacturing and marketing of fountain
soft drink dispensing systems and citrus beverage dispensing systems.  

 

SECTION 4.15       Subsidiaries.  No Company has any Subsidiaries and is not a
general or limited partner in any Person, except as set forth in Schedule
4.15, which lists as to each Subsidiary or general or limited partnership
interest: name of entity; (ii) jurisdiction of incorporation or organization;
(iii) foreign qualification; (iv) share/percentage/nature ownership; and (v)
primary business.  Except as set forth
in Schedule 4.15, there are no outstanding warrants, options, rights,
contracts or commitments of (A) any Company, other than Parent

 

18

 

Company, of
any kind entitling any Person to purchase or otherwise acquire (a) any shares
of capital stock of such Company; or (b) any securities convertible into or
exchangeable for any shares of capital stock of such Company; or (B) Parent
Company of any kind entitling any Person to purchase or otherwise acquire (x)
more than 5% of the outstanding shares of capital stock of Parent Company
(assuming the full conversion or exercise of any securities convertible into or
exchangeable for shares of capital stock of Parent Company); or (y) any
securities convertible into or exchangeable for 5% of the shares of capital
stock of Parent Company (assuming the full conversion or exercise of any securities
convertible into or exchangeable for shares of capital stock of Parent
Company).  

 

SECTION 4.16       ERISA.  No Reportable Event (as defined in Section
4043(b) of ERISA) to which the notice requirement has not been waived has
occurred with respect to any Plan.  Each
Plan complies with all applicable provisions of ERISA, and each Company has
filed all reports required by ERISA and the Code to be filed with respect to
each Plan.  No Company has any knowledge
of any event which could result in a liability of such Company to the
PBGC.  Each Company has met all
requirements with respect to funding the Plans imposed by ERISA or the
Code.  Since January 1, 1986, there have
not been any, nor are there now existing any events or conditions that would
permit, termination of any Plan under circumstances which would cause the Lien
provided under Section 4068 of ERISA to attach to any Property of any
Company.  The value of the Plans’
liabilities as defined in Section 4001(a)(16) of ERISA on the date hereof does
not exceed the value of such Plans’ assets allocable to such benefits as of the
date of this Agreement and shall not be permitted to do so hereafter.  No Plan is or has been a multiemployer plan
as defined in Section 4001(a)(3) of ERISA. 

 

SECTION 4.17       Compliance
with Law.  Except as disclosed in
Schedule 4.17, each Company has complied in all material respects with, and is
in compliance in all material respects with, all Laws applicable to it and its
Property, including Environmental Laws and the provisions of the Fair Labor Standards Act of 1938, 29
U.S.C. Section 200, et seq., as amended, including specifically, but without
limitation, 29 U.S.C. Section 215(a).  

 

SECTION 4.18       Government
Regulation.  No Company is subject
to regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act, the Investment Company Act of 1940, the Interstate Commerce Act (as
any of the preceding acts have been amended), or any other Law which regulates
either the incurring by such Company of Indebtedness or the determination or
setting of, or changes to, the rates or amounts charged by Borrower for the
goods or products it sells or the services it performs, including Laws relating
to common contract carriers or the sale of electricity, gas, steam, water or
other public utility services.  No
Company is (i) an “investment company” registered or required to be registered
under the Investment Company Act of 1940, as amended, and no Company is
“controlled” by such a company; or (ii) a “holding company” or a “public utility”
within the meaning of the Public Utility Holding Company Act of 1935, as
amended, and is not a “subsidiary company” or an “affiliate” of any such
company.  

 

SECTION 4.19       Insider.  No Company is, and no Person having
“control” (as that term is defined in 12 U.S.C. Section 375(b)(5) or in
regulations promulgated pursuant thereto) of any Company is, an “executive
officer”, “director” or “principal shareholder” (as those terms are defined in
12 U.S.C. Section 375(b) or in regulations promulgated pursuant thereto) of any
Bank,

 

19

 

of a bank
holding company of which any Bank is a Subsidiary, or of any Subsidiary of a
bank holding company of which any Bank is a Subsidiary.  

 

SECTION 4.20       Certain
Environmental Matters.  Except as
disclosed in Schedule 4.20, (i) no Company (A) is aware of, received
notice of or otherwise learned of any Environmental Complaint or Environmental
Liability which could individually or in the aggregate have a Material Adverse
Effect; (B) has any threatened or actual liability (contingent, direct or
otherwise) in connection with the release or threatened release, generation,
handling, treatment, storage, disposal or transportation of any Hazardous
Material, or other substance which could individually or in the aggregate have
a Material Adverse Effect; (C) is aware of, received notice of or otherwise
learned of any federal or state investigation evaluating whether any remedial
action is needed to respond to a release or threatened release, and/or the
generation, handling, treatment, storage, disposal or transportation of any
Hazardous Material for which such Company is or may be liable; and (D) is in
violation of any Judgment or Litigation based upon Environmental Laws, or
subject to any such Judgment or Litigation; (ii) each Company (A) has, in full
force and effect, all permits, licenses, approvals and other authorizations
necessary for the use and operation of its Property, including, the generation,
handling, treatment, storage, disposal, transportation or release of any
Hazardous Material; and (B) is in compliance with all Environmental Laws,
except to the extent the failure to so comply could not reasonably be expected
to have a Material Adverse Effect or to result in any Environmental Liability
that could reasonably be expected to have a Material Adverse Effect; and (iii)
all Properties of each Company are free from any Hazardous Material and
Environmental Liens.  There have been no
environmental investigations, studies, audits, tests, reviews or other analyses
conducted by or on behalf of, or which are in the possession or knowledge of,
any Company, or any of such Company’s predecessors, in relation to any Property
now or previously owned or leased by such Company, or any of such Company’s
predecessors, which have not been (y) made available to any Bank or its agents,
employees or contractors; and (z) listed in Schedule 4.20.  No Company has received a notice of any
Environmental Liability, Environmental Lien or Environmental Complaint other
than those that have been provided to the Agent and listed in Schedule 4.20.  

 

SECTION 4.21       Insurance;
Certifications.  The insurance
certificates delivered pursuant to Section 3.1 are true, correct and
complete, and the insurance coverage set forth therein complies in all regards
with the requirements set forth in Section 5.10.  In furtherance of the foregoing, but not in
limitation thereof, and in furtherance of all other matters as to which
certifications are required pursuant to Section 3.1, all matters
certified to by each and every Person which were evidenced by certificates and
certifications referred to in Section 3.1 were true, correct and
complete, as so certified and received by the Agent and each Bank, as of the
Closing Date and were certified by officers of each Company, each of whom was
authorized to execute and deliver such certificate for and on behalf of such
Company.

 

ARTICLE 5

AFFIRMATIVE COVENANTS

 

Until payment
in full of the Notes, the payment and performance of all other Obligations, and
so long as the Banks have any obligation hereunder to make any Loans, each
Borrower and

 

20

 

Parent Company will, and Parent Company will cause each Company to,
punctually and completely perform and observe each of the following covenants:

 

SECTION 5.1         Financial
Statements, Reports and Documents. 
Each Borrower shall deliver the following to the Agent, in form,
substance and scope satisfactory to Agent and otherwise as provided herein:

 

(a)           Monthly Statements.  As soon as available, and in any event
within 30 days after the end of each month, copies of the consolidated
statements of income and cash flow and consolidating statements of income of
the Companies for such month and for the portion of the Fiscal Year ending with
such month, and the related consolidated balance sheets as at the end of such
period, in each case setting forth in comparative form the corresponding
figures for the corresponding periods of the preceding Fiscal Year, all in reasonable
detail and certified, with respect to the consolidated financial statements, by
the president, chief financial officer or controller of Parent Company as being
true, complete and accurate in all material respects, as fairly presenting the
consolidated financial condition and results of operations of the Companies for
the periods therein covered, and as having been prepared in accordance with
GAAP, subject to normal year-end audit adjustments and Quarter Review
Adjustments, and certified, with respect to consolidating financial statements,
by the president, chief financial officer or controller of Parent Company as
being, to the best of their knowledge, true, complete and accurate in all
material respects; provided that, such materiality shall be based on the impact
of the information on the consolidated financial statements and not on the
impact on any individual direct or indirect subsidiary of the Parent Company;

 

(b)           Annual Statements.  

 

(i)            The Company has
engaged BDO Seidman LLP to audit the financial statements of Parent Company
dated as of December 31, 2002 and 2001 and for the three years ended December
31, 2002, 2001 and 2000 (the “Re-Audited Financial Statements”).  As soon as available, and in any event on or
before July 31, 2004, copies of the Re-Audited Financial Statements, which will
include audited consolidated statements of income, stockholders’ equity and
cash flow and unaudited consolidating statements of income of the Companies for
Fiscal Years 2000, 2001 and 2002, and the related audited consolidated balance
sheets of the Companies as at the end of 2001 and 2002, in each case setting
forth in comparative form the corresponding figures for the preceding Fiscal
Year, all in reasonable detail and accompanied by (i) an unqualified opinion
(except as permitted in Section 5.1(b)(iv)) of BDO Seidman LLP or other
independent, public accountants of recognized national standing selected by
Borrowers and satisfactory to the Banks, to the effect that, with respect to
the consolidated financial statements, such financial statements have been
prepared in accordance with GAAP, consistently applied, and fairly present the
consolidated financial condition and results of operations of the Companies, as
at the end of, and for, such Fiscal Years; and (ii) a certificate executed by
the president, chief financial officer or controller of Parent Company to the
same effect as such opinion and to the effect with respect to consolidating
financial statements that the information contained in the consolidating financial
statements is, to the best of their knowledge, true, complete and accurate in
all material respects; provided that, such materiality shall be based on the
impact of the

 

21

 

information on
the consolidated financial statements and not on the impact on any individual
direct or indirect subsidiary of the Parent Company; 

 

(ii)           As soon as
available, and in any event on or before July 31, 2004, copies of the audited
consolidated statements of income, stockholders’ equity and cash flow and
unaudited consolidating statements of income of the Companies for Fiscal Year
2003, and the related audited consolidated balance sheets of the Companies as
at the end of such Fiscal Year, in each case setting forth in comparative form
the corresponding figures for the preceding Fiscal Year, all in reasonable
detail and accompanied by (i) an unqualified opinion (except as permitted in Section
5.1(b)(iv)) of BDO Seidman LLP or other independent, public accountants of
recognized national standing selected by Borrowers and satisfactory to the
Banks, to the effect that, with respect to the consolidated financial
statements, such financial statements have been prepared in accordance with
GAAP, consistently applied, and fairly present the consolidated financial
condition and results of operations of the Companies, as at the end of, and
for, such Fiscal Year; and (ii) a certificate executed by the president, chief
financial officer or controller of Parent Company to the same effect as such
opinion and to the effect with respect to consolidating financial statements
that the information contained in the consolidating financial statements is, to
the best of their knowledge, true, complete and accurate in all material
respects; provided that, such materiality shall be based on the impact of the
information on the consolidated financial statements and not on the impact on
any individual direct or indirect subsidiary of the Parent Company; 

 

(iii)          As soon as
available, and in any event within 95 days after the end of each Fiscal Year
after 2003, copies of the audited consolidated statements of income,
stockholders’ equity and cash flow and unaudited consolidating statements of
income of the Companies for such Fiscal Year, and the related audited
consolidated balance sheets of the Companies as at the end of such Fiscal Year,
in each case setting forth in comparative form the corresponding figures for
the preceding Fiscal Year, all in reasonable detail and accompanied by (A) an
unqualified opinion of BDO Seidman LLP or other independent, public accountants
of recognized national standing selected by Borrowers and satisfactory to the
Banks, to the effect that, with respect to the consolidated financial
statements, such financial statements have been prepared in accordance with
GAAP, consistently applied, and fairly present the consolidated financial
condition and results of operations of the Companies, as at the end of, and
for, such Fiscal Year; and (B) a certificate executed by the president, chief
financial officer or controller of Parent Company to the same effect as such
opinion and to the effect with respect to consolidating financial statements
that the information contained in the consolidating financial statements is, to
the best of their knowledge, true, complete and accurate in all material
respects; provided that, such materiality shall be based on the impact of the
information on the consolidated financial statements and not on the impact on
any individual direct or indirect subsidiary of the Parent Company; 

 

(iv)          The auditor’s
opinions referenced in clauses (i) and (ii) above may be
qualified as follows (to the extent such qualifications do not result in
non-compliance with applicable requirements of the Securities and Exchange
Commission):

 

22

 

(1)           Such opinions may
contain references to reliance on auditor’s opinion(s) of KPMG LLP and/or
Arthur Anderson LLP with regard to audits for Lancer FBD Partnership, Ltd.
joint venture to the effect that the auditors may rely on such other auditors’
opinion(s) that remain in effect with respect to Lancer FBD Partnership;
provided that such a qualification shall cease to be allowed if such other
auditor(s) withdraws such opinion(s); and

 

(2)           Such opinions may
contain scope limitations relating to (a) any Company’s inventory or accounts
receivables in 1999 or 2000 that relate solely to the auditor’s inability to do
actual physical inventory verification and/or accounts receivable confirmation,
or (b) any Company’s Brazilian operations that relate solely to the auditor’s
physical examination of books and records for 1999, 2000 and 2001 due to the
closure of such operations in 2002.

 

In addition, such opinions may contain
emphasis (explanatory) paragraph(s) relating solely to Companies’ adoption of
new accounting pronouncements promulgated by the Financial Accounting Standards
Board so long as the adoption and implementation thereof would not violate Section
1.2 or Section 6.8 of this Agreement;

 

(c)           Audit, Management and Other
Reports.  Immediately upon the
request of the Agent, a copy of each written report submitted to any Company by
independent accountants in any annual, quarterly or special audit, review or
examination;

 

(d)           SEC and Other Reports.  Promptly upon its becoming available, one
copy of each financial statement, report, notice or proxy statement sent by any
Company to its stockholders or debtholders generally and of each regular or
periodic report, registration statement or prospectus filed by any Company with
any securities exchange or the Securities and Exchange Commission or any
successor agency or any similar Governmental Authority of a foreign country,
and of any order issued by any Governmental Authority in any proceeding to
which any Company is a party;

 

(e)           Compliance Certificate.  Within one week of the delivery of financial
statements delivered pursuant to Sections 5.1(b)(i) and 5.1(b)(ii) and
concurrently with the delivery of the financial statements delivered pursuant
to Sections 5.1(a) and 5.1(b)(iii), respectively, a certificate
in the form of Exhibit M, executed by the president, chief financial
officer or controller of Parent Company, (i) stating that a diligent review of
the activities of the Companies during such period has been made under such
officer’s supervision and that to the knowledge of such officer, each Company
has observed, performed and fulfilled each and every obligation and covenant
contained in each Loan Document to which it is a party and is not in Default under
any Loan Document to which it is a party, or, if any such Default has occurred,
specifying the nature and status thereof; and (ii) setting forth in reasonable
detail the computation and information necessary to determine whether the
Companies are in compliance with Section 6.1 as of the end of the
respective month or Fiscal Year, as applicable; provided, however, with
respect to any Permitted Acquisition, each Borrower shall (A) deliver such
certificate, with preliminary pro forma financial information required under Article
6 on the closing date of such Permitted Acquisition; and (B) deliver such a
certificate with final pro forma financial information required under Article
6, within 75 days after the closing date of such Permitted Acquisition; and

 

23

 

provided further that
with respect to the financial statements delivered pursuant to 5.1(b)(i) such
certificate shall be adjusted to the extent necessary to conform to the
covenants applicable to such Fiscal Years under the terms of the Restated
Agreement as then in effect for such Fiscal Years.

 

(f)            Monthly Reports.  Within 30 days after the end of each Fiscal
Month, (i) a Consolidated Borrowing Base Certificate in the form of Exhibit
N, executed by the president or chief financial officer of Parent Company,
with information required therein completed to reflect the Consolidated
Borrowing Base as of the end of the Fiscal Month; and (ii) an aging schedule of
accounts receivable in summary form, certified by the president or chief
financial officer of Parent Company, which reflects aging of current accounts
receivable of the Companies which are current or 30, 60 or 90 days past due as
of the end of such preceding Fiscal Month;

 

(g)           Insurance Report.  Within 15 days after any significant change
in insurance coverage by Borrower, a report describing such change; and, within
90 days after the end of each Fiscal Year, a report describing the insurance
coverage of Borrower;

 

(h)           Litigation Reports.  Within (i) 90 days after the end of each
Fiscal Year, complete reports by counsel to each Company describing all
Litigation affecting such Company or any of its Property which could reasonably
be expected to (A) result in a Judgment in excess of $500,000 (without regard to
insurance coverage); or (B) otherwise have a Material Adverse Effect; and (ii)
45 days after the end of each Fiscal Quarter (except the last) in which a
significant change in Litigation has occurred or additional Litigation has been
threatened or commenced, reports by counsel to such Company describing such
changes in or additions to Litigation since the date of the annual Litigation
Report most recently received by the Agent;

 

(i)            Environmental Notices.  Notice to the Agent, in writing, promptly
upon any Company’s receipt of notice or otherwise learning (whichever first
occurs) from any Person of any (i) Environmental Complaint or Environmental
Lien; or (ii) any other claim, demand, action, event, condition, report or
investigation indicating any potential or actual liability (A) upon which any
Environmental Liability or Environmental Lien could result against any Company,
any Bank or any Property of any Company; or (B) arising in connection with (1)
the non-compliance with, or violation of, the requirements of any Environmental
Law; (2) the release or threatened release, generation, treatment, handling,
storage, disposal or transportation of any Hazardous Material into the
environment for which act, occurrence or event any Company would have a duty to
report to a Governmental Authority under an Environmental Law; or (3) the
existence of any Environmental Lien on any Property of any Company; and such
Company shall immediately deliver a copy of each such notice to the Agent;

 

(j)            Supplemented Schedules.  As soon as possible, and in any event within
15 days after any Borrower or Parent Company obtains knowledge thereof, such
Borrower or Parent Company, as applicable, shall provide the Agent with a
supplement to any existing Schedule which would make such Schedule (and any
subsequent supplement thereto), and the corresponding representation and
warranty to which it applies, true, complete and accurate; provided, however,
any such supplement shall not be deemed to have amended any Schedule to this
Agreement unless and until the Banks have approved such amendment;

 

24

 

(k)           Net Sales Reports.  As soon as available, and in any event
within 30 days after the end of each Fiscal Quarter, a net sales report,
setting forth in comparative form, the actual net sales of the Companies for
such Fiscal Quarter and the corresponding net sales projections for the
Companies for such Fiscal Quarter as set forth in the Net Sales Projections
Closing Certificate, all in reasonable detail, certified by the president,
chief financial officer or controller of Parent Company as being consistent
with the books and records of the Companies;

 

(l)            Cash Projections.  As soon as available, and in any event
within 15 days after the end of each month, cash projections of the Companies
for the succeeding three month period in reasonable detail;

 

(m)          Cash Statements.  On each Wednesday, or if such day is not a
Business Day, then the Business Day next following such Wednesday, a cash
update of the Companies for the preceding week in substantially the form of
Exhibit O, certified by the president, chief financial officer or controller of
Parent Company as being, to the best of their knowledge, true, complete and
accurate in all material respects; provided that, such materiality shall be
based on the impact of the information on the consolidated information and not
on the impact on any individual direct or indirect subsidiary of the Parent
Company; 

 

(n)           Auditors’ Progress Reports.  Parent Company shall facilitate oral
communications between the Banks and BDO Seidman LLP as requested by the Banks,
either by telephone or in person, for the purpose of updating the Banks on the
progress of auditing the Re-Audited Financial Statements and the 2003 audit,
until such audits have been completed;

 

(o)           Shareholder Lawsuits.  Promptly, but in no event later than three
Business Days from the date any Specified Person has actual knowledge of the
receipt of service of any shareholder lawsuit, written notice of such
shareholder lawsuit describing such lawsuit (including the court and cause
number);

 

(p)           Major Suppliers.  Promptly, but in no event later three
Business Days from the date any Specified Person has actual knowledge that any
Major Supplier has refused to supply to any Company or has placed any Company
on “cash on delivery” basis, a written notice describing such occurrence;

 

(q)           Cease and Desist Orders.  Promptly, but in no event later than three
Business Days from the date any Specified Person has actual knowledge of the
receipt of written notice of any government sanctions or cease and desist
orders, a written summary of such sanctions or cease and desist orders and
copies of any writings relating thereto;

 

(r)            On the second Wednesday after the
date of this Agreement and every other Wednesday thereafter (or if any such
Wednesday is not a Business Day, then on the following Business Day), a status
report (via email or other written communication) of the DOJ and Securities and
Exchange Commission investigations based on the actual knowledge of the
Specified Persons, including information known to any Specified Person (based
on a direct communication from the investigating agency to such Specified
Person or any other direct communication from the investigating agency of which
such Specified Person has actual knowledge) as to whether any individual or
individuals have become targets of such

 

25

 

investigations, and copies of any
correspondence, memoranda, requests or other documents delivered to any Company
by these agencies to the extent such disclosure is permitted by law and not
otherwise indicated by the issuing agency to be of a confidential nature; provided,
however, that Borrowers shall not be required to disclose communications
with legal counsel in connection with this requirement to the extent such
disclosure could result in losing the attorney/client communications privilege
with respect to such communications;

 

(s)           Other Information.  Within such period reasonably prescribed by
the Agent, such other information concerning the business, operations, Property
or financial condition of any Company as any Bank (through the Agent) shall
reasonably request.  

 

SECTION 5.2         Payment
of Taxes and Other Liabilities. 
Each Borrower and Parent Company will, and Parent Company will cause
each Company to, pay and discharge when due, but in no event, later than 45
days following the date when due, (i) 90% of the aggregate amount of all trade
payables; (ii) royalties; (iii) license fees; (iv) franchise fees; (v)
operating costs and expenses; and (vi) similar expenses and obligations related
to its operations, except for Contested Claims; and, except for Contested
Claims, each Borrower and Parent Company will, and Parent Company will cause
each Company to, timely pay and discharge when due (a) all Taxes; (b) all other
lawful claims against it or any of its Property; and (c) all of its other
Indebtedness, obligations and liabilities. 
In no regard shall the foregoing serve as a basis of excusing or
delaying the payment by any Borrower of any Indebtedness or other amounts from
time to time owed by it.  

 

SECTION 5.3         Maintenance
of Existence and Rights: Conduct of Business.  Each Borrower and Parent Company will, and Parent Company will
cause each Company to, preserve and maintain its existence and all of its Legal
Rights necessary or desirable in the ordinary course of its business and
conduct and the ownership, maintenance and operation of its Property, and
conduct its business in an orderly and efficient manner consistent with good
business practices and industry standards and in accordance with all Laws,
except where the failure to so preserve, maintain or conduct would only result
in a trivial and inconsequential effect. 
In addition, each Borrower and Parent Company will, and Parent Company
will cause each Company to, act prudently and in accordance with customary
industry standards and with its contractual obligations in managing and
operating its Property, business and investments and will keep in good working
order and condition, ordinary wear and tear excepted, all of its Property and
Legal Rights which are necessary or desirable to the conduct of its business
and the ownership and maintenance of its Property.  

 

SECTION 5.4         Notice
of Default.  Parent Company shall
furnish to the Agent, immediately upon any Company becoming aware of the
existence of any condition or event which constitutes or would become a Default
or an Event of Default, written notice thereof that specifies the nature and
period of existence thereof and the action which such Company is taking or
proposes to take with respect thereto.  

 

SECTION 5.5         Other
Notices.  As soon as possible, but
in any event within 3 days of any Company becoming aware thereof, Parent
Company will promptly notify the Agent of (i) any material adverse change in
the financial condition, operations, Property or business of any Company; (ii)
any default under, or any threatened or actual acceleration of the maturity of,
any

 

26

 

Indebtedness owing or secured
by any Company (or any of its Property), which individually or in the aggregate
represents a monetary obligation of $250,000 or more, or one with respect to
which a default thereunder might have a Material Adverse Effect; (iii) any
default or event of default under any lease pertaining to a location at which
any Company operates or conducts any of its business or stores any of its
Property; (iv) any significant adverse claim against or affecting any Company
or any of the Property of any Company; and (v) the commencement of, and/or any
material determination in, any Litigation which could reasonably be expected to
result in a Judgment in excess of $250,000 (without regard to insurance
coverage).  In respect to each of the
foregoing notices, each Borrower will promptly provide to the Agent all
reasonably related information requested by the Agent, in reasonable detail
satisfactory to the Agent.

 

SECTION 5.6         Compliance
with Loan Documents.  Each Borrower
and Parent Company will, and Parent Company will cause each Company to,
promptly and completely comply with and observe and perform all covenants and
provisions of each Loan Document to which it respectively is a party.  In furtherance of the foregoing, but in no
way limiting the generality thereof, the proceeds of each Loan will be used
strictly in compliance with Section 2.16.

 

SECTION 5.7         Compliance
with Agreements.  Each Borrower and
Parent Company will, and Parent Company will cause each Company to, promptly
comply in all material respects with all material contracts, leases,
agreements, indentures, mortgages or documents binding on it or affecting it or
its Property, business or operations.

 

SECTION 5.8         Access;
Books and Records.  Upon reasonable
notice, during all business hours, each Borrower and Parent Company authorizes
and will permit, and Parent Company will cause each Company to authorize and
permit, any representatives of the Agent or any Bank (i) to have access to, and
grant permission for such representatives to examine, copy or make excerpts
from, any and all books, records and documents that relate to the business,
operations or Property of any Company; (ii) to inspect any and all Property of
any Company; and (iii) to discuss the business, operations and financial condition
of any Company with its officers, partners and employees.  Each Borrower and Parent Company will, and
Parent Company will cause each US Company to, maintain complete and accurate
books and records of its respective transactions in accordance with GAAP.  Each Borrower and Parent Company will, and
Parent Company will cause each Non-US Company to, maintain complete and
accurate books and records of its respective transactions in accordance with
the generally accepted accounting principles of the jurisdiction of
incorporation or organization of such Non-US Company.

 

SECTION 5.9         Compliance
with Law.  Except for non-compliance
with certain Securities and Exchange Commission reporting requirements (the “SEC
Reporting Requirements”), and with certain American Stock Exchange (“AMEX”)
listing standards, as set forth in Schedule 4.17, each Borrower and
Parent Company will, and Parent Company will cause each Company to, comply in
all material respects with all Laws applicable to it or any of its Property,
business operations or transactions; provided, however, that after July
31, 2004, in addition to the foregoing, each Borrower and Parent Company will,
and Parent Company will cause each Company to, comply in all material respects
with the SEC Reporting Requirements and with AMEX listing standards
notwithstanding the exception set forth in this Section 5.9.

 

27

 

SECTION 5.10       Insurance.  Each Borrower and Parent Company will, and
Parent Company will cause each Company to, maintain insurance with reputable
insurers of sound financial strength and creditworthiness with respect to its
Property and as to its operations and business, all as required by each Loan
Document to which it is a party and otherwise in such types, amounts, scope and
coverage, and against such risks, casualties, contingencies and liabilities, as
required or necessitated by Law, and additionally, as is customarily maintained
by other Persons engaged in similar businesses and operations, the foregoing
insurance coverage specifically including the following: (i) worker’s
compensation or similar insurance as may be required by applicable Law; (ii)
public liability insurance against claims for personal injury, death or
property damage suffered upon, in or about, any Property occupied by any
Company or occurring as a result of the ownership, maintenance or operation by
any Company of any equipment, vehicle or other Property or as the result of the
use of products or equipment manufactured, constructed, sold or operated by any
Company or services rendered by it, and insurance against the loss or damage to
the Property and businesses of any Company now owned or hereafter
acquired.  In addition, (A) each
Borrower and Parent Company will, and Parent Company will cause each Company
to, (x) name the Agent as an additional insured on all such general and
comprehensive liability insurance and as loss payee on all such Property
insurance; and (y) cause each policy of insurance to provide that such policy
will not be canceled or modified (as to term, coverage, scope, property or
risks covered, or otherwise) without 30 days prior written notice to the Agent;
and (B) Parent Company will deliver copies of the policies and endorsements for
such insurance to the Agent promptly after issuance or renewal of each.

 

SECTION 5.11       ERISA
Compliance.

 

Each Borrower
and Parent Company will, and Parent Company will cause each Company to, at all
times: 

 

(a)           make contributions to each Plan in a
timely manner and in an amount sufficient to comply with the minimum funding
standards requirements of ERISA and the Code; 

 

(b)           immediately upon acquiring knowledge
of any “reportable event” to which the notice requirement has not been waived
or of any “prohibited transaction” (as such terms are defined in the Code or
ERISA, as applicable) in connection with a Plan, furnish the Agent with a
statement executed by an Authorized Officer of such Company, setting forth the
details thereof and the action which such Company proposes to take with respect
thereto and, when known, any action taken by the Internal Revenue Service with
respect thereto; 

 

(c)           notify the Agent immediately upon
receipt by any Company of any notice of an interest by the PBGC to terminate or
appoint a trustee or of the institution of any proceeding or other action which
may result in the termination of any Plan and furnish to the Agent copies of
such notice; 

 

(d)           furnish the Agent with copies of each
annual report (together with all related schedules and attachments) for each
Plan filed with the Internal Revenue Service not later than 30 days after such
report has been filed; and 

 

28

 

(e)           furnish the Agent with copies of any
request for waiver of the funding standards or extension of the amortization
periods required by Sections 303 and 304 of ERISA or Section 412 of the Code
promptly after the request is submitted to the Secretary of the Treasury, the
Department of Labor or the Internal Revenue Service, as the case may be.

 

SECTION 5.12       Further
Assurances.  Each Borrower and
Parent Company will, and Parent Company will cause each Company to, cure and
cause to be cured promptly any defects or deficiencies in the execution,
delivery, creation or issuance of the Loan Documents, or any of them, and any
of the transactions contemplated thereby. 
In addition, each Borrower and Parent Company will, and Parent Company
will cause each Company to, promptly make, execute or endorse, and acknowledge
and deliver or file, or cause each of the same to be done, all such vouchers,
invoices, notices, certifications and additional agreements, documents,
instruments, undertakings or other assurances, and take any and all such other
action, as the Agent may, from time to time, reasonably request or deem reasonably
necessary or proper under any of the Loan Documents to which such Company is a
party and the obligations of such Company thereunder.

 

SECTION 5.13       Maintenance
of Corporate Identity.  Each
Borrower and Parent Company will, and Parent Company will cause each Company
to, maintain separate corporate records, books and accounts.  Each Borrower and Parent Company will, and
Parent Company will cause each Company to, observe the formal legal, financial
and accounting requirements necessary for the maintenance of each Company as a
separate legal entity, including the keeping of corporate records indicating
that, to the extent required by Law or its charter documents, transactions are
reviewed and authorized by its Board of Directors and stockholders.  All moneys and funds advanced and to be
advanced to or on behalf of any Company by its Affiliates (other than capital
contributions and other equity infusions, in each case, that are of a “common
stock” nature, by shareholders or Affiliates of such Company into such
Company), pursuant to a loan or otherwise, will be evidenced by valid, binding
and enforceable written obligations to repay such moneys and funds, the
repayment of which shall be subordinated to the full and final payment of the
Obligations, on terms and conditions satisfactory to the Banks.

 

SECTION 5.14       Primary
Business.  Each Borrower and Parent
Company will, and Parent Company will cause each Company to, continue to
design, engineer, manufacture and/or market beverage dispensing systems as its
primary business.

 

SECTION 5.15       Subordination
of Affiliate Obligations.  Each
Borrower and Parent Company will, and Parent Company will cause each Company
to, cause all loans or advances of any Company to any Affiliate of any Company,
other than loans or advances of any Loan Party to any other Loan Party, at any
time arising or existing to be evidenced by promissory notes.  All such promissory notes are set forth on Schedule
5.15.  Each Borrower and Parent
Company will obtain and deliver to the Agent, and Parent Company will cause
each Company to obtain and deliver to the Agent, the written agreement, in
form, substance and scope satisfactory to the Agent, of the holder of each such
promissory note evidencing the subordination of such holder’s right to payment under
each such note to the payment of the Obligations, which agreement shall not
prohibit the payment of principal payments under such promissory note to the
holder thereof so long as no Default or Event of Default has occurred and is
continuing.  Each Borrower and Parent
Company will, and Parent Company will cause each Company to, cause the face of
each promissory note to be marked with a reference to such subordination
agreement, and will take

 

29

 

and cause to be taken all such
further and additional actions as the Agent may reasonably request to effect
and evidence such subordination.

 

ARTICLE 6

NEGATIVE COVENANTS

 

Until payment
in full of the Notes, the payment and performance of all other Obligations, and
so long as the Banks have any obligation hereunder to make any Loans, each
Borrower and Parent Company will, and Parent Company will cause each Company
to, punctually and completely perform and observe each of the following
covenants:

 

SECTION 6.1         Certain
Financial Matters.  Neither any
Borrower nor Parent Company will permit: 

 

(a)           the ratio of (i) the current assets
of the Companies determined on a consolidated basis; to (ii) the sum of (A) the
current liabilities of the Companies determined on a consolidated basis; plus
(B) to the extent not otherwise included under GAAP, the principal amount of
outstanding Revolving Loans, to be less than 1.25 to 1.00 at the end of any
Fiscal Quarter; or 

 

(b)           the ratio of:

 

(i)            EBIT of the
Companies determined on a consolidated basis (excluding (A) gains or losses as
a result of discontinued operations in Brazil; and (B) for the four quarter
periods ending as of December 31, 2003, March 31, 2004, June 30, 2004, and
September 30, 2004, actual expenses incurred by the Companies, relating to
the Investigations, in an aggregate amount not to exceed $3,000,000 with
respect to this clause (B));

 

to

 

(ii)           the interest
expense (the actual accrued interest for debt payments, but not including the
present value of interest rate swaps) of the Companies, 

 

determined on
a consolidated basis, as of the end of any Fiscal Quarter and for the
four-quarter period ending as of such Fiscal Quarter, to be less than 2.50 to
1.00; provided, however, for each Fiscal Quarter in which an Acquisition
is consummated, and each Fiscal Quarter ending prior thereto, the financial
information necessary to determine the foregoing ratio shall be adjusted to
reflect, on a pro forma basis, such Acquisition as if it had occurred as of the
beginning of the first of such Fiscal Quarters included in the relevant
four-quarter measurement period;

 

or

 

(c)           Intentionally Omitted.

 

(d)           the net worth of the Companies
determined on a consolidated basis as of the end of any Fiscal Quarter
(excluding 100% of the “Accumulated Other Comprehensive Income/Loss” balance
listed in the “Shareholders Equity” section of the Parent Company’s

 

30

 

balance sheet) to be less than
the sum of (i) $44,000,000 plus (ii) 75% of the cumulative amount of net income
of the Companies determined on a consolidated basis from September 30, 1999
through the end of such Fiscal Quarter (without regard to, or reduction for,
any net loss reported for any Fiscal Quarter) plus (iii) 100% of the amount of
Indebtedness of any Company converted into shares of capital stock or other
equity interests of such Company, if any, plus (iv) 100% of the value of all
consideration received for the issuance or sale of capital stock or other
equity interests of any Company; or 

 

(e)           the net worth of any Company, other
than the Mexico Companies, Lancer do Brasil, EcuaLancer S.A. Lancer Sales
Company, and any New Company, as of the end of any Fiscal Quarter to be less
than $400,000; or 

 

(f)            the net worth of any New Company as
of end of any Fiscal Quarter to be negative; or 

 

(g)           the ratio of (i) Total Funded Debt as
of the end of any Fiscal Quarter; to (ii) Consolidated EBITDA for the
four-quarter period ending as of the end of such Fiscal Quarter (excluding (A)
gains or losses as a result of discontinued operations in Brazil; and (B) for
the four quarter periods ending as of December 31, 2003, March 31, 2004, June
30, 2004, and September 30, 2004, actual expenses incurred by the
Companies, relating to the Investigations, in an aggregate amount not to exceed
$3,000,000 with respect to this clause (B)), to be more than 3.00 to
1.00 at the end of such Fiscal Quarter; provided, however, for each
Fiscal Quarter in which an Acquisition is consummated, and each Fiscal Quarter
ending prior thereto, the financial information necessary to determine
Consolidated EBITDA shall be adjusted to reflect, on a pro forma basis, such
Acquisition as if it had occurred as of the beginning of the first of such
Fiscal Quarters included in the relevant four-quarter measurement period; or

 

(h)           the capital expenditures of the
Companies determined on a consolidated basis to exceed the amount set out below
opposite the applicable period; provided that there shall be excluded from the
calculation of such capital expenditures (i) any capital expenditure of any
Company to the extent that such Company is reimbursed for such capital
expenditure by The Coca-Cola Company; and (ii) up to $500,000 in Capital Lease
Obligations of the Companies determined on a consolidated basis for any Fiscal
Year:

 

	
  Fiscal Years (Beginning/Ending)

  	
   

  	
  Amount

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  1/1/96 through 12/31/04

  	
   

  	
  $

  	
  36,000,000

  	
   

  
	
  1/1/96 through 12/31/05

  	
   

  	
  $

  	
  40,000,000

  	
  ;

  

 

or

 

(i)            the ratio of (i) Cost of Goods Sold
for the four-quarter period ending as of the end of each Fiscal Quarter to (ii)
Total Inventory as of the end of any Fiscal Quarter, to be less than for the
four-quarter period ending as of the end of such Fiscal Quarter set out below
opposite the period in which such Fiscal Quarter ends:

 

31

 

	
  as of the end of each Fiscal
  Quarter

  	
   

  	
  2.00 to 1.00

  
	
  as of the end of each Fiscal
  Year

  	
   

  	
  2.50 to 1.00; or

  

 

(j)            the ratio of (i) the sum of (a)
consolidated EBITDA (excluding (A) gains or losses as a result of discontinued
operations in Brazil; and (B) for the four-quarter periods ending as of
December 31, 2003, March 31, 2004, June 30, 2004, and September 30, 2004,
actual expenses incurred by the Companies, relating to the Investigations, in
an aggregate amount not to exceed $3,000,000 with respect to this clause (B));
less (b) capital expenditures; plus (c) capital expenditures reimbursable by
The Coca-Cola Company; plus (d) debt or capital leases incurred in connection
with the capital asset acquisition; less (e) gain or loss on the sale of
capital assets; plus (f) cash proceeds from the sale of assets to (ii) the sum
of (a) contractually due principal and interest; plus (b) non-contractual debt
retirement (excluding payments on the Revolving Loans); plus (c) capital lease
payments, all calculated on a consolidated basis for the four-quarter period
ending as of the last day of each Fiscal Quarter, to be less than 1.00 to 1.00.

 

SECTION 6.2         Limitation
on Indebtedness.  Neither any
Borrower nor Parent Company will, and Parent Company will not permit any
Company to, incur, create, contract, assume, have outstanding, permit or suffer
to exist, Guarantee or otherwise be or become, directly or indirectly, liable
in respect of any Indebtedness, except the following (collectively, “Permitted
Indebtedness”):

 

(i)            the Obligations; 

 

(ii)           current liabilities
for Taxes incurred in the ordinary course of business which are not yet due and
payable; 

 

(iii)          trade payables
arising in the ordinary course of business;

 

(iv)          Indebtedness listed
in Schedule 6.2; 

 

(v)           forward contracts
and other hedging instruments executed to hedge existing or anticipated
exposure to currency or interest rate fluctuations; and 

 

(vi)          the issuance or sale
of convertible senior notes by the Parent Company, provided that (A) such notes
are issued or sold for cash only, (B) the net cash proceeds of such issuance or
sale are applied to repay certain Loans in accordance with Section 2.8(d);
(C) the net cash proceeds of such issuance or sale do not exceed an amount equal
to the aggregate principal amount of all Term A Loans then outstanding; (D)
such notes do not mature prior to July 15, 2005; (E) such notes are unsecured;
and (F) the provisions of such notes, including, but not limited to, the
payment of principal thereunder and the representations and warranties
contained therein, are approved in writing by all the Banks.

 

SECTION 6.3         Limitation
on Property.  Neither any Borrower
nor Parent Company will, and Parent Company will not permit any Company to, (i)
grant, create, enter into, incur, permit or suffer to exist, upon or with
regard to any of its respective Property now owned or hereafter acquired, (A)
any Lien, except

 

32

 

for Permitted Liens; or (B) any
Negative Pledge, except for the benefit of the Agent and Banks; (ii) enter into
any sale-and-lease-back transaction other than sale and-lease-back transactions
involving inventory manufactured by any Company, provided that the aggregate
book value of all such inventory shall not exceed the sum of $1,500,000; (iii)
establish a deposit account in the United States unless such account is with
Agent or unless Agent has been provided with an account control agreement
executed by the bank with which the deposit account is maintained reasonably
satisfactory to Agent.  Anything in the
foregoing or elsewhere in the Loan Documents to the contrary notwithstanding,
it is understood that no Liens, other than Permitted Liens, or Negative Pledges,
except for the benefit of the Banks, are permitted on or with respect to any of
the Property of Borrower.

 

SECTION 6.4         Restricted
Payments.  Neither any Borrower nor
Parent Company will, and Parent Company will not permit any Company to,
directly or indirectly (i) declare or make, or incur any liability to pay or
make, any Dividends; or (ii) redeem, repurchase, retire or otherwise acquire
for value any of its capital stock, warrants, stock equivalents or other
evidence of equity of any class or nature; or (iii) set apart any money or other
Property for a defeasance, sinking or analogous fund for any Dividend or
distribution thereon, or for any redemption, retirement or other acquisition
thereof; provided however, so long as no Default or Event of Default has
occurred and is continuing and no Default or Event of Default will occur as a
result of such distribution, the foregoing shall not prohibit (A) any Company
from paying a Dividend (x) to any other Company that is a Loan Party to
consummate an Acquisition permitted under this Agreement; or (y) to any Company
that is a Loan Party to pay the federal income taxes of such Company or to
provide working capital for such Company; (B) Operating Subsidiary from paying
Dividends to Investment Subsidiary, as its limited partner, for immediate
re-distribution to any other Company that is a Loan Party; or (C) Parent
Company from paying Dividends to its shareholders.

 

SECTION 6.5         Limitation
on Investments.  Neither any
Borrower nor Parent Company will, and Parent Company will not permit any
Company to, make or have outstanding any Investments in any Person, except for:

 

(i)            Temporary Cash
Investments;

 

(ii)           Investments listed
in Schedule 6.5; and 

 

(iii)          Investments
expressly permitted by other provisions of this Agreement.

 

SECTION 6.6         Affiliate
Transactions.  Neither any Borrower
nor Parent Company will, and Parent Company will not permit any Company to,
enter into any transaction with, or pay any management or other fees or
compensation to, any Affiliate of any Company other than transactions in the
ordinary course of business which are on fair and reasonable terms no less
favorable to Borrower, Parent Company or such other Company, as applicable,
than would be obtained in a comparable arm’s-length transaction with a Person
who is not an Affiliate of Borrower, Parent Company or any such other Company,
as applicable.  In addition, neither
Borrower nor Parent Company will, and Parent Company will not permit any
Company to, enter into any transaction with, or pay any management or other
fees or compensation to, any Person (a “Non-Affiliated Person”) who is
not an Affiliate of any Company wherein such Affiliate is directly or
indirectly involved in, related to, or associated with, such transaction other
than

 

33

 

transactions in the ordinary
course of business which are on fair and reasonable terms no less favorable to
Borrower, Parent Company or such other Company, as applicable, than would be
obtained in a comparable arm’s-length transaction with a Non-Affiliated Person
wherein an Affiliate of such Borrower, Parent Company or such other Company is
not directly or indirectly involved, related or associated.

 

SECTION 6.7         Limitation
on Sale of Property.  Neither any
Borrower nor Parent Company will, and Parent Company will not permit any
Company to, sell, assign, lease, sublease or discount or otherwise exchange or
dispose of any of its Property other than (i) sales or leasing of inventory in
the ordinary course of its business; and (ii) sales or other dispositions of
obsolete equipment that is no longer needed for its ordinary business or which
is being replaced by equipment of at least comparable value and utility to the
equipment replaced when such equipment was efficiently operational and
functional.

 

SECTION 6.8         Accounting
Method.  Neither any Borrower nor
Parent Company will, and Parent Company will not permit any Company to, change
its Fiscal Year or method of accounting, without the prior approval of the
Banks.

 

SECTION 6.9         Internal
Governance Documents; Name and Principal Place of Business.  Neither any Borrower nor Parent Company
will, and Parent Company will not permit any Company to, amend their respective
Governing Documents in any respect which could have a Material Adverse Effect.  Without notifying the Agent in writing at
least 30 Business Days prior to the effective date of each of the following
changes, no Borrower nor Parent Company will, and Parent Company will not
permit any Company to, (i) change its name, or operate any of its business,
operations or Property or own or lease any Property under any name, different
than as set forth in Schedule 4.14; (ii) operate or conduct any of its
business or store or maintain any of its inventory, equipment or other
Property, at a location other than as set forth in Schedule 4.14; (iii)
change its identity or corporate structure; or (iv) change its principal place
of business or chief executive office, as applicable, from such address and
location set forth in Schedule 4.14.

 

SECTION 6.10       Certain
Environmental Matters.  Except in
compliance in all respects with Environmental Laws, and otherwise in no way
posing an imminent and significant endangerment to public health or welfare or
the environment, neither any Borrower nor Parent Company will, and Parent
Company will not permit any Company to, (i) cause or permit any Hazardous
Material to be placed, held, transported, located, released or disposed of on,
under, from, to, or at, any Property now or hereafter owned, leased or
otherwise controlled directly or indirectly by any Company (for purposes of
this Section 6.10, the “Subject Property”); or (ii) permit the
Subject Property ever to be used (whether by any Company or any other Person)
as a dump site or storage site (whether permanent or temporary) for any
Hazardous Material.  Without limitation
of the Agent’s and the Banks’ Rights under the Loan Documents, the Agent and
its representatives shall have the right, but not the obligation, to enter upon
the Subject Property or take such other actions as the Agent or any Bank deems
necessary or advisable to cleanup, remove, resolve or minimize the impact of,
or otherwise deal with, any Hazardous Discharge or Environmental Complaint upon
the Agent’s or any Bank’s receipt of any notice from any Governmental Authority
or other Person, asserting the existence of any Hazardous Discharge or
Environmental Complaint on or pertaining to the Subject Property which, if
true,

 

34

 

could result in Environmental
Liability against Borrower, the Agent, any Bank or otherwise which, in the sole
opinion of any of them, could jeopardize any of their present or future Liens
against or rights to the Subject Property. 
All costs and expenses incurred by the Agent, the Banks and their
representatives in the exercise of any such Rights shall become part of the
Obligations and be payable upon demand, together with interest on the unpaid
portion thereof at the Default Rate.

 

SECTION 6.11       Mergers,
Acquisitions and Dissolutions. 
Except in connection with a Permitted Acquisition, neither any Borrower
nor Parent Company will, and Parent Company will not permit any Company to,
become a party to a merger, acquisition or consolidation, or purchase or
otherwise acquire by merger, lease or purchase all or a substantial part of the
assets or Property of any Person or any shares or other evidence of legal or
beneficial ownership of any Person, or dissolve or liquidate.  A “Permitted Acquisition” means (i)
any single Acquisition by Parent Company or a wholly owned Subsidiary of Parent
Company (with a series of related Acquisitions being treated as a single
Acquisition), provided that the total purchase price consideration (including
Indebtedness assumed) does not exceed the sum of $1,500,000 and (ii) any other
Acquisition by Parent Company or a wholly owned Subsidiary of Parent Company
approved by all the Banks; provided however, as to each such
transaction: 

 

(a)           no Default or Event of Default has
occurred and is continuing and no Default or Event of Default will occur as a
result of the Permitted Acquisition; 

 

(b)           the primary business activity of the
Acquisition Target is substantially related to the business activities of the
Operating Subsidiary;

 

(c)           Parent Company provides to the Banks
pro forma financial statements of the Companies giving effect to the Permitted
Acquisition which shall not be materially less favorable, in the reasonable
judgment of the Banks, than the projections previously provided to the Banks; 

 

(d)           the financial ratios under Section
6.1 are complied with before and after giving effect to the Permitted
Acquisition, such compliance being determined on a pro forma basis as of the
date of such Acquisition; 

 

(e)           each of the Banks receives such
information as such Bank may reasonably request to confirm the assumptions made
in such pro forma financial statements; and 

 

(f)            each of the Banks receives (i) (x)
audited balance sheets of the Acquisition Target for the Acquisition Target’s
three prior fiscal years and the related statements of income, stockholders’
equity and cash flows for such years, with reports thereon by its independent
public accountants, prepared in accordance with GAAP applied throughout the
periods covered thereby on a basis consistent with that of prior periods,
subject to normal year-end audit adjustments or (y) if the financial
information in clause (x) above does not exist, unaudited balance sheets of the
Acquisition Target for the Acquisition Target’s three prior fiscal years and
the related statements of income, stockholders’ equity and cash flows for such
years, prepared in accordance with GAAP applied throughout the periods covered
thereby on a basis consistent with that of prior periods, subject to normal
year-end adjustments, and any other financial

 

35

 

information regarding the
Acquisition Target available to any Company and (ii) any unaudited year-to-date
financial statements or reports for the period ending after the end of the most
recent fiscal year of the Acquisition Target for which the Banks have received
the financial reports referred to in clause (i) above.

 

SECTION 6.12       Subsidiaries.  Neither any Borrower nor Parent Company
will, and Parent Company will not permit any Company to, create or permit to
exist any Subsidiary of such Person, except for (i) the Subsidiaries listed in Schedule
4.15; and (ii) Subsidiaries formed or acquired pursuant to a Permitted
Acquisition that becomes a Loan Party. 
Neither any Borrower nor Parent Company will, and Parent Company will
not permit any Company to become a general partner, venturer or similar
capacity in any partnership, venture or similar Person.

 

SECTION 6.13       Sale
of Receivables.  Unless in favor of
the Agent and the Banks or reasonably necessary in connection with collection
efforts on delinquent receivables, no Borrower nor Parent Company will, and
Parent Company will not permit any Company to, sell or discount any of its
accounts or notes receivable.

 

SECTION 6.14       Sale
of Certain Interests.  Neither any
Borrower nor Parent Company will, and Parent Company will not permit any
Company to, transfer or Sell any outstanding capital stock, partnership
interests or other ownership interests of any Subsidiary of Parent Company.

 

SECTION 6.15       Negative
Pledge.  Neither any Borrower nor
Parent Company will, and Parent Company will not permit any Company to, create
or incur any lien or encumbrance on any of its assets, other than (i) liens and
security interests to Agent securing indebtedness owing to Agent and the Banks;
and (ii) Permitted Liens (as defined herein). 
Further, Neither any Borrower nor Parent Company will, and Parent
Company will not permit any Company to, grant any Negative Pledge upon any
Company or any of its Property, except for the benefit of the Agent and the
Banks.

 

ARTICLE 7

EVENTS OF DEFAULT

 

SECTION 7.1         Events
of Default.  An “Event of Default”
shall exist if any one or more of the following events shall occur and be
continuing: 

 

(a)           either Borrower fails or refuses to
pay, within five Business Days of the date when due, any principal of, or
interest on, any Note, or any fee, expense or other Obligations payable by such
Borrower; or 

 

(b)           any representation, warranty or
certification made or deemed made by, or on behalf of, any Company under, or in
connection with, any of the Loan Documents, or in any certificate, notice,
request, statement or other communication furnished or made to the Agent or any
Bank pursuant hereto or in connection herewith is untrue, misleading or
inaccurate in any material respect as of the date on which such representation,
warranty or certification was made (or deemed made) or furnished; or 

 

36

 

(c)           either (i) an event or circumstance
designated as a “default” or an “event of default” under any other Loan
Document; (ii) any Company fails to perform, observe or comply with any
covenant or agreement contained in Sections 5.1(o), 5.1(p) or 5.1(q);
(iii) except as provided in Section 7.1(a), Section 7.1(c)(ii) or
Section 7.1(c)(iv) any Company fails to perform, observe or comply with
any covenant or agreement contained in this Agreement or any other Loan
Document, which failure continues for a period of 30 days after the occurrence
thereof; or (iv) any Company fails to perform, observe or comply with any
covenant or agreement contained in Section 6.1, which failure continues
for a period of 45 days after the due date of the Compliance Certificate
evidencing such failure or noncompliance; or 

 

(d)           either (i) any Company defaults in
the payment of any Indebtedness in excess of $100,000 of such Company or
defaults in respect of any note, agreement, indenture, loan agreement, credit
agreement, bond or other document evidencing or relating to any such
Indebtedness, and such default continues for more than the period of grace, if
any, specified therein or (ii) any Indebtedness of any Company in excess of
$100,000 becomes due or prepayable before its stated maturity by acceleration
of the maturity thereof or otherwise; except that any non-payment in respect of
that certain debt payable to SPAL/Panamco in the total amount of $1.196 million
(the “SPAL/Panamco Debt”) shall not be an Event of Default under this Section
7.1(d) unless collection actions are commenced by any party with respect to
such debt, including, without limitation, the filing of suit or the initiation
of any other legal proceedings against any Company, in which case any such
non-payment under the SPAL/Panamco Debt shall be an Event of Default if not
paid within 20 Business Days after the date any Specified Person has knowledge
of the commencement of such collection actions; or 

 

(e)           any Company (i) applies for or
consents to the appointment of, or the taking of possession by, a receiver,
trustee, custodian, intervenor or liquidator of such Company or of all or a
substantial part of its Property; (ii) commences or files a voluntary petition,
proceeding or case in bankruptcy, or admits in writing that it is unable to pay
its debts as they become due or generally not pay its debts as they become due;
(iii) makes a general assignment for the benefit of creditors; (iv) files a
petition or answer seeking reorganization or an arrangement with creditors or
take advantage of any Debtor Laws; (v) files an answer admitting the material
allegations of or consenting to, or defaults in answering, a petition,
proceeding or case filed against it in any bankruptcy, reorganization or
insolvency proceeding; or (vi) takes corporate action for the purpose of
effecting any of the foregoing; or 

 

(f)            an involuntary petition, proceeding,
case or complaint is filed against any Company seeking bankruptcy, liquidation,
dissolution, winding-up or reorganization of such Company or the composition or
readjustments of its debts, or the appointment of a receiver, custodian, trustee,
intervenor or liquidator of it or all or substantially all of its Property, and
such petition, proceeding, case or complaint is not dismissed within 30 days of
the filing thereof; or an order, order for relief, judgment or decree shall be
entered by any court of competent jurisdiction or other competent authority
approving a petition, proceeding, case or complaint seeking liquidation,
reorganization, dissolution, winding-up or bankruptcy of any Company or
appointing a receiver, custodian, trustee, intervenor or liquidator of any
Company, or of all or substantially all of its Property, and such order, order
for relief, judgment or decree continues unstayed for a period of 30 days; or 

 

37

 

(g)           one or more final and non-appealable
Judgments that, individually or in the aggregate, require the payment of money
in excess of the sum of $250,000 or any other Judgments that, individually or
in the aggregate, require the payment of money in excess of the sum of $10
million are rendered against any Company or with respect to its Property, and
such Judgment or Judgments shall not be satisfied or discharged within 30 days
of the date it is rendered; or 

 

(h)           both (i) either (A) proceedings are
instituted to terminate, or a notice of termination is filed with respect to,
any Plan by any Company, any member of the “controlled group” (as defined in
the Code) of any Company, PBGC or any representative of any thereof, or any
such Plan shall be terminated, in each case under Section 4041 or 4042 of
ERISA; or (B) a “reportable event” (as defined in Title 4 of ERISA) occurs with
respect to any Plan and continues for a period of 60 days; and (ii) the sum of
the estimated liability to PBGC under Section 4062 of ERISA and the currently
payable obligations of the Companies to fund liabilities (in excess of amounts
required to be paid to satisfy the minimum funding standard of Section 412 of
the Internal Revenue Code) under the Plan or Plans subject to such event
exceeds 10% of the Companies’ consolidated net worth at such time; or 

 

(i)            a Change in Control; or 

 

(j)            except pursuant to the express terms
of any Loan Document, any Loan Document shall, at any time after its execution
and delivery and for any reason, cease to be in full force and effect or be
declared to be null and void, or Borrower or any other Person (other than the
Agent or the Banks) shall deny that it has any or any further liability or
obligations under any Loan Document to which it is a party; or

 

(k)           either Borrower fails to take all
appropriate action under its policies of insurance to obtain defense by the
relevant insurer with respect to any claims against any Company; or

 

(l)            the aggregate amount of expenses
incurred by any Borrower after the date of this Agreement defending one or more
claims against one or more of the Companies that are not yet paid or reimbursed
by an insurer at any time exceeds $500,000, excluding, however, such expenses
with respect to claims by employees, former employees and their families based
solely on such employee’s or former employee’s employment or employee benefits,
and claims relating solely to product liability; or

 

(m)          governmentally imposed fines in excess
of $500,000 are assessed or levied voluntarily or involuntarily against one or
more of the Companies, or if any Company is subject to a governmentally imposed
cease and desist order with respect to any of its operations other than a cease
and desist order relating solely to prohibiting future violations of laws in
connection with (i) the sale or trading of securities; (ii) the dissemination
of information to investors; (iii) the filing of reports with the Securities
and Exchange Commission; or (iv) the maintenance of books and records; or

 

(n)           net sales for any quarter are less
than 80% of the specific projections set forth on the Net Sales Closing
Certificate with respect to such quarter; or

 

38

 

(o)           BDO Seidman LLP should disengage
itself from an audit for any year or provide a qualified opinion (except to the
extent permitted in Section 5.1(b)(iv)).

 

SECTION 7.2         Remedies
Upon Event of Default.  In the event
an Event of Default occurs and is continuing, the Agent may, and upon written
request of the Required Banks, shall, exercise any one or more of the following
Rights, and any other Rights available at law or in equity or provided in any
of the Loan Documents: (i) terminate all or any portion of the Commitments, and
such Commitments shall thereupon terminate; and (ii) declare the principal of,
and all earned and accrued interest on, the Notes then outstanding and all
other accrued and unpaid Obligations to be immediately due and payable,
whereupon the same shall be and become due and payable, each and all of the
foregoing without presentment, demand, protest, notice of default, notice of intent to accelerate, notice of acceleration
or other notice of any kind, all of which are hereby waived by each Borrower, provided
however, upon the occurrence of any Event of Default specified in Section
7.1(e) or Section 7.1(f), all of the Commitments shall thereupon
automatically and immediately terminate and the principal of, and all earned
and accrued interest on the Notes then outstanding and all other accrued and
unpaid Obligations shall thereupon be and become automatically and immediately
due and payable, each and all of the foregoing without presentment, demand,
protest, notice of default, notice of intent
to accelerate, notice of acceleration or other notice of any kind,
all of which are hereby waived by each Borrower.  If any amount payable under any of the Loan Documents is not paid
when due the outstanding and unpaid portion of such amount shall bear interest
at the Default Rate.

 

ARTICLE 8

THE AGENT AND BANKS

 

SECTION 8.1         Appointment
of the Agent.  Each of the Banks
hereby appoints the Agent to act as herein specified, and acting in the manner
and to the extent provided in this Article 8, the Agent accepts such
appointment.  Each of the Banks hereby
irrevocably authorizes the Agent to receive payments of principal, interest and
other amounts due hereunder as specified herein and otherwise to take such
action on its behalf, to exercise such powers and to perform such duties under
the Loan Documents as are specifically delegated to, or required of, the Agent
by the terms of the Loan Documents, together with all other powers reasonably
incidental thereto, which authorization permits the Agent to perform any of its
duties under the Loan Documents by or through its agents, attorneys or employees.  The Agent shall have no duties or
responsibilities except those expressly set forth with respect to it in the
Loan Documents.  The relationship of the
Agent to the Banks is only that of one company acting solely as an
administrative agent for others, and nothing in the Loan Documents, express or
implied, is intended to, or shall be construed to, constitute the Agent a
trustee or other fiduciary for any holder of any of the Notes, or of any
participation therein, nor to impose on the Agent duties and obligations other
than those expressly provided for in the Loan Documents.  As to any matters not expressly provided for
in the Loan Documents and any matters to which the Loan Documents place within
the discretion of the Agent, the Agent shall not be required to exercise any
discretion or take any action (and it may request instructions from the Banks
with respect to any such matter), in which case it shall be required to act or
refrain from acting (and shall be fully protected and free from liability to all
Banks in so acting or refraining from acting) upon the instructions of the
Required Banks (including itself), and such instructions shall be binding

 

39

 

upon all Banks and all holders
of, and participants in, the Notes; provided however, (i) the Agent
shall in all cases be fully justified in failing or refusing to act under any
Loan Document unless it shall be indemnified to its satisfaction by the Banks
against any and all liability and expense (other than any such liability or
expense proximately caused by the Agent’s gross negligence or willful
misconduct, as determined by a final judgment) which may be incurred by it by
reason of taking or continuing to take any such action; and (ii) the Agent
shall not in any event be required to take any action which (A) is contrary to
any Loan Document or Law; or (B) exposes it to a risk of personal liability
that it considers unreasonable.

 

SECTION 8.2         Exculpation:
Agent’s Reliance.  AS AMONG THE
BANKS, NEITHER THE AGENT NOR ANY OF ITS AFFILIATES, NOR ANY OF ITS OR THEIR
DIRECTORS, OFFICERS, AGENTS, ATTORNEYS, INSURERS OR EMPLOYEES, NOR ANY OF ITS
OR THEIR SUCCESSORS, HEIRS, LEGAL REPRESENTATIVES OR ASSIGNS (COLLECTIVELY, THE
“AGENT INDEMNITEES”), SHALL EVER BE LIABLE FOR ANY ACTION TAKEN OR OMITTED TO
BE TAKEN BY ANY OF THEM UNDER OR IN CONNECTION WITH ANY LOAN DOCUMENT, INCLUDING THEIR NEGLIGENCE OF ANY KIND,
EXCEPT THAT EACH SHALL RESPECTIVELY BE LIABLE FOR ITS OWN GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT, AS DETERMINED BY A FINAL JUDGMENT.  Without limiting the generality of the
foregoing or any other provision of any Loan Document, the Agent: (i) may treat
the payee of any Note as the holder thereof until the Agent receives and
accepts an assignment and acceptance entered into by the Persons as provided in
Section 10.7 and all other provisions of Section 10.7 are
complied with to the reasonable satisfaction of the Agent; (ii) may consult
with legal counsel (including counsel for any Company), independent public accountants
and other experts and advisors selected by it and shall be fully protected and
free from liability to all Banks for any action taken or omitted to be taken in
good faith by it in accordance with the advice of such counsel, accountants,
experts or advisors; (iii) makes no warranty or representation to any Bank and
shall not be responsible to any Bank for any statements, recitals, information,
warranties or representations made in or in connection with any Loan Document,
or in any communication or writing made or delivered in connection therewith;
(iv) shall not have any duty to ascertain, to inquire or to keep itself
informed as to the financial condition of the Companies or any of them or the
performance or observance of any of the terms, covenants or conditions of any
Loan Document on the part of any Person or to inspect the Property (including
the books and records) of any Company or such Company’s Subsidiaries or any
other Person; (v) shall not be responsible to any Bank for the financial
condition of the Companies or any of them or the due execution, legality,
validity, enforceability, collectibility, genuineness, sufficiency or value of
any Loan Document or instrument or document furnished in connection therewith,
or the creation, perfection, continued creation or perfection, or priority, of
any Lien purported to be created by any Loan Document, or any other instrument
or document furnished pursuant hereto or thereto; and (vi) may rely, and shall
be fully protected and free from liability to all Banks in relying, (A) upon
the representations and warranties of any Company, the Banks in exercising its
powers hereunder; and (B) upon any notice, consent, certificate, statement,
resolution, instrument or other writing (which may be by telegram, cable, telecopy,
facsimile, telex, mail or telephone) believed by it to be genuine and signed,
sent, communicated or otherwise made by the proper Person or Persons.

 

40

 

SECTION 8.3         Defaults.  The Agent shall not be deemed to have
knowledge of the occurrence of a Default or Event of Default (other than the
non-payment of principal of or interest on Loans or of commitment fees) unless
the Agent has received written notice from any Bank or any Borrower specifying
the occurrence of such Default or Event of Default and stating that such notice
is a “Notice of Default”.  In the
event that the Agent receives a Notice of Default, it shall give prompt notice
thereof to the Banks (and shall give each Bank prompt notice of each such
non-payment).  Subject to Section 8.1,
the Agent shall take such action with respect to such Default or Event of
Default as shall be directed by the Required Banks; provided that,
unless and until the Agent shall have received such directions, the Agent may
(but shall not be obligated to) take such action, or refrain from taking such
action, with respect to such Default or Event of Default as it shall in its
sole and absolute discretion deem advisable in the best interest of the Banks.

 

SECTION 8.4         Rights
as a Bank.  The Frost National Bank
(and any successor acting as the Agent), in its capacity as a Bank hereunder
shall have the same rights and powers hereunder as any Bank and may exercise
the same as though it were not the Agent, and the term “Bank”, “Banks”,
“Required Banks”, “holders of Notes” or similar terms shall,
unless otherwise expressly indicated, include The Frost National Bank (and any
successor acting as Agent) in its individual capacity.  The Frost National Bank (and any successor
acting as the Agent) and its Affiliates may accept deposits from, lend money
to, act as trustee under indentures or as transfer agent in respect of capital
stock of, and generally engage in any kind of banking, trust, investment,
financial advisory or other business with, any Borrower or its respective
Affiliates, and may accept fees and other consideration from any Borrower or
its respective Affiliates for services in connection with any of the foregoing,
any of the Loan Documents or otherwise, all as if it were not Agent hereunder
and without having to account for the same to the Banks.  All fees and other amounts received by Agent
for its capacity as Agent hereunder shall solely be for its benefit and no
other party hereto.

 

SECTION 8.5         Indemnification.  EACH BANK AGREES TO INDEMNIFY, REIMBURSE AND
HOLD HARMLESS EACH AGENT INDEMNITEE (TO THE EXTENT NOT INDEMNIFIED AND
REIMBURSED, ON DEMAND, BY ANY BORROWER), RATABLY ACCORDING TO ITS PERCENTAGE
SHARE, FROM AND AGAINST ANY AND ALL LOSSES, LIABILITIES, OBLIGATIONS, CLAIMS,
LOSSES, DAMAGES, PENALTIES, ACTIONS, SUITS, JUDGMENTS, DEMANDS, SETTLEMENTS,
COSTS, DISBURSEMENTS OR EXPENSES (INCLUDING FEES AND EXPENSES OF ATTORNEYS,
ACCOUNTANTS, EXPERTS AND ADVISORS) OF ANY KIND OR NATURE WHATSOEVER (IN THIS SECTION
8.5 THE FOREGOING IS COLLECTIVELY REFERRED TO AS THE “LIABILITIES AND
COSTS”), WHICH TO ANY EXTENT (IN WHOLE OR PART) MAY BE IMPOSED ON, INCURRED BY,
OR ASSERTED AGAINST, SUCH AGENT INDEMNITEE IN ANY WAY RELATING TO, OR ARISING
OUT OF, THE LOAN DOCUMENTS AND THE TRANSACTION AND EVENTS (INCLUDING THE
ENFORCEMENT THEREOF) AT ANY TIME ASSOCIATED THEREWITH OR CONTEMPLATED THEREIN
(INCLUDING ANY VIOLATION OR NONCOMPLIANCE WITH ANY ENVIRONMENTAL LAWS BY ANY
PERSON OR ANY LIABILITIES OR DUTIES OF ANY PERSON WITH RESPECT TO HAZARDOUS
MATERIALS FOUND IN OR RELEASED INTO THE ENVIRONMENT) OR AS A RESULT OF ANY
ACTION TAKEN OR OMITTED TO BE TAKEN BY SUCH AGENT INDEMNITEE, INCLUDING

 

41

 

ITS NEGLIGENCE OF ANY KIND, OTHER THAN AS PROVIDED
IN THE FOLLOWING PROVISO, THE GROSS NEGLIGENCE OF AN AGENT INDEMNITEE;
PROVIDED THAT NO BANK SHALL BE LIABLE FOR ANY PORTION, IF ANY, OF ANY
LIABILITIES AND COSTS WHICH IS PROXIMATELY CAUSED BY THE AGENT’S OWN INDIVIDUAL
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, AS DETERMINED IN A FINAL JUDGMENT.  WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING, EACH BANK AGREES, IN PROPORTION WITH ITS PERCENTAGE SHARE, TO
REIMBURSE THE AGENT PROMPTLY UPON ITS DEMAND FOR ANY COSTS AND EXPENSES
(INCLUDING ATTORNEYS’ FEES AND EXPENSES AND OTHER CHARGES) INCURRED BY THE
AGENT IN CONNECTION WITH THE PREPARATION, EXECUTION, DELIVERY, ADMINISTRATION,
MODIFICATION, AMENDMENT OR ENFORCEMENT (WHETHER THROUGH NEGOTIATIONS, LEGAL
PROCEEDINGS, OR OTHERWISE) OF, OR LEGAL ADVICE IN RESPECT OF THEIR RIGHTS OR
RESPONSIBILITIES UNDER, THE LOAN DOCUMENTS, OR ANY OF THEM, OR ANY OTHER
DOCUMENTS CONTEMPLATED BY THE LOAN DOCUMENTS, TO THE EXTENT THAT THE AGENT IS
NOT REIMBURSED, ON DEMAND, FOR SUCH AMOUNTS BY ANY BORROWER.  Each Bank’s obligations under this paragraph
shall survive the termination of this Agreement and the discharge of any
Borrower’s obligations hereunder.

 

SECTION 8.6         Bank’s
Credit Decision and Non-Reliance. 
Each Bank hereby acknowledges that it has, independently and without
reliance upon the Agent or any other Person, and based upon such documents and
information as it has deemed appropriate, made (i) its own independent
investigation and analysis (including legal and credit investigation and
analysis) of the Companies and their Affiliates, and their respective financial
conditions, operations and affairs, and Properties, and the transactions
provided for in, and contemplated by, each of the Loan Documents; and (ii) its
own independent decision to enter into and perform each Loan Document.  Each Bank also acknowledges that it will,
independently and without reliance upon the Agent or any other Person, and
based on such investigation, analysis, documents and information as it shall
deem appropriate at the time, continue to make its own independent legal,
credit and other decisions in taking or omitting to take action under or in
connection with the Loan Documents. 
Except for notices, reports and other documents and information expressly
required to be furnished to the Banks by the Agent hereunder, the Agent shall
not have any duty or responsibility to provide any Bank with any credit or
other information concerning the affairs, financial condition, or business of
the Companies or any of their respective Affiliates which may come into the
possession of the Agent or any of its Affiliates.

 

SECTION 8.7         Deferral
of Distributions; Investments. 
Whenever the Agent in good faith determines that it is uncertain about
how to distribute to the Banks any funds which it has received, or whenever the
Agent in good faith determines that there is any dispute among the Banks about
how such funds should be distributed, the Agent may choose to defer
distribution of the funds which are the subject of such uncertainty or dispute.  If the Agent in good faith believes that the
uncertainty or dispute will not be promptly resolved, it may, or if the Agent
is otherwise required to invest funds pending distribution to the Banks, it
shall, invest such funds pending distribution in any manner it deems appropriate,
absent timely instructions from the Required Banks; all interest on any such
investment (net of investment and related costs, if any,

 

42

 

incurred in connection
therewith) shall be distributed upon the distribution of such investment and in
the same proportion and to the same Persons as such investment.  All moneys received by the Agent for
distribution to the Banks (other than to the Person who is the Agent in its
separate capacity as a Bank) shall be held by the Agent pending such
distribution solely as the Agent for such Banks, and the Agent shall have no
equitable title to any portion thereof. 
ABSENT GROSS NEGLIGENCE OR WILLFUL MISCONDUCT ON ITS PART BUT
EXCLUDING ITS OWN NEGLIGENCE OF ANY OTHER KIND, AS DETERMINED BY
A FINAL JUDGMENT, THE AGENT SHALL BE FULLY PROTECTED AND FREE FROM LIABILITY TO
THE BANKS FOR ANY COSTS AND LIABILITIES RESULTING FROM OR RELATED TO THE
DEFERRAL OF DISTRIBUTIONS AND/OR MAKING OF INVESTMENTS AS PROVIDED FOR IN THIS SECTION
8, INCLUDING THE FAILURE OF ANY SUCH INVESTMENT.   

 

SECTION 8.8         Nature
of Article 8.  The provisions of
this Article 8 (other than the following Section 8.9) are
intended solely for the benefit of the Agent and the Banks, and neither any
Borrower nor any other Person shall be entitled to rely on any such provision
or assert any such provision in a claim or defense against the Agent or any
Bank.  The Agent and the Banks may waive
or amend such provisions as they desire without any notice to or consent of any
Borrower.  Nothing contained in any Loan
Document, and no action taken by any Bank or the Agent pursuant hereto or in
connection herewith or pursuant to or in connection with the Loan Documents,
shall be deemed to constitute the Banks, together or with or without the Agent,
a partnership, association, joint venture or other entity.

 

SECTION 8.9         Resignation
and Removal by Agent.  The Agent may
resign at any time as the Agent under the Loan Documents by giving written
notice thereof (which notice shall contain the date of such resignation) to the
Banks and the Borrowers and, upon the gross negligence or manifest incompetence
of the Agent, the Agent may be removed as the Agent under the Loan Documents by
the Required Banks.  Upon any such
resignation or removal, the Required Banks (without having to obtain the
consent of any Borrower) shall have the right to appoint a successor
Agent.  If no successor Agent shall have
been so appointed by the Required Banks and shall have accepted such
appointment within 30 calendar days after the retiring Agent’s giving of notice
of resignation or the Required Banks’ removal of the retiring Agent, as
applicable, then the retiring Agent may, on behalf of Banks (without having to
obtain the consent of any Borrower) appoint a successor Agent, which shall be a
commercial bank organized under the laws of the United States of America or of
any State thereof having a combined capital and surplus of at least $500
million.  In any case where a successor
Agent is being selected, the parties agree to attempt to select such successor
from one of the Banks.  Upon the
acceptance of any appointment as the Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all rights,
powers, privileges and duties of the retiring or removed Agent and the retiring
or removed Agent shall be discharged from its duties and obligations under the
Loan Documents.  After any retiring
Agent’s resignation or removal hereunder as Agent, the provisions of this Article
8 shall inure to its benefit as to any actions taken or omitted to be taken
by it while it was the Agent under the Loan Documents.

 

43

 

ARTICLE 9

CHANGED CIRCUMSTANCES

 

SECTION 9.1         Intentionally
omitted.

 

SECTION 9.2         Illegality.  Notwithstanding any other provision herein,
if at any time a Bank determines (which determination shall be reasonably
exercised and if so reasonably exercised, shall be conclusive and binding upon
the parties, absent manifest error) that maintaining LIBOR Loans hereunder has
become unlawful pursuant to applicable Law, or any interpretation, application
or administration thereof (whether or not having the force of law), then such
Bank (an “Affected Bank”) shall so promptly notify the Agent, the other
Banks and each Borrower.  Upon giving
such notice each Borrower shall, upon the request of any Bank, prepay any LIBOR
Loan then outstanding (which prepayment, if requested by such Borrower, shall
be made with the proceeds or effect of a Base Rate Loan extended
contemporaneously by such Bank), together with accrued interest thereon, and
loss and expenses, if any, provided for in Section 2.12.

 

SECTION 9.3         Increased
Cost And Reduced Return.

 

(a)           If the adoption of, or any change in,
any Law, or in the interpretation, application or administration thereof, or
compliance by any Bank (or its Lending Office) with any request or directive
(whether or not having the force of law) of any central bank or other
Governmental Authority: 

 

(i)            shall subject any
Bank (or its Lending Office) to any tax, duty or other charge of any kind
whatsoever with respect to this Agreement or any Note or any LIBOR Loan made by
it, or its obligations in respect to any of the foregoing, or shall change the
basis of taxation of payments to such Bank (or its Lending Office) in respect
to any amounts due to it in respect to any of the foregoing (except for changes
in the rate of tax on the overall net income of such Bank or its Lending Office
imposed by any jurisdiction); or

 

(ii)           shall impose,
modify or deem applicable any reserve, special deposit, compulsory loan or
similar requirement (including, without limitation, any such requirement
imposed by the Board of Governors of the Federal Reserve System) against assets
of, deposits with or other liabilities of or for the account of, advances,
loans or other extensions of credit by, or other acquisition of funds by, any
Bank (or its Lending Office), which is not otherwise included in the
determination of the Adjusted London Interbank Offered Rate; or 

 

(iii)          shall impose on any
Bank (or its Lending Office) or on the London interbank market any other
condition affecting this Agreement, any Note, or any LIBOR Loan, or its
obligations in respect to any of the foregoing;

 

and the result
of any of the foregoing is to increase the cost to such Bank (or its Lending
Office) of maintaining any LIBOR Loan or to reduce the amount of any sum
received or receivable by such Bank (or its Lending Office) under this
Agreement or under its Notes with respect thereto,

 

44

 

then subject to Section 10.8
within five days after demand by such Bank (with a copy to the Agent), each
Borrower shall, without limiting the effect of any other applicable provision
hereof (but without duplication) pay to such Bank such additional amount or
amounts as will compensate such Bank for such increased costs or reduction of
amount receivable.

 

(b)           If the adoption of, or any change in,
any Law regarding capital adequacy or risk-based capital guidelines or
requirements, or in the interpretation, application or administration thereof
or compliance by any Bank (or its Lending Office, or its or any of their
Affiliates) with any request or directive regarding capital adequacy or
risk-based capital guidelines or requirements (whether or not having the force
of law) of any central bank or other Governmental Authority, does or shall, in
the reasonable determination of such Bank, have the effect of reducing the rate
of return on such Bank’s (or its Lending Office, or its or their Affiliates)
capital or assets as a consequence of its obligations hereunder, to a level
below that which such Bank (or its Lending Office, or its or their Affiliates)
could have achieved but for such adoption, change or compliance (taking into
consideration such Bank’s (or its Lending Office, or its or their Affiliates)
policies with respect to capital adequacy or risk-based capital guidelines or
requirements), then from time to time, within five days after demand by such
Bank (with a copy to the Agent), subject to Section 10.8, each Borrower
shall, without limiting the effect of the foregoing provisions of this Section
9.3 (but without duplication), pay to such Bank such additional amount or
amounts as will compensate such Bank for the amount of such reduction.

 

(c)           Each Bank will promptly notify each
Borrower and the Agent of any event of which it has knowledge which will
entitle such Bank to compensation pursuant to this Section 9.3.  A certificate of any Bank claiming
compensation under this Section 9.3 and setting forth the additional
amount or amounts to be paid to it, as well as the manner in which such amount
or amounts were calculated, hereunder shall be conclusive and binding on
Borrowers in the absence of manifest error. 
In determining such amount, such Bank may use, among others, any
reasonable averaging and attribution methods.

 

SECTION 9.4         Intentionally
omitted.

 

SECTION 9.5         Alternate
Lending Office Designation.  Each
Bank agrees that it will endeavor to use reasonable efforts to designate an
alternate Lending Office with respect to any LIBOR Loans affected by the
matters or circumstances described in Sections 9.2 and 9.3 to
reduce the liability of each Borrower or avoid the results provided thereunder,
so long as such designation is not disadvantageous to such Bank as determined
by it in its sole discretion; provided, however, no Bank shall have any
obligation to so designate an alternate Lending Office located in the United
States of America.

 

ARTICLE 10

 

MISCELLANEOUS

 

SECTION 10.1       Notices.  (a) All notices, requests and other
communications to any party under any Loan Document shall be in writing or, in
the case of a Notice of Borrowing, by telephone confirmed the same day in
writing on or before 11:00 A.M. (San Antonio, Texas time) (including bank wire,
telecopy, telex or similar writing) and shall be given to such party at its

 

45

 

address, telecopy or telex
number set forth in Annex A or such other address, telecopy or telex
number as such party may hereafter specify for the purpose by notice to the
Agent and each Borrower.  Each such
notice, request or other communication shall be effective (i) if given by
telex, when such telex is transmitted to the telex number specified pursuant to
this Section 10.1 and the appropriate answerback is received; (ii) if
given by telecopy, when such telecopy is transmitted to the telecopy number
specified pursuant to this Section 10.1, and the sender has received
electronic confirmation thereof; (iii) if given by registered or certified
mail, return receipt requested, 72 hours after such communication is deposited
in the mails with postage prepaid, addressed as aforesaid; or (iv) if given by
any other means, when delivered at the address specified pursuant to this Section
10.1; provided that notices to the Agent under Article 2 or Article
9 shall not be effective until actually received by a representative of the
Agent, as distinguished from received at its place of business only.

 

(b)           Any verbal communication or
instrument in writing received by the Agent in connection with a Borrowing or a
Loan, or any other matter with respect to any Loan Document, which purports to
be dispatched or signed by or on behalf of any Borrower and confirmed, in the
case of a verbal communication, by the Agent by telephone confirmation with an
Authorized Officer of such Borrower, shall conclusively be deemed to have been
dispatched or signed by or on behalf of such Borrower pursuant to such Person’s
authority to bind such Borrower and all other Persons for the liabilities and
matters in connection therewith to the Agent and each Bank; and the Agent and
each Bank may conclusively rely thereon and shall have no obligation, duty or
responsibility to determine the validity or genuineness thereof or the
authority of the Person or Persons executing or dispatching the same.

 

SECTION 10.2       No
Waivers.  No failure or delay by the
Agent or any Bank in exercising any Right under any Loan Document, and no
course of dealing with respect to any such Rights, shall operate as a waiver
thereof, nor shall any single or partial exercise thereof or any abandonment or
discontinuance of steps or actions to enforce any Rights, preclude or prejudice
the concurrent or subsequent exercise thereof or the exercise of any other such
Rights.  The Rights provided in the Loan
Documents shall be cumulative and not exclusive of any rights or remedies
provided by Law or in equity.

 

SECTION 10.3       Payment
of Costs and Expenses; Professionals and Consultants.

 

(a)           Each Borrower agrees to pay all
reasonable costs and expenses incurred (whether before, after or during the
Closing Date) by or on behalf of the Agent and each Bank (including audit costs
and expenses and all attorneys’ and other professionals’ and consultants’ fees,
costs and expenses of the Agent and of each Bank incurred in connection with
the preparation of, advice or counsel regarding, or enforcement of, any Loan
Document) in connection with (i) the investigation, review, negotiation,
preparation, execution, delivery, administration, syndication, participation,
filing, recordation, refinancing, restructuring, renegotiation or enforcement
of each of the Loan Documents, and any and all renewals, amendments, extensions,
restatements, supplements, rearrangements, consents, waivers, assignments and
modifications thereto or thereof, and the transactions contemplated thereby;
(ii) the monitoring, evaluating, making, maintaining, servicing, enforcement
and collection of the Revolving Loans and the Term Loans; (iii) the creation,
preservation, maintenance, protection, perfection and enforcement of Rights
under each Loan Document and Liens in Property (whether or not incurred in
connection with

 

46

 

the commencement of a
proceeding, litigation, foreclosure or other proceeding), specifically
including all costs and expenses incurred with respect to any bankruptcy,
insolvency or reorganization proceeding, regardless of whether the Agent or a
Bank ultimately prevails in such bankruptcy, insolvency or reorganization
proceeding; and (iv) all amounts expended, advanced or incurred by or on behalf
of the Agent or any Bank to satisfy any obligation of any Borrower under any
Loan Document which is not timely satisfied by such Borrower, if the Agent or
any Bank, at its discretion, so chooses to incur any such expenses or costs.

 

(b)           Should any Borrower fail to perform
or observe any covenant or agreement contained in any of the Loan Documents and
such failure continues through the cure period provided for therein, if any,
the Agent or any Bank may then perform or attempt to perform such covenant or
agreement on behalf of such Borrower. 
Such Person will endeavor to give such Borrower notice of such
performance or attempted performance. 
Such Borrower shall, at the request of such Person, promptly pay any
amount expended in such performance or attempted performance to such Person at
the principal office of the Agent, together with interest on the portion
thereof from time to time remaining unpaid at the Default Rate.  Notwithstanding the foregoing, it is
expressly understood and agreed that (i) neither the Agent nor any Bank assumes
any liability or responsibility for the performance of any covenants or
agreements of any Borrower hereunder or under any of the other Loan Documents,
or any other documents, or other control over the management and affairs of any
Borrower; and (ii) such Borrower’s failure to perform any covenant or agreement
that is cured, in whole or part, by any of their action shall be and continue a
Default unless and until (A) all of such Person’s attendant costs and expenses
have been reimbursed as herein provided; and (B) such Borrower has submitted,
and the Agent has received and approved with the consent of the Required Banks,
such objective evidence that supports the determination that such Default will
not reoccur.

 

(c)           Each Borrower acknowledges and agrees
that all attorneys, accountants, auditors, and other professional Persons and
consultants who are from time to time engaged or employed by the Agent
(including, without limitation, Cox & Smith Incorporated) or by any Bank
(including, without limitation, Mayer, Brown, Rowe & Maw, LLP engaged by
Harris) and whose fees and expenses are or may be paid or reimbursed, as
applicable, by Borrowers, pursuant to the terms of any Loan Document, are the
professionals of the Agent or such Bank, respectively, and not of any Borrower,
and each of them (i) shall have the right to act exclusively in the interest of
the Agent or such Bank, respectively; and (ii) shall have no duty of
disclosure, duty of loyalty, duty of care or any other duty of any type or
nature whatsoever, or deemed to have any attorney-client or other similar
professional relationship whatsoever, to any Borrower.

 

SECTION 10.4       Indemnification.  SUBJECT TO SECTION 10.8, EACH
BORROWER SHALL INDEMNIFY, DEFEND, PROTECT AND HOLD HARMLESS EACH BANK AND THE
AGENT, AND THEIR RESPECTIVE AFFILIATES, SUBSIDIARIES, PARENT COMPANIES AND OTHER
RELATED ENTITIES, AND THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS,
ATTORNEYS AND OTHER PROFESSIONALS AND CONSULTANTS, INSURERS AND STOCKHOLDERS,
AND EACH OF THEM (AND TOGETHER WITH EACH AND ALL OF THEIR RESPECTIVE
SUCCESSORS, ASSIGNS, HEIRS AND LEGAL REPRESENTATIVES, THE “INDEMNIFIED
PARTIES”) FROM AND AGAINST LIABILITIES, OBLIGATIONS, LOSSES, CLAIMS,
ACTIONS, SUITS AND OTHER LEGAL PROCEEDINGS, JUDGMENTS, PENALTIES, DAMAGES,
COSTS,

 

47

 

INTEREST, CHARGES, ATTORNEYS’
AND OTHER PROFESSIONALS’ AND CONSULTANTS’ FEES AND OTHER EXPENSES AND
DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER (“INDEMNIFIED COSTS”),
WHICH MAY BE IMPOSED ON, INCURRED OR SUSTAINED BY, OR ASSERTED AGAINST, THE
INDEMNIFIED PARTIES, OR ANY OF THEM, BY REASON OF, ARISING OUT OF, OR IN ANY
MANNER RELATED TO (DIRECTLY OR INDIRECTLY, CONSEQUENTIALLY, OR OTHERWISE), A
BORROWER’S BREACH OF ANY OF THE TERMS AND CONDITIONS OF ANY LOAN DOCUMENT
AND/OR A BORROWER’S NEGLIGENCE.  THE
FOREGOING IS INTENDED TO INDEMNIFY, DEFEND, PROTECT AND HOLD HARMLESS EACH OF
THE INDEMNIFIED PARTIES AGAINST ALL RISKS, FORESEEABLE OR UNFORESEEABLE,
ARISING FROM A BORROWER’S BREACH OF THE TERMS AND CONDITIONS OF ANY LOAN
DOCUMENT AND/OR A BORROWER’S NEGLIGENCE, INCLUDING, WITHOUT LIMITATION, THE NEGLIGENCE OR
ALLEGED NEGLIGENCE (WHETHER SOLE, COMPARATIVE, CONTRIBUTORY OR OTHERWISE) OF
ANY OF THE INDEMNIFIED PARTIES, ARISING OUT OF THEIR EFFORTS OR
OMISSIONS TO CURE OR REMEDY A BORROWER’S BREACH OF THE TERMS AND CONDITIONS OF
ANY LOAN DOCUMENT AND/OR A BORROWER’S NEGLIGENCE.  TO THE EXTENT THAT THE FOREGOING INDEMNIFICATION MAY BE DEEMED
UNENFORCEABLE, IN WHOLE OR IN PART, FOR ANY REASON WHATSOEVER, INCLUDING
BECAUSE IT IS VIOLATIVE OF LAW OR PUBLIC POLICY AS DETERMINED BY A FINAL,
NON-APPEALABLE JUDGMENT OR ORDER OF A COURT OF COMPETENT JURISDICTION, EACH
BORROWER AGREES TO CONTRIBUTE THE MAXIMUM PORTION THAT IT IS NOT PROHIBITED TO
PAY UNDER APPLICABLE LAW, TO THE PAYMENT AND SATISFACTION OF THE “SUBJECT TRANSACTIONS;
PROVIDED, HOWEVER AN INDEMNIFIED PARTY SHALL NOT BE ENTITLED TO
INDEMNIFICATION FOR INDEMNIFIED COSTS TO THE EXTENT SUCH INDEMNIFIED COSTS ARE
DIRECTLY CAUSED BY A BREACH OF ITS MATERIAL OBLIGATIONS UNDER ANY LOAN DOCUMENT
OR ITS OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT AS DETERMINED BY A COURT OF
COMPETENT JURISDICTION.

 

SECTION 10.5       Sharing
of Set-Offs.  Each Borrower hereby
grants to Agent and each Bank the right of set-off, to secure repayment of the
Obligations, upon any and all monies, securities or other Property of such
Borrower and the proceeds therefrom, now or hereafter held or received by or in
transit to Agent or any Bank or any of their respective agents, from or for the
account of such Borrower, whether for safekeeping, custody, pledge,
transmission, collection or otherwise, and also upon any and all deposits
(general or special) and credits of such Borrower, and any and all claims of
such Borrower against Agent or any Bank at any time existing.  In connection with any set-off, counterclaim
or similar action by any Bank, such Bank agrees that it shall comply with, and
otherwise be bound by, the provisions of Section 2.13.  Each Borrower, the Agent and each Bank agree
that any Person purchasing a participation from a Bank pursuant to Section
10.7(b) shall, to the fullest extent permitted by Law and if provided in
the participation agreement between the Bank and the participant, have all of
the obligations of a Bank pursuant to the terms of this Section 10.5.  Without limiting any Bank’s right of set-off
or counterclaim or otherwise, the Agent shall have the right to charge any
account of any Borrower 

 

48

 

maintained with Agent for the
amount of any payment due under any Loan Document or under the Notes.

 

SECTION 10.6       Amendments
and Waivers.  All modifications,
consents, amendments, waivers and the like of any provision of any Loan
Document, or consent to any departure by any Borrower therefrom (collectively,
the foregoing are referred to in this Section 10.6 as a “modification”),
shall be effective only if the same is in a writing in form, scope and
substance, and subject to conditions and requirements, if any, acceptable to
the Agent and the Required Banks, and if so acceptable, is signed by such
Borrower, the Agent and, at least, the Required Banks; provided that no
such modification shall, unless consented to in writing by all the Banks, (i)
modify the Commitment of any Bank or subject any Bank to any additional funding
obligation; (ii) reduce the principal amount or the stated rate of interest on
any Loan or reduce any fees hereunder (other than fees payable solely to the
Agent); (iii) extend the date fixed for any principal reduction pursuant to Section
2.8 or Section 2.9, the payment of any interest on any Loan, the
payment of any Reimbursement Obligation or the payment of any fees hereunder
(other than fees payable solely to the Agent), the maturity date of any of the
Obligations, the Revolving Commitment Termination Date or the Term Commitment
Termination Date; (iv) release or impair the Lien in any Property in favor of
the Banks; (v) release any Guarantor of the Obligations; (vi) change the
percentage of the Commitments or the aggregate unpaid principal amount of the
Notes, or the number of Banks which shall be required for the Banks or any of
them to take any action under this Section 10.6 or any other provision
of the Loan Documents, (vii) affect this Section 10.6 or Section 10.3
or Section 10.4 or modify the definition of “Required Banks”; or (viii)
modify the financial covenant set forth in Section 6.1(j); provided,
further, that, no modification or waiver which modifies the rights, duties
or obligations of the Agent shall be effective without the prior written
consent of the Agent.

 

SECTION 10.7       Successors
and Assigns; Participations; Assignments.

 

(a)           The Loan Documents shall be binding
upon, and inure to the benefit of the parties thereto and their respective
successors and assigns, except that (i) neither any Borrower nor Parent Company
may assign or transfer any of its rights or obligations under any Loan Document
without the prior written consent of the Agent and all the Banks; and (ii)
unless otherwise permitted under this Section 10.7, no Bank may
transfer, pledge, assign, sell participations in or otherwise convey or
encumber its Commitments or Loans. 
Neither Borrower shall directly or indirectly purchase or otherwise
retire any Obligations owed to any Bank nor will any Bank accept any offer to
do so, unless each Bank shall have received substantially the same offer with
respect to the same pro rata share of the Obligations owed to it.  If any Borrower, directly or indirectly, at
any time purchases some but less than all of the Obligations owed to the Agent
and the Banks, then notwithstanding any provision herein to the contrary such
purchaser or purchasers shall not be entitled to any rights of the Agent or the
Banks under the Loan Documents (including voting rights or the right to
participate in or determine any modification (as that term is defined in Section
10.6)), unless and until such Borrower has purchased all of the
Obligations.

 

(b)           Neither this Agreement nor any other
Loan Document, nor any benefits hereunder or thereunder, shall inure to or for
the benefit of any Person that is not a signatory party hereto, other than any
of such Persons that are expressly named or designated as indemnitees,
releasees

 

49

 

or exculpatees herein.  All conditions to make Revolving Loans or Term
Loans hereunder, and all covenants, warranties, representations, and other
terms and provisions of, and applicable to, each Borrower in each Loan Document
are imposed solely and exclusively for the benefit of the Agent and each Bank,
and their respective successors and assigns. 
No other Person shall have standing to require satisfaction of such
conditions in accordance with their terms or be entitled to assume that no
Revolving Loans or Term Loans will be made in the absence of strict compliance
with any or all of such conditions; and no other Person shall, under any
circumstances, be deemed to be a beneficiary of such conditions, covenants,
warranties, representations and other terms and provisions.  Any of such conditions, and the breach of,
or noncompliance with, any such covenants, warranties, representations and
other terms and provisions may be freely waived in whole or in part by the
Agent and the Banks (subject to applicable provisions hereof) at any time if in
its or their (as applicable) sole discretion it or they (as applicable) deem it
advisable to do so.  No such conditions,
covenants, warranties, representations or other terms or provisions are
intended to release, or authorize or permit a breach by, any Borrower of any of
its obligations and requirements to any third Person, or any noncompliance
therewith, or to evidence the contractual interference therewith by the Agent
and the Banks.

 

(c)           Subject to the provisions of this Section
10.7, any Bank may, in the ordinary course of its business, with the
consent of each Borrower and in accordance with applicable Law, at any time
sell to one or more Qualified Banks (each a “Participant”) a
participating interests in all or any part of any Loans, or in the Commitments,
of such Bank.  In the event of any such
sale by a Bank to a Participant, (i) such Bank shall remain a “Bank” for
all purposes under this Agreement, and the Participant shall not constitute a “Bank”
hereunder; (ii) such Bank’s obligations under this Agreement shall remain
unchanged; (iii) such Bank shall remain solely responsible for the performance
of its obligations under this Agreement; (iv) such Bank shall remain the holder
of any such Note and the obligor to fund its respective Commitments for all
purposes under this Agreement; and (v) each Borrower, the Agent and the other
Banks shall continue to deal solely and directly with such Bank in connection
with such Bank’s rights and obligations under this Agreement and the other Loan
Documents.  Participants shall have no
rights under this Agreement or any of the Loan Documents, other than rights of
set-off (and attendant obligations) expressly set forth herein.  No Bank shall sell any participating
interest under which the Participant shall have, and no Participant shall have,
any rights to vote on any modification (as such term is defined in Section
10.6) of this Agreement or any other Loan Document, and any agreement
between any Bank and any Participant granting any Participant any voting rights
shall be void ab initio.  Except in the case
of the sale of a participating interest to a Bank, the relevant participation
agreement shall not permit the Participant to transfer, pledge, assign, sell
participations in, or encumber its portion of, the Commitments or the Loans.

 

(d)           Subject to the provisions of this Section
10.7, with the prior consent of each Borrower, and in accordance with
applicable Law, any Bank may, in the ordinary course of its business, assign to
one or more Qualified Banks (each a “Purchaser”) a proportional part
(not less than $5 million of each of the Bank’s Commitments, unless such Bank
is reducing its Commitments to zero) of its rights and obligations under the
Loan Documents, and such Purchaser shall assume all such rights and
obligations, pursuant to an assignment and assumption agreement and other
necessary and related documents, all in form, scope and substance satisfactory
to the Agent, executed by such Purchaser, such transferor Bank and the Agent;
and (ii) pay to the Agent, for its account, a non-refundable processing fee in
the amount of $2,000.

 

50

 

Upon the effectiveness of such
assignment and assumption agreement, such Purchaser shall for all purposes be a
Bank party to this Agreement and shall have all the rights and obligations of a
Bank under this Agreement to the same extent as if it were an original party
hereto with Commitments as set forth in the assignment agreement, and the
transferor Bank shall be released from its obligations hereunder to a
corresponding extent, and no further consent or action by any Borrower, the
Banks or the Agent shall be required. 
Upon the consummation of any transfer to a Purchaser pursuant to this Section
10.7(d), the transferor Bank, the Agent and each Borrower shall make appropriate
arrangements so that, if required, new Notes are issued to such Purchaser.  Any sale pursuant to this Section 10.7(d)
shall be of an equal pro rata portion of each of the transferor Bank’s
Commitments and Loans.  A Purchaser
shall be subject to all the provisions of this Section 10.7 the same as
if it were a Bank signatory hereto as of the Closing Date.

 

(e)           Each Borrower authorizes each Bank to
disclose any and all financial information in such Bank’s possession concerning
such Borrower which has been delivered to such Bank by or on behalf of them
pursuant to this Agreement or which has been delivered to such Bank by them in
connection with such Bank’s credit evaluation prior to entering into this
Agreement (i) to any Participant or Purchaser (each a “Transferee”); and
(ii) with the prior consent of each Borrower, to any prospective Transferee.

 

(f)            No Transferee (including for this
purpose a different Lending Office of a Bank) shall be entitled to receive any
greater payment under this Agreement than the transferor Bank would have been
entitled to receive with respect to the rights assigned, unless such assignment
is made with the prior written consent of each Borrower or by reason of the
provisions referred to in Section 9.5 regarding the designation of a
different Lending Office under certain circumstances.

 

(g)           Notwithstanding any other provisions
of this Section 10.7, no transfer or assignment of the interests or
obligations of any Bank hereunder or any grant of participations therein shall
be permitted if such transfer, assignment or grant would require any Borrower
to file a registration statement with the Securities and Exchange Commission or
to qualify the Loans under the “Blue Sky” laws of any state.

 

(h)           Each Bank initially party to this
Agreement hereby represents, and each person that becomes a Bank pursuant to an
assignment permitted by Section 10.7(d) will, upon its becoming party to
this Agreement, represent that it is a Qualified Bank, and that it will make or
acquire Loans only for its own account in the ordinary course of its business; provided,
however, that subject to the preceding provisions of this Section 10.7,
the disposition of any promissory notes or other evidences of or interests in
Obligations held by it shall at all times be within its exclusive control.

 

SECTION 10.8       Maximum
Interest Rate.  It is the intent of
the parties hereto that each of the Agent and the Banks (collectively, the “Financing
Parties”), and each Borrower in the execution, delivery and performance of
all Loan Documents, the transactions provided for therein and contemplated
thereby, and all matters incidental and related thereto and arising therefrom,
shall comply and conform strictly with Applicable Law from time to time in
effect, including without limitation, Usury Laws.  In furtherance thereof, the Financing Parties and each Borrower
stipulate and agree that none of the terms and provisions contained in, or
pertaining to,

 

51

 

the Loan Documents shall ever
be construed to create a contract to pay for the use or forbearance or
detention of money with interest at a rate or in an amount in excess of the
Maximum Rate or maximum amount of interest permitted or allowed to be
contracted for, charged, received, taken or reserved under said Laws.  For purposes of each Loan Document, (i)
“interest” shall include the aggregate of all amounts which constitute or are
deemed to constitute interest under the Laws of the State of Texas or, to the
extent they may apply, the federal Laws of the United States of America, that
are contracted for, chargeable, receivable (whether received or deemed to have
been received), taken or reserved under each such document; and (ii) all
computations of the maximum amount of interest permitted or allowed under
Applicable Law will be made on the basis of the actual number of days elapsed
over a 365 or 366 day year, whichever is applicable.  Neither any Borrower nor any other person shall ever be required to
pay unearned interest on the Notes or any other Obligations or with respect to
any of the Loan Documents and shall never be required to pay interest on the
Notes or any other Obligations or with respect to any of the Loan Documents at
a rate or in an amount in excess of the Maximum Rate or maximum amount of
interest that may be lawfully contracted for, charged, received, taken or
reserved under Applicable Law, and the provisions of this paragraph shall control
over all other provisions of the Loan Documents.  If the effective rate or amount of interest
which would otherwise be payable under the Loan Documents would exceed the
Maximum Rate or maximum amount of interest any Financing Party or any other
holder of any Note or other Obligations is allowed by Applicable Law to charge,
contract for, take, reserve or receive, or in the event any Financing Party or
any holder of any Note or other Obligations shall charge, contract for, take,
reserve or receive moneys that are deemed to constitute interest which would,
in the absence of this provision, increase the effective rate or amount of
interest payable under the Loan Documents to a rate or amount in excess of that
permitted or allowed to be charged, contracted for, taken, reserved or received
under Applicable Law then in effect, then the principal amount of such Note or
other Obligations or the amount of interest which would otherwise be payable
thereunder shall be payable at, or reduced to, as applicable, the maximum
amount allowed pursuant to the then applicable weekly ceiling referred to
hereinabove at the definition of the term Applicable Law, or if no such ceiling
is then in effect, as authorized and allowed under said Laws as now or
hereafter construed by the courts having jurisdiction, and all such moneys so
charged, contracted, for, received, taken or reserved that are deemed to
constitute interest in excess of the Maximum Rate or maximum amount of interest
permitted by Applicable Law shall be immediately returned or credited to the
account of such Borrower upon such determination.  In determining the amount or rate of interest under Applicable
Law, all sums paid, or agreed to be paid, by any Borrower to any Financing
Party or any holder of any Note or other Obligations for the use, forbearance,
detention, taking, charging, receiving or reserving of the Loans shall, to the
maximum extent permitted by Applicable Law, be amortized, prorated, allocated
and spread throughout the full term of the Loans until payment in full so that
the rate or amount of interest on account of such Loans does not exceed the
Maximum Rate applicable to such Loans for so long as such Loans are
outstanding.

 

SECTION 10.9       Governing
Law; Submission to Jurisdiction. 
THIS AGREEMENT, EACH NOTE AND EACH OTHER LOAN DOCUMENT (INCLUDING ITS
AND THEIR VALIDITY, ENFORCEABILITY AND INTERPRETATION) SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF TEXAS (WITHOUT
REGARD TO ANY CONFLICTS OF LAW PRINCIPLES) AND TO THE EXTENT CONTROLLING, THE
FEDERAL LAWS OF THE USA; PROVIDED THAT (1)

 

52

 

THE PROVISIONS OF CHAPTER 346
OF THE TEXAS FINANCE CODE (WHICH REGULATES CERTAIN REVOLVING LOAN ACCOUNTS AND
REVOLVING TRI-PARTY ACCOUNTS) ARE EXPRESSLY DECLARED BY THE PARTIES NOT TO BE
APPLICABLE TO ANY LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED BY ANY OF
THEM, AND (II) THE LAWS OF THE STATE OF TEXAS AND/OR THE UNITED STATES OF
AMERICA SHALL NOT LIMIT THE AMOUNT OR RATE OF INTEREST WHICH THE HOLDER OF ANY
NOTE MAY CONTRACT FOR, CHARGE, RECEIVE, COLLECT, TAKE, RESERVE AND/OR APPLY IF
OTHER APPLICABLE LAWS PERMIT AT ANY TIME A HIGHER AMOUNT OR THE PARTIES
EXPRESSLY ACKNOWLEDGE THAT (y) THEY INTEND THAT THIS AGREEMENT AND EACH OTHER
LOAN DOCUMENT SHALL BE GOVERNED BY THE PROVISIONS (INCLUDING, WITHOUT
LIMITATION, THE RIGHT OF THE PARTIES TO SELECT THE GOVERNING LAW) OF THE
UNIFORM COMMERCIAL CODE AND NOT BY COMMON LAW; AND (z) THE STATE OF TEXAS BEARS
A REASONABLE RELATIONSHIP TO THIS TRANSACTION AND NO OTHER STATE HAS A
MATERIALLY GREATER INTEREST IN THIS TRANSACTION THAN THE STATE OF TEXAS.  EACH BORROWER HEREBY SUBMITS TO THE
NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE WESTERN
DISTRICT OF TEXAS (SAN ANTONIO DIVISION) AND OF ANY TEXAS STATE COURT SITTING IN
BEXAR COUNTY, TEXAS FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR
RELATING TO THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY.

 

SECTION 10.10     Counterparts; Effectiveness.  This Agreement may be signed in any number
of counterparts, and by each of the parties hereto on separate counterparts,
all of which taken together shall constitute one and the same instrument.  This Agreement shall become effective when
the Agent shall have received counterparts hereof signed by all of the parties
hereto.

 

SECTION 10.11     Independence of Covenants.  Each covenant and agreement of each Borrower
under each Loan Document shall be given independent effect so that if a
particular action or condition is prohibited or required by any covenant, the
fact that it would be permitted by an exception to, or be otherwise within the
limitations of, another covenant shall not avoid the occurrence of a Default or
Event of Default if such action is taken or condition exists.

 

SECTION 10.12     Survival.  The obligations of each Borrower under Sections 2.12, 9.3,
10.3, 10.4, 10.8, 10.18 and 10.20 shall
survive the termination of this Agreement, the payment of all other
Obligations, and the termination of the Commitments.  The representations and warranties set forth in this Agreement
and each of the other Loan Documents shall survive the execution, delivery and
performance of this Agreement and the other Loan Documents and shall continue
until one year after the later of (i) the repayment of the Obligations; and
(ii) the date on which the Banks’ obligations to make Loans shall have fully
and finally terminated; and any investigation at any time by or on behalf of
the Agent or any Bank shall not diminish any of their respective rights to rely
thereon.

 

SECTION 10.13     Severability.  In case any one or more of the provisions or
part of a provision contained in any Loan Document shall for any reason be held
to be invalid, illegal or unenforceable in any respect in any jurisdiction,
such invalidity, illegality or unenforceability

 

53

 

shall be deemed not to affect
any other jurisdiction or any other provision or part of a provision of any
Loan Document, but such Loan Document shall be reformed and construed in such
jurisdiction as if such provision or part of a provision held to be invalid or
illegal or unenforceable had never been contained herein and such provision or
part reformed so that it would be valid, legal and enforceable in such
jurisdiction to the maximum extent possible.

 

SECTION 10.14     Governmental Regulation.  Anything contained in any Loan Document to
the contrary notwithstanding, each Borrower acknowledges and agrees that
neither the Agent nor any Bank shall be obligated (i) to extend or fund any
credit or other financial accommodation to, or for the benefit of, any Borrower
in an amount; or (ii) to perform any other agreement or obligation to, or for
the benefit of, any Borrower in any regard, in contradiction or violation of
any limitation or prohibition provided by any applicable statute or regulation,
or any interpretation, ruling, decision, opinion or other pronouncement in
respect thereto (whether or not having the effect of law), which any of them
believes is applicable.

 

SECTION 10.15     No Control.  None of the covenants, terms or other
provisions of any Loan Document or any document executed in conjunction
therewith or related thereto shall, or shall be deemed to, give the Agent or
any Bank rights or powers to exercise control over, or participate in the
management of, the business, affairs, operations or management of any Borrower
or any of their respective Property, including any right or power to influence
or affect any of its treatment, transportation, storage or disposal of toxic
and/or hazardous waste, substances or constituents.  The relationship between each Borrower and the other parties
hereto created by this Agreement and each of the other Loan Documents is only
that of debtor-creditor (with or without security, as applicable), and the
Rights of such other parties hereunder and thereunder are limited to the rights
to receive payment of the Obligations and to exercise the Rights provided
herein and therein and in any other document executed in conjunction herewith
or therewith or related hereto or thereto.

 

SECTION 10.16     Renewals, Extensions, Rearrangements,
Termination, Etc.  With respect to
each and every (i) renewal, extension, increase and rearrangement, if any, of
the Obligations, or any part thereof; and (ii) amendment, modification,
supplement, restatement, waiver and consent, if any, of or to this Agreement or
any other Loan Document, all provisions of this Agreement and the other Loan
Documents shall apply with equal force and effect to each such event or
circumstance, except to the extent, if any, expressly set forth in connection
with each such event or circumstance; provided, however, the foregoing
is not intended in any regard to convey, acknowledge or otherwise evidence on
the part of the Agent or any Bank, expressly or by implication, any present
consent or agreement to any such event or circumstance occurring subsequent to
the date hereof, it being acknowledged and agreed that the entry by the parties
hereto to any such events or circumstances shall be evaluated as they occur and
subject to the other provisions of the Loan Documents, as same may be
applicable.  Except as expressly
provided therein, all Loan Documents shall remain in effect until full and
complete payment of all Obligations, termination of all commitments and
obligations of the Banks to make or extend any credit or financial
accommodation to, or for the benefit of, any Borrower, and receipt by the Agent
and the Banks, or any of the foregoing Persons, if so requested, of such
written assurances of each Borrower and any other designated Person or Persons
that no other claims, rights, defenses, liabilities or obligations exist in
respect hereto or against any of them or any other Indemnified Party.

 

54

 

SECTION 10.17     Conflicts.  In the event of any inconsistency or conflict between the terms
of this Agreement and the terms of any other Loan Document, the terms of this
Agreement shall control.

 

SECTION 10.18     Confidentiality.  Each Bank and the Agent agree to use
reasonable precautions to keep confidential, in accordance with customary
procedures for handling confidential information of this nature and in
accordance with safe and sound banking practices, any information supplied to
it by any Borrower pursuant to this Agreement, provided that nothing herein
shall limit the disclosure of any such information (i) to the extent required
by statute, rule, regulation or judicial process; (ii) to counsel for any Bank
or the Agent; (iii) to bank examiners, auditors or accountants of any Bank or
the Agent; (iv) to any other Bank or the Agent; (v) in connection with any
litigation to which any Bank or the Agent is a party, provided, further, that,
unless specifically prohibited by applicable Law or court order, each Bank and
the Agent shall, at least five Business Days prior to disclosure thereof,
notify such Borrower of any request for disclosure of any such non-public
information (A) by any governmental agency or representative thereof (other
than any such request in connection with an examination of such Bank’s
financial condition by such governmental agency); or (B) pursuant to legal
process; or (vi) to any Transferee (or any prospective Transferee, with the
consent of each Borrower) so long as such Transferee (or any such prospective
Transferee) enters into a confidentiality agreement with each Borrower and the
Banks in form, scope and substance satisfactory to the Banks and satisfactory
to each Borrower, provided further that nothing shall limit the disclosure of
any such information which (a) is already in the possession of the Agent or any
Bank, provided that such information is not known by the Agent or any Bank to
be subject to a confidentiality agreement or obligation of secrecy to any
Company or any other Person; (b) becomes generally available to the public
other than as a result of a disclosure by the Agent or any Bank; or (c) becomes
available to the Agent or any Bank on a non-confidential basis from a source
other than any Company, provided that such source is not known by the Agent or
any Bank to be bound by a confidentiality agreement with other obligation of
secrecy to any Company or any Person.

 

SECTION 10.19     Payments Set Aside.  To the extent that any Borrower makes a
payment or payments to the Agent or any Bank, or any of them (or their
Transferee), or the Agent or any Bank, or any of them (or their Transferee)
enforces any Lien or exercises its right of set-off, and such payment or
payments or the proceeds of such enforcement or set-off, or any part thereof,
are subsequently invalidated, declared to be fraudulent or preferential, set
aside and/or required to be repaid to a trustee, receiver or any other Person
under any Debtor Laws or equitable cause, then, to the extent of such recovery,
the obligation or part thereof originally intended to be satisfied, and all
rights and remedies therefor, shall be revived and shall continue in full force
and effect as if such payment had not been made or such enforcement or set-off
had not occurred.

 

SECTION 10.20     RELEASE; LIMITATION OF LIABILITY;
COMMENCEMENT OF ACTIONS.  EACH
BORROWER AND EACH GUARANTOR HEREBY RELEASES, REMISES, ACQUITS AND FOREVER
DISCHARGES THE AGENT, EACH BANK AND EACH OTHER INDEMNIFIED PARTY FROM ANY AND
ALL ACTIONS AND CAUSES OF ACTION, JUDGMENTS, EXECUTIONS, SUITS, DEBTS, CLAIMS,
DEMANDS, LIABILITIES, OBLIGATIONS, LOSSES, COSTS, DAMAGES AND EXPENSES OF ANY
AND EVERY CHARACTER, KNOWN OR UNKNOWN, DIRECT AND/OR INDIRECT,

 

55

 

ASSERTED OR UNASSERTED,
LIQUIDATED OR UNLIQUIDATED, ACCRUED OR UNACCRUED, MATURE OR NOT YET MATURE, AT
LAW OR IN EQUITY, OF WHATSOEVER KIND OR NATURE, WHETHER HERETOFORE OR HEREAFTER
ACCRUING, FOR OR BECAUSE OF ANY MATTER OR THINGS DONE, OMITTED OR SUFFERED TO
BE DONE BY ANY OF THE INDEMNIFIED PARTIES PRIOR TO AND INCLUDING THE DATE
HEREOF, AND IN ANY WAY DIRECTLY OR INDIRECTLY ARISING OUT OF OR IN ANY WAY
CONNECTED TO TRANSACTIONS ARISING OUT OF THE LOAN DOCUMENTS, INCLUDING BUT NOT
LIMITED TO CLAIMS OF USURY, ANY CLAIM FOR BREACH OF CONTRACT ARISING OUT OF OR
RELATED TO THE TRANSACTIONS CONTEMPLATED BY ANY LOAN DOCUMENT, OR ANY ACT,
OMISSION, OR EVENT OCCURRING IN CONNECTION THEREWITH (WHETHER ANY OF SUCH IS A
CLAIM BASED ON CONTRACT, TORT, DUTY IMPOSED BY LAW OR OTHERWISE), AND
SPECIFICALLY
INCLUDING THE NEGLIGENCE OR ALLEGED NEGLIGENCE (WHETHER SOLE, COMPARATIVE,
CONTRIBUTORY OR OTHERWISE) OF ANY OF THE INDEMNIFIED PARTIES
(ALTHOUGH NO SUCH CLAIMS ARE KNOWN TO EXIST) (ALL OF THE FOREGOING HEREINAFTER
CALLED THE “RELEASED MATTERS”). 
EACH BORROWER AND GUARANTOR ACKNOWLEDGE THAT THE AGREEMENTS IN THIS SECTION
10.20 ARE INTENDED TO COVER ANY INJURIES OR DAMAGES ARISING IN CONNECTION
WITH THE RELEASED MATTERS.  WITHOUT
LIMITING THE FOREGOING AND TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW, NO
CLAIM MAY BE MADE BY OR ON BEHALF OF ANY BORROWER OR ANY OTHER PERSON AGAINST
THE AGENT OR ANY BANK OR ANY OTHER INDEMNIFIED PARTY FOR ANY SPECIAL, INDIRECT,
CONSEQUENTIAL OR PUNITIVE DAMAGES IN RESPECT OF THE RELEASED MATTERS, AND EACH
BORROWER HEREBY WAIVES, RELEASES, AND AGREES NOT TO SUE, OR COMMENCE OR
AUTHORIZE THE COMMENCEMENT OF ANY LITIGATION, UPON ANY OF THE RELEASED
MATTERS.  WITHOUT LIMITING THE
FOREGOING, ANY CLAIM MADE BY OR ON BEHALF OF ANY BORROWER OR ANY OTHER PERSON
AGAINST THE AGENT OR ANY BANK OR ANY OTHER INDEMNIFIED PARTY SHALL BE BARRED
UNLESS IT IS ASSERTED BY THE COMMENCEMENT OF AN ACTION OR PROCEEDING IN A COURT
AS PRESCRIBED IN SECTION 10.9 BY THE FILING OF A COMPLAINT THEREIN
WITHIN ONE (1) YEAR AFTER THE FIRST ACT, OCCURRENCE OR OMISSION UPON WHICH SUCH
CLAIM OR CAUSE OF ACTION, OR ANY PART THEREOF, IS BASED (I) IS DISCOVERED OR
(II) IN THE EXERCISE OF REASONABLE DILIGENCE, SHOULD HAVE BEEN DISCOVERED; AND
EACH BORROWER AGREES THAT SUCH PERIOD OF TIME IS A REASONABLE AND SUFFICIENT
TIME FOR IT TO INVESTIGATE AND ACT UPON ANY SUCH CLAIM OR CAUSE OF ACTION.  THE PROVISIONS OF THIS SECTION 10.20
SHALL SURVIVE ANY TERMINATION, HOWSOEVER OCCURRING, OF THIS AGREEMENT AND EACH
LOAN DOCUMENT AND THE FULL AND FINAL PAYMENT OF THE NOTES AND THE OTHER
OBLIGATIONS.

 

SECTION 10.21     Reaffirmation of Stock Pledge Agreement.  Parent Company hereby reaffirms its
obligations under that certain Stock Pledge Agreement, dated June 30, 2000,
between the Parent Company and Agent, as amended from time to time (the “Stock
Pledge Agreement”) and agrees that neither this Agreement nor the
transactions described herein shall in

 

56

any way affect its obligations under the
Stock Pledge Agreement and that the Stock Pledge Agreement continues in full
force and effect securing the Obligations.

 

SECTION 10.22     Reaffirmation of Deed of Trust.  Operating Subsidiary hereby reaffirms its
obligations under that certain Deed of Trust, Assignment, Security Agreement
and Financing Statement, as amended, extended or renewed from time to time (the
“Deed of Trust”), dated June 30, 2000 and recorded in Volume 8634, Page
641 of the Real Property Records of Bexar County, Texas, and agrees that
neither this Agreement nor the transactions described herein shall in any way
affect its obligations under the Deed of Trust and that the Deed of Trust
continues in full force and effect securing the Obligations.

 

SECTION 10.23       Amendment and Restatement.  This Agreement is given in amendment and
restatement (but not in novation, extinguishment or satisfaction) of the
Original Agreement and the Restated Agreement. 
All liens and security interests securing payment of the obligations
under the Original Agreement and the Restated Agreement are hereby collectively
ratified and brought forward as security for the payment and performance of the
Obligations.

 

SECTION 10.24     Review.  Each Borrower and Parent Company acknowledges and represents to
the Agent and each Bank that Borrower has reviewed this Agreement and each
other Loan Document, has had the benefit of legal counsel of its own choice
throughout its review and negotiation of this Agreement and each other Loan
Document, has been afforded an opportunity to review and negotiate this
Agreement and each other Loan Document with the advice of its legal counsel,
and is fully informed and knowledgeable of the terms, provisions, rights and
effects of this Agreement and each other Loan Document.  In furtherance of the foregoing, but not in
limitation thereof, each Borrower and Parent Company acknowledge and agree that
each Loan Document should be and shall be construed as if jointly drafted by
the parties hereto.

 

SECTION 10.25     This Agreement.  THIS WRITTEN LOAN AGREEMENT AND ALL OTHER
LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES WITH RESPECT TO
THE SUBJECT MATTER COVERED HEREBY AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS
BETWEEN OR AMONG THE PARTIES.

 

IN WITNESS WHEREOF, the parties hereto have
caused this Agreement to be duly executed by their respective authorized
signatories as of the day and year first above written.

 

[Signatures
on the following page]

 

57

 

	
   

  	
  OPERATING
  SUBSIDIARY:

  
	
   

  	
   

  
	
   

  	
  LANCER PARTNERSHIP, LTD.,

  
	
   

  	
  limited partnership

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Lancer Capital Corporation, a Delaware

  
	
   

  	
   

  	
  corporation, general partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Scott Adams

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Scott Adams

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Secretary

  	
   

  
							

 

	
   

  	
  Mexico
  Subsidiary:

  
	
   

  	
   

  
	
   

  	
  LANCER DE MEXICO, S.A. de C.V., a sociedad

  
	
   

  	
  anónima de capital variable organized under
  the

  
	
   

  	
  laws of the United Mexican States

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Scott Adams

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Scott Adams

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Secretary

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PARENT
  COMPANY:

  
	
   

  	
   

  
	
   

  	
  LANCER CORPORATION, a Texas corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Scott Adams

  	
   

  	 

	
   

  	
   

  	
  Name:

  	
  Scott Adams

  	
   

  	 

	
   

  	
   

  	
  Title:

  	
  Secretary

  	
   

  	 

													

 

58

 

	
   

  	
  GUARANTORS:

  	 

	
   

  	
   

  	 

	
   

  	
  SERVICIOS LANCERMEX, S.A. de C.V., a sociedad
  anónima de capital variable organized under the laws of the United
  Mexican States, solely as guarantor of the indebtedness of Lancer de Mexico,
  S.A. de C.V.

  	 

	
   

  	
   

  	 

	
   

  	
  By:

  	
  /s/ Scott
  Adams

  	
   

  
	
   

  	
  Name:

  	
  Scott Adams

  	
   

  	 

	
   

  	
  Title:

  	
  Secretary

  	
   

  	 

	
   

  	
   

  	 

	
   

  	
   

  	 

	
   

  	
  INDUSTRIAS LANCERMEX, S.A. de C.V., a sociedad
  anónima de capital variable organized under the laws of the United
  Mexican States, solely as guarantor of the indebtedness of Lancer de Mexico,
  S.A. de C.V.

  	 

	
   

  	
   

  	 

	
   

  	
  By:

  	
  /s/ Scott Adams

  	
   

  	 

	
   

  	
  Name:

  	
  Scott Adams

  	
   

  	 

	
   

  	
  Title:

  	
  Secretary

  	
   

  	 

	
   

  	
   

  	 

	
   

  	
   

  	 

	
   

  	
  LANCER INTERNATIONAL SALES, INC., a

  Texas corporation

  	 

	
   

  	
   

  	 

	
   

  	
   

  	 

	
   

  	
  By:

  	
  /s/ Scott
  Adams

  	
   

  	 

	
   

  	
  Name:

  	
   Scott Adams

  	
   

  	 

	
   

  	
  Title:

  	
  Secretary

  	
   

  	 

	
   

  	
   

  	 

	
   

  	
   

  	 

	
   

  	
  LANCER CAPITAL CORPORATION, a 

  Delaware corporation

  	 

	
   

  	
   

  	 

	
   

  	
   

  	 

	
   

  	
  By:

  	
  /s/ Scott
  Adams

  	
   

  	 

	
   

  	
  Name:

  	
  Scott Adams

  	
   

  	 

	
   

  	
  Title:

  	
  Secretary

  	
   

  	 

																		

 

59

 

	
   

  	
  ADVANCED BEVERAGE SOLUTIONS, LLC, a Illinois
  limited liability company

  	 

	
   

  	
   

  	 

	
   

  	
   

  	 

	
   

  	
  By:

  	
  /s/ Scott Adams

  	
   

  
	
   

  	
  Name:

  	
  Scott Adams

  	
   

  	 

	
   

  	
  Title:

  	
  Secretary

  	
   

  	 

	
   

  	
   

  	 

	
   

  	
   

  	 

	
   

  	
  AGENT/BANKS:

  	 

	
   

  	
   

  	 

	
   

  	
  THE FROST NATIONAL BANK, a national banking
  association, Individually and as the Agent

  	 

	
   

  	
   

  	 

	
   

  	
   

  	 

	
   

  	
  By:

  	
  /s/ Phil Dudley

  	
   

  	 

	
   

  	
  Name:

  	
  Phil Dudley

  	
   

  	 

	
   

  	
  Title:

  	
  Senior Vice President

  	
   

  	 

	
   

  	
   

  	 

	
   

  	
   

  	 

	
   

  	
  WHITNEY NATIONAL BANK, a national

  	 

	
   

  	
  banking association

  	 

	
   

  	
   

  	 

	
   

  	
   

  	 

	
   

  	
  By:

  	
  /s/ Robert L. Browning

  	
   

  	 

	
   

  	
  Name:

  	
  Robert L. Browning

  	
   

  	 

	
   

  	
  Title:

  	
  Senior Vice President

  	
   

  	 

	
   

  	
   

  	 

	
   

  	
   

  	 

	
   

  	
  HARRIS TRUST AND SAVINGS BANK, an

  	 

	
   

  	
  Illinois banking corporation

  	 

	
   

  	
   

  	 

	
   

  	
   

  	 

	
   

  	
  By:

  	
  /s/ Richard A. Garcia

  	
   

  	 

	
   

  	
  Name:

  	
  Richard A. Garcia

  	
   

  	 

	
   

  	
  Title:

  	
  Vice President

  	
   

  	 

																

 

60

 

ANNEX A

 

THE FROST NATIONAL
BANK

 

1.                                       Domestic
Lending Office:

 

The Frost National Bank

100 West Houston Street

San Antonio, Texas  78205

 

2.                                       LIBOR
Lending Office for current LIBOR Loans:

 

The Frost National Bank

100 West Houston Street

San Antonio, Texas  78205

 

	
  3.

  	
   

  	
  Term A Commitment:

  	
  $

  	
  4,130,875.00

  
	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  Term B Commitment:

  	
  $

  	
  387,500.00

  
	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
   

  	
  Revolving Commitment:

  	
  $

  	
  5,000,000.00

  
	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
   

  	
  Total Commitment:

  	
  $

  	
  9,518,375.00

  

 

7.                                       Information
for Notices:

 

The Frost National Bank

100 West Houston Street

San Antonio, Texas  78205

Attention:  Phil Dudley

Phone:  (210) 220-5320

Fax:  (210) 220-5774

 

A-1

 

ANNEX
A

 

WHITNEY NATIONAL BANK,
a national banking association

 

1.                                       Domestic
Lending Office:

 

Whitney National Bank

228 St. Charles Avenue

New Orleans, Louisiana 70130

 

2.                                       LIBOR
Lending Office for current LIBOR Loans:

 

Whitney National Bank

228 St. Charles Avenue

New Orleans, Louisiana 70130

 

	
  3.

  	
   

  	
  Term A Commitment:

  	
  $

  	
  1,379,712.25

  
	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  Term B Commitment:

  	
  $

  	
  129,425.00

  
	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
   

  	
  Revolving Commitment:

  	
  $

  	
  1,670,000.00

  
	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
   

  	
  Total Commitment:

  	
  $

  	
  3,179,137.25

  

 

7.                                       Information
for Notices:

 

Whitney National Bank

228 St. Charles Avenue

New Orleans, Louisiana 70130

Attention:  Robert L. Browning,
Senior Vice President

Phone:  (504) 586-7163

Fax:  (504) 552-4622

 

A-2

 

ANNEX
A

 

HARRIS TRUST AND
SAVINGS BANK, an Illinois banking corporation

 

1.                                       Domestic
Lending Office:

 

Harris Trust and Savings Bank

111 West Monroe Street 5

East Chicago, Illinois 60603

 

2.                                       LIBOR
Lending Office for current LIBOR Loans:

 

Harris Trust and Savings Bank

111 West Monroe Street 5

East Chicago, Illinois 60603

 

	
  3.

  	
   

  	
  Term A Commitment:

  	
   

  	
  $

  	
  2,751,162.75

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  Term B Commitment:

  	
   

  	
  $

  	
  258,075.00

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
   

  	
  Revolving Commitment:

  	
   

  	
  $

  	
  3,330,000.00

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
   

  	
  Total Commitment:

  	
   

  	
  $

  	
  6,339,237.75

  

 

7.                                       Information
for Notices:

Harris Trust and Savings Bank

c/o Bank of Montreal

700 Louisiana, Suite 4400

Houston, Texas  77002

Attention:  Thomas McGraw &
Richard Garcia

Phone:  (713) 546-9597

Fax:  (713) 223-0477

 

A-3

 

ANNEX
A

 

Address for Operating Subsidiary:

 

Lancer Partnership, Ltd.

6655 Lancer Boulevard

San Antonio, Texas 78219

Attention:  Chief Financial
Officer

Phone: (210) 310-7000

Fax:  (210) 310-7091

 

Address for Mexico Subsidiary:

 

Lancer de Mexico, S.A. de C.V.

c/o Lancer Corporation

6655 Lancer Boulevard

San Antonio, Texas 78219

Attention:  Chief Financial
Officer

Phone: (210) 310-7000

Fax:  (210) 310-7091

 

Address for Parent Company:

 

Lancer Corporation

6655 Lancer Boulevard

San Antonio, Texas 78219

Attention:  Chief Financial
Officer

Phone: (210) 310-7000

Fax:  (210) 310-7091

 

Address for Lancer Capital, Lancer International, ABS, Servicios
Lancermex, Industrias Lancermex

 

6655 Lancer Boulevard

San Antonio, Texas 78219

Attention:  Chief Financial
Officer

Phone: (210) 310-7000

Fax:  (210) 310-7091

 

A-4

 

ANNEX B

 

CERTAIN
DEFINITIONS

 

As used herein, the following terms shall
have the respective meanings assigned to them as follows:

 

“Acquisition” means, as to any Person,
the following: (i) the purchase or acquisition by such Person of all of (A) the
capital stock of a corporation, (B) the membership interests of a limited
liability company or (C) the partnership interests of a general or limited
partnership, provided that each such transaction results in such Person
possessing the power to control the management and policies of such
corporation; or (ii) the purchase or acquisition by any such Person of the
assets of a going concern business (as defined in accordance with GAAP).

 

“Acquisition Documents” means all
agreements, documents, instruments, employee-related agreements and plans,
deeds, bills of sale, assignments, assumptions, financial statements and
information, projections and other acquisition-related documents received or
delivered by any Person as part of the closing of such Acquisition.

 

“Acquisition Borrowing” means a
Borrowing for which the proceeds are any part of the consideration for the
Acquisition by Operating Subsidiary of an Acquisition Target.

 

 “Acquisition
Loan” has the meaning set forth in Section 2.1(c) of the Original
Credit Agreement.

 

 “Acquisition
Target” means the Person or business which is the subject of an Acquisition
by Operating Subsidiary.

 

“Adjusted London Interbank Offered Rate”
means, with respect to any Interest Period, a rate per annum equal to the
quotient obtained (rounded upwards, if necessary, to the next higher 1/16th of
1%) by dividing (i) the applicable London Interbank Offered Rate by (ii) 1.00
minus the LIBOR Reserve Percentage.  The
Adjusted London Interbank Offered Rate shall be adjusted automatically on and
as of the effective date of any change in the LIBOR Reserve Percentage.

 

“Affiliate” means any Person who,
directly or indirectly, controls, is controlled by or is under common control
with the relevant Person.  For the
purposes of this definition, “control” (including, with correlative meanings,
the terms “controlled by” and “under common control with”), as used with
respect to any Person, means a member of the board of directors, a partner or
an officer of such Person, or any other Person with possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of such Person, through the ownership (of record, as trustee or by
proxy) of Voting Shares, through a management contract, or otherwise.  Any Person owning or controlling directly or
indirectly 10% or more of the Voting Shares, or other equity interests of
another Person shall be deemed to be an Affiliate of such Person.

 

“Affected Bank” has the meaning set
forth in Section 9.2.

 

B-1

 

“Agent” has the meaning set forth in
the introductory paragraph of this Agreement and shall include, at all relevant
times, each successor appointed in the manner provided for in Article 8.

 

“Agent Indemnities” has the meaning
set forth in Section 8.2.

 

“Agreed Maximum Rate” means a per
annum rate of interest equal to 5% plus the Base Rate, which Agreed
Maximum Rate shall apply only during a period while there is no Maximum Rate
applicable to the transactions contemplated hereby.

 

“Agreement” means this Amended and
Restated Credit Agreement, as the same may be amended, modified or supplemented
from time to time, and references to “this Agreement”, “hereof”,
“hereto”, “herein”, “hereunder” and words of similar
import refer to this Agreement as a whole, and not to any particular article or
section.

 

“Applicable Law” means, with respect
to each of the Agent and the Banks the law in effect, from time to time,
applicable to this loan transaction and each Loan Document which lawfully
permits the contracting for, taking, reserving, receiving, charging and/or
collection of the maximum lawful, non-usurious rate of interest by such Person
on each Loan Document and the transactions evidenced thereby, and arising in
connection therewith (including, but without limitation, the Notes), including
laws of the State of Texas, to the extent controlling, the federal laws of the
United States of America, and laws of any jurisdiction whose laws may be
mandatorily applicable to such Person, notwithstanding other provisions of any
Loan Document or federal laws of the United States of America applicable to
such Person and the transaction contemplated hereby, which would permit such
Person to contract for, take, reserve, receive, charge or collect a greater
amount of interest then under such jurisdiction’s law.  To the extent that Applicable Law is
determined by reference to Article 1.04, Title 79, Revised Civil Statutes of
Texas, 1925, as amended, the interest ceiling applicable hereto and in
connection herewith shall be the “weekly ceiling as defined in said Article
1.04; provided, however, it is agreed that the terms hereof, including
the rate, or index, formula or provision of law used to compute the rate in
connection herewith, will be subject to the revisions as to current and future
balances, from time to time, pursuant to Applicable Law.  IT IS FURTHER AGREED THAT IN NO EVENT SHALL
CHAPTER 15 OF SUBTITLE 3, TITLE 79, REVISED CIVIL STATUTES OF TEXAS, 1925, AS
AMENDED, APPLY TO ANY LOAN DOCUMENT OR THE TRANSACTIONS EVIDENCED THEREBY, OR
ARISING IN CONNECTION THEREWITH.

 

“Applicable Margin” means, with respect to any Loan, 2.00
percent per annum.

 

“Australian Subsidiary” means Lancer
Pacific Pty. Ltd, an Australian corporation, formerly known as Glenn Pleass
Holdings Pty. Ltd.

 

“Authorized Officer” means (i) as to
Operating Subsidiary, the president, chief financial officer, assistant
treasurer or controller of the General Partner of Operating Subsidiary and (ii)
as to any other Company, the president, chief financial officer, assistant
treasurer or controller of such Company.

 

B-2

 

“Bank” has the meaning set forth in
the introductory paragraph of this Agreement.

 

“Base Rate” means, as determined by
the Agent on a daily basis, the higher of (i) the variable rate per annum
established by Frost from time to time as its corporate base rate for
short-term commercial loans to corporate borrowers (which each Borrower
acknowledges is not necessarily the lowest rate offered by Frost); and (ii) the
overnight cost of funds of Frost as determined solely by Frost plus a margin of
1/2% per annum.  Each change in the Base
Rate shall become effective, without prior notice to either Borrower,
automatically as of the opening of business on the date of such change in the
Base Rate.

 

“Base Rate Loan” means a Loan to be
made or continued as or converted into such a designated Loan pursuant to the
applicable Notice of Borrowing or Continuation/Conversion Notice, as the case
may be, which will bear interest at the Base Rate.

 

“Borrowing” means a borrowing, whether
under the Restated Agreement or this Agreement, pursuant to a Notice of
Borrowing, or a continuation or a conversion pursuant to Section 2.5 of
the Restated Agreement, consisting, in each case, of the same Type of Loan, and
having, in the case of LIBOR Loans, the same Interest Period.

 

“Brazilian Subsidiary” means Lancer do
Brasil.

 

“Business Day” means any day except a
Saturday, Sunday or other day on which commercial banks in San Antonio, Texas
are authorized or required by law to close.

 

“Capital Lease Obligations” means, as
to any Person, the obligations of such Person to pay rent or other amounts
under a lease of (or other agreement conveying the right to use) real and/or
personal property which obligations are required to be classified and accounted
for as a capital lease on a balance sheet of such Person under GAAP.

 

“Change in Control” means, (i) Alfred
A. Schroeder and George F. Schroeder, collectively shall cease to be the
“beneficial owners” (as that term is used in Rules 13d-3 and l3d-5 under the
Exchange Act) of at least 20% of the combined voting power of the then
outstanding voting securities of Parent Company normally entitled to vote in
elections of directors; (ii) any Person who, on the Closing Date, is not the
“beneficial owner” (as that term is used in Rules 13d-3 and 13d-5 under the
Exchange Act) of at least 5% of the combined voting power of the
then-outstanding voting securities of Parent Company normally entitled to vote
in elections of directors becomes the “beneficial owner” (as that term is used
in Rules l3d-3 and 13d-5 under the Exchange Act) of at least 35% of the
combined voting power of the then-outstanding voting securities of Parent
Company normally entitled to vote in elections of directors; or (iii) during
any period of 12 consecutive months, Continuing Directors of Parent Company
cease for any reason (other than death or disability) to constitute a majority
of the Board of Directors of Parent Company then in office.

 

“Class” has the meaning set forth in Section
1.2(f).

 

“Closing Date” means June 30, 2004.

 

B-3

 

“Code” means the Internal Revenue Code
of 1986, as heretofore and hereafter amended, or any successor statute.

 

“Commitment” means a Revolving
Commitment, and “Commitments” means two or more of the foregoing, as the
context may require.

 

“Companies” means Operating
Subsidiary, Mexico Subsidiary, Parent Company, and all of their respective present
and future direct and indirect Subsidiaries, and “Company” means any one
of them.

 

“Consolidated Borrowing Base” means an
amount equal to the sum of (i) 80% of the Consolidated Eligible Accounts
Receivable; plus (ii) 30% of the Eligible Inventory of the Companies determined
on a consolidated basis.

 

“Consolidated EBITDA” means, for any
period, the net income (plus or minus any extraordinary charges or credits) of
the Companies determined on a consolidated basis, plus (i) the aggregate
amount of all income tax expense of the Companies for such period; plus
(ii) interest expense for such period (including the interest expense with
respect to the Loans and the interest component of payments under Capital Lease
Obligations); plus (iii) the aggregate amount deducted in determining
consolidated net income of the Companies for such period for depreciation and
amortization of Property.

 

“Consolidated Eligible Accounts Receivable”
means the accounts receivable of the Companies determined on a consolidated
basis meeting all of the following criteria as of the date of any
determination: (a) the account receivable shall be due and payable not more
than 180 days from the date of the invoice or agreement evidencing the same;
(b) the account receivable shall be billed promptly after the shipment of the
goods or performance of the services giving rise to the account receivable and
shall not remain unpaid for more than 60 days after such account receivable is
due and payable; (c) the account receivable shall arise from the performance by
the obligee of the account receivable of services which have been fully and
satisfactorily performed, or from the absolute sale by the obligee of the
account receivable of goods (i) in which such obligee had sole and complete
ownership; and (ii) which have been shipped and delivered to the account
debtor, evidencing which such obligee has possession of shipping and delivery
receipts; (d) the account receivable is not subject to set-off, counterclaim,
defense, allowance or adjustment other than discounts for prompt payment shown
on the invoice, or to dispute, objection or complaint by the account debtor
concerning its liability on the account receivable, and the goods, the sale of
which gave rise to the account receivable, have not been refunded, rejected,
lost or damaged; (e) the account receivable shall arise in the ordinary course
of business of the obligee thereof, and no notice of bankruptcy or insolvency
of the account debtor, nor any notice of such account debtor’s inability to pay
its debts as they become due, has been received by the obligee of such account
receivable; (f) the account debtor is not a director, officer, employee or
Affiliate of any Company; and (g) the account debtor’s obligation to pay the
account receivable is not conditional upon such account debtor’s approval or
the account receivable is not subject to any repurchase obligation or return
right.  Notwithstanding the foregoing,
Consolidated Eligible Accounts Receivable shall not include (A) the accounts
receivable of any Mexico Company; or (B) the amount of all or any part of any
account receivable to the extent that the inclusion of all or such part of the
amount of such account

 

B-4

 

receivable
would cause the aggregate amount of all accounts receivable which are otherwise
eligible under this provision owed by any account debtor, other than The
Coca-Cola Company and any of its wholly owned Subsidiaries, or any other
significant customer of Borrower (an “Anchor Bottler”) whose status as an
Anchor Bottler has received the prior written approval of Banks (which Anchor
Bottlers initially include those customers listed on Exhibit P attached
hereto and made a part hereof and which exhibit shall be revised from time to
time), to the Companies determined on a consolidated basis to exceed 20% of the
amount equal to (x) the aggregate amount of all accounts receivable held by the
Companies that meet the criteria set out in items (a), (b), (c), (d), (e), (f)
and (g) above; less the accounts receivable held by the Companies that are to
be excluded by item (A) above.

 

“Contested Claim” means any Tax,
Indebtedness or other claim or liability, (i) the validity or amount of which
is being diligently contested in good faith by any Company by appropriate
proceedings being diligently prosecuted; (ii) for which adequate reserves, if
required by GAAP, have been established by such Company; and (iii) with respect
to which any right to execute upon or sell any Property or assets of any
Company has not matured or has been and continues to be effectively enjoined,
superseded or stayed.

 

“Continuation/Conversion Notice” means
the notice provided by a Borrower to Agent pursuant to the terms of the
Original Agreement or the Restated Agreement in connection with the
continuation/conversion of a Base Rate Loan or a LIBOR Loan.

 

“Continuing Directors” means any
member of the Board of Directors of Parent Company on the date of this
Agreement, any director elected since the date thereof in any annual meeting of
the shareholders upon the recommendation of the Board of Directors of Parent
Company; or any other member of the Board of Directors of Parent Company who
will be recommended or elected to succeed a Continuing Director by a majority
of Continuing Directors who are then members of the Board of Directors of
Parent Company.

 

“Credit Event” means the making of any
Loan.

 

“Current Material Adverse Event”
means, as of a particular time, any circumstance or event that has occurred
which, individually or in the aggregate with other circumstances or events, (i)
has had a material adverse effect upon the validity, performance, perfection or
enforceability of any Loan Documents; (ii) is material and adverse to the
financial condition, business, operations or prospects of the Companies, taken
as a whole, or the Property of the Companies, taken as a whole; (iii) has
impaired the ability of any Company to fulfill promptly and completely its
obligations under any of the Loan Documents to which is a party; (iv) has resulted
in or caused a Default or an Event of Default under this Agreement; or (v) has
had a material and adverse effect upon the business relationship between The
Coca-Cola Company and any Company. 
Borrowers, Parent Corporation and the Guarantors acknowledge and agree
that the term “Current Material Adverse Event” includes any circumstance or
event meeting any of the criteria set forth in clauses (i) through (v) above
even if such circumstance or event relates to or is connected with any matters
described in Annex D-1 and/or Annex D-2 hereto, it being specifically
understood and agreed that Borrowers, Parent Corporation and the Guarantors
will not assert that a circumstance or event meeting any of the criteria set
forth in clauses (i) through

 

B-5

 

(v) above is
not a “Current Material Adverse Event” because of any disclosure made in Annex
D-1 and/or Annex D-2 or otherwise.

 

“Debtor Law” means all applicable
liquidation, conservatorship, bankruptcy, moratorium, arrangement,
receivership, insolvency, reorganization or similar Laws, or general equitable
principles, from time to time in effect, affecting the Rights of creditors
generally or providing for relief to debtors.

 

“Default” means any of the events
specified in Section 7.1, regardless of whether there shall have
occurred any passage of time or giving of notice or both that would be
necessary in order to constitute such event an Event of Default.

 

“Default Rate” means, at the time in
question, the lesser of (i) the Base Rate, as in effect for each day during
such time, plus
4%; and (ii) the Maximum Rate.

 

“Dividends” means, in respect of any
corporation, limited liability company or similar Person, cash distributions or
any other distributions (whether in cash, Property or obligations) on, or in
respect of, any class of capital stock of such entity, except for distribution
made solely in shares of common stock.

 

“DOJ” means the United States
Department of Justice.

 

“Domestic Lending Office” means, with
respect to any Bank, the office of such Bank specified as its “Domestic Lending
Office” opposite its name on Annex A attached hereto and made a part
hereof or such other office of such Bank as such Bank may from time to time
specify to each Borrower and the Agent.

 

“EBIT” means, for any period, the net
income (plus or minus any extraordinary charges or credits) of any Company plus
(i) the aggregate amount of all income tax expense of such Company for such
period; plus (ii) the interest expense for such period (including the interest
expense for such period with respect to the Loans and the interest component of
payments under Capital Lease Obligations.)

 

“Eligible Inventory” means, with
respect to each Company, inventory of such Company meeting all of the following
criteria as of the date of determination: (i) the inventory is not owned by any
Mexico Company or located in Mexico; (ii) there are no Liens with respect to
the inventory except Permitted Liens other than described in clauses (iii) and
(iv) in the definition of “Permitted Liens” and such inventory is in the
possession of such Company or its bailee and is not evidenced by any negotiable
or nonnegotiable document of title; (iii) the inventory has not been refunded,
repossessed or damaged; (iv) the inventory consists solely of finished goods
relating to a “specific contract” with a third-party that, when delivered to
such third-party, will result in accounts receivable that meet the requirements
set forth in the definition of Consolidated Eligible Accounts Receivable; and
(v) the inventory is not held on consignment or subject to a buyer’s
rights.  For purposes of determining the
value of Eligible Inventory to be included in the Consolidated Borrowing Base,
the value thereof shall be equal to the actual net cost of the inventory to
such Company.  For purposes of this
definition, “specific contract” means a contract representing an irrevocable,
noncancellable order for goods to be delivered within 60 days.

 

B-6

 

“Environmental Complaint” means any
third-party (including private parties, governmental agencies, and employees)
action, lawsuit, claim, demand, event, condition, report, investigation or
proceeding which seeks to impose liability for (i) noise; (ii) pollution or
contamination of the surface water, groundwater, or land; (iii) generation,
handling, treatment, storage, disposal, air, or transportation of Hazardous
Materials; (iv) exposure to Hazardous Materials; or (v) non-compliance with any
Environmental Law.

 

“Environmental Law” shall mean any
federal, state, or local law, statute, ordinance, or regulation pertaining to
health, industrial hygiene, or the environmental conditions, including without
limitation, (i) the Resource Conservation and Recovery Act, as amended by the
Hazardous and Solid Waste Amendments of 1984, as now or hereafter amended (42
U.S.C. Section 6901 et seq.); (h) the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended by the Superfund
Amendments and Reauthorization Act of 1986, as now or hereafter amended (42
U.S.C. Section 9601 et seq.); (iii) the Clean Water Act, as now or
hereafter amended (33 U.S.C. Section 1251 et seq.); (iv) the Toxic
Substances Control Act, as now or hereafter amended (15 U.S.C. Section 2601 et
seq.); (v) the Clean Air Act, as now or hereafter amended (42 U.S.C.
Section 7401 et seq.), Texas Solid Waste Disposal Act (V.T.C.A. Health
and Safety Code Section 361.001 et seq.) and the Texas Water Code
(V.T.C.A. Water Code Sections 26.001-26.407); (vi) all regulations promulgated
under any of the foregoing; (vii) any local, state or foreign law, statute,
regulation or ordinance analogous to any of the foregoing; and (viii) any other
federal, state, local, or foreign law (including any common law), statute,
regulation, or ordinance, regulating, prohibiting, or otherwise restricting the
placement, discharge, release, threatened release, generation, treatment, or
disposal upon or into any environmental media of any substance, pollutant, or
waste which is now or hereafter classified or considered to be hazardous or
toxic to human health or the environment.

 

“Environmental Liability” means any
claim, demand, obligation, cause of action, accusation, allegation, order,
violation, damage, injury, judgment, penalty or fine, cost of enforcement, cost
of remedial action or any other cost or expense whatsoever, including
reasonable attorneys’ fees and disbursements, resulting from the violation or
alleged violation of any Environmental Law, the storage, handling,
transportation or release of Hazardous Materials, or the imposition of any
Environmental Lien.

 

“Environmental Lien” means a Lien in
favor of a Governmental Authority or other Person (i) for any liability under
an Environmental Law; or (ii) for damages arising from or costs incurred by
such Governmental Authority or other person in response to a release or
threatened release of hazardous or toxic waste, substance or constituent into
the environment.

 

“ERISA” means the Employee Retirement
Income Security Act of 1974, as amended, together with all presently effective
and future regulations issued pursuant thereto.

 

“Event of Default” has the meaning set
forth in Section 7.1.

 

“Exchange Act” shall mean the
Securities Exchange Act of 1934, as amended.

 

“Federal Funds Rate” means, for any period, a
fluctuating interest rate per annum equal for each day during such period to
the weighted average of the rates on overnight Federal fund

 

B-7

 

transactions
with members of the Federal Reserve System arranged by Federal funds brokers,
as published for such day (or, if such day is not a Business Day, on the next
preceding Business Day) by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day which is a Business Day, the average of
the quotations for such day on such transactions received by the Agent from
three Federal funds brokers of recognized standing selected by it.

 

“Financing Parties” has the meaning
set forth in Section 10.8.

 

“Fiscal Month”, “Fiscal Quarter”
and “Fiscal Year” refer to the fiscal month, fiscal quarter and fiscal
year, respectively, of Parent Company and each of its Subsidiaries.

 

“Frost” means The Frost National Bank,
a national banking association.

 

“FTC” means the Federal Trade
Commission.

 

“GAAP” means generally accepted
accounting principles set forth in the opinions and pronouncements of the
Accounting Principles Board and the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board, or in such other statements by such other entity as may be in
general use by significant segments of the accounting profession, which are
applicable to the circumstances as of the date of determination.

 

“General Partner” means Lancer Capital
Corporation, a Delaware corporation.

 

“Governmental Authority” means,
whether now or hereafter constituted and/or existing, (i) any government or
nation; (ii) any state, province, commonwealth, territory, possession, county,
parish, town, township, city or municipality; (iii) any other Person or entity
that exercises executive, legislative, judicial, regulatory or administrative
functions of, or pertaining to, government; (iv) any political or other
authority, district or subdivision of any of the Persons or entities referred
to in the preceding clauses (i), (ii) and (iii); (v) any court, tribunal,
panel, board, commission, department, agency, bureau, examiner or
instrumentality of the Persons or entities referred to in the preceding clauses
(i), (ii), (iii) and (iv); and (vi) any arbitrator, mediator or arbitration
and/or mediation panel, board or the like, whether impaneled pursuant to Laws,
by contract or otherwise.

 

“Guarantee” means, directly or
indirectly (without duplication): (i) guarantee or guaranty, as applicable, an
endorsement, an assumption, or an undertaking, an understanding or a contingent
agreement or other agreement (hereinafter in this definition, the foregoing
shall be collectively referred to as “any agreement” or “any other
agreement”, as the context may require) to purchase or acquire, or to
furnish funds or Property for the payment or maintenance of, or otherwise to be
or become liable (contingently, irrevocably, absolutely or otherwise) under or
with respect to, or to perform or cause to be performed, the Indebtedness (or
any Property constituting security therefor), other obligations and
liabilities, net worth, capital requirements, working capital, earnings,
financial condition or position, or financial covenants of any Person, or the
redemption or repurchase obligations of any Person’s capital stock, warrants or
stock or other equity, partnership or similar capital equivalents, or any class
or nature; (ii) a guarantee of, or any other agreement for, the payment of
dividends or other distributions upon the stock, equity, partnership or other
interests of any Person; (iii) any agreement to purchase, sell or lease

 

B-8

 

(as lessee or
lessor) Property, products, materials, supplies or services primarily for the
purpose of enabling a debtor to make payment of its obligations or
Indebtedness, or to provide assurances thereof to any creditor or other obligee
of a debtor; (iv) any agreement to assure a creditor or other obligee against
any loss, including but without limitation, causing a bank or other Person to
issue a letter of credit or other similar instrument for the benefit of another
Person; or (v) any agreement commonly known as or referred to as a “comfort” or
“keepwell” letter or agreement; provided however, in no event shall
“Guarantee” include endorsements for collection or deposit made in the ordinary
course of business.  The terms
“guarantee” and “guaranteed” used as a verb shall have a correlative meaning.

 

“Governing Documents” means (i) as to
any corporation, the articles of incorporation and bylaws of such corporation
(including any amendments or modifications); (ii) as to any limited liability
company, the articles of organization and regulations of such limited liability
company (including any amendments or modifications); (iii) as to any limited
partnership, the certificate of limited partnership and the limited partnership
agreement of such limited partnership (including any amendments or modifications);
and (iv) as to any general partnership, the partnership agreement of such
partnership (including any amendments or modifications).

 

“Hazardous Discharge” means the
happening of any event, status or circumstance involving the use, storage,
spill, transportation, removal, disposal, discharge or cleanup of any Hazardous
Material.

 

“Hazardous Material” means (i) any
hazardous substance defined in the Comprehensive Response, Compensation and
Liability Act 42 U.S.C. Section 9601 et seq.; (ii) any substance the
presence of which on any Property requires reporting or remediation under any
Environmental Law; (iii) gasoline, diesel fuel, fuel oil, motor oil and any
other petroleum hydrocarbons, including any additives or other byproducts
associated therewith; and (iv) asbestos and asbestos-containing materials in
any form.

 

“HSR Act” means the Hart-Scott Rodino
Antitrust Improvements Act of 1976, as amended and the rules and regulations
thereunder.

 

“Indebtedness” means, for any Person
(without duplication), any liability, indebtedness or obligation, contingent or
otherwise, of such Person:  (i) for
borrowed money (whether by loan or the issuance and sale of debt securities or
instruments or the sale of Property to another Person subject to an
understanding or agreement, contingent or otherwise, to repurchase such
Property from such Person); (ii) evidenced by bonds, notes, debentures or
similar instruments; (iii) representing the deferred purchase or acquisition
price of Property or services, including trade accounts payable; (iv) with
respect to amounts or obligations Guaranteed or Indebtedness of another secured
by a Lien on the Property of such Person, whether or not the respective
indebtedness or obligations so secured have been assumed by such Person; (v) with
respect to reimbursement of, or payment in respect to, letters of credit,
bankers’ acceptances, surety or other bonds or similar instruments issued or
credit transactions; (vi) for any Guarantee of such Person; (vii) under, or in
respect of, an interest rate swap, cap or collar agreement or similar
arrangement providing for the transfer or mitigation of interest or currency
risks generally or under specific contingencies; (viii) under leases serving as
a source of financing or otherwise capitalized in accordance with GAAP; (ix)
under sales or other title retention agreements; (x)

 

B-9

 

under, or in
respect of, any indemnity and similar obligations, howsoever arising,
including, indemnities incurred or arising in connection with the purchase,
sale or use of Property, the scope of which indemnity is unlimited, unqualified
or unquantifiable, or exceeds the fair market value of the Property being
purchased, sold or used, or pertains to Environmental Liability or to the
negligence, actions, emissions or other activities of any Person; (xi) under,
or in respect of, any partnership, joint venture or similar entity in which
such Person is a general partner, joint venturer or similar participant; (xii)
in respect of unfunded vested benefits under any Plan; (xiii) to redeem,
repurchase, retire or otherwise acquire any shares of capital stock, warrants,
stock equivalents or other evidences of equity of any class or nature of such
person, or to set apart any money or other Property for a defeasance, sinking
or analogous fund for any Dividend or distribution thereon, or for any
redemption, repurchase, retirement or other acquisition thereof; or (xiv) which
would under GAAP be shown on such Person’s balance sheet as a liability.

 

“Interest Period” means with respect
to each Borrowing consisting of a LIBOR Loan, the period commencing on the date
of such Borrowing and ending one, three or six months thereafter, as each
Borrower elected in the applicable Notice of Borrowing or Continuation/Conversion
Notice; provided that:

 

(i)            any
Interest Period which would otherwise end on a day that is not a
LIBOR-Business-Day shall be extended to the next succeeding LIBOR-Business-Day
unless such LIBOR-Business-Day falls in another calendar month, in which case
such Interest Period shall end on the immediately preceding LIBOR-Business-Day;

 

(ii)           any
Interest Period which begins on the last LIBOR-Business-Day of a calendar month
(or on a day for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period) shall, subject to clause
(iii) below, end on the last LIBOR-Business-Day of a calendar month; and

 

(iii)          no
Interest Period applicable to a Term Loan shall be elected that extends beyond
the Term Commitment Termination Date, and no Interest Period applicable to a
Revolving Loan shall be elected that extends beyond the Revolving Commitment
Termination Date.

 

“Investigations” means (i) the
internal investigation by the Parent Company’s audit committee, completed on or
near January 30, 2004; (ii) the investigation of the Parent Company by the
Securities and Exchange Commission; and (iii) the investigation of the Parent
Company by the United States Attorney’s Office for the Northern District of
Georgia.

 

“Investment” in any Person means any
investment, whether by means of share purchase, loan, advance, extension of
credit, capital contribution or otherwise, in or to such Person, the guarantee
of any Indebtedness of such Person or the subordination of any claim against
such Person to other Indebtedness of such Person.

 

“Investment Subsidiary” means Lancer
Investment Corporation, a Delaware corporation.

 

“Judgment” means any judgment, order,
subpoena, levy, abstract, mandamus, decree, injunction, restraining order or
other directive, demand or the like, of any Governmental Authority, howsoever
issued by it (whether pursuant to its equity rights or powers, or otherwise).

 

B-10

 

“Laws” means all applicable statutes,
laws, ordinances, regulations, rules, directives, guidelines, interpretations,
rulings, orders, requirements, determinations, judgments, writs, injunctions,
decrees and other similar pronouncements or directives of any Governmental
Authority, and “Law” means each of the foregoing.

 

 “Legal
Rights” means, with respect to a Person, and to such Person’s business,
operations and Property, all licenses, permits, certificates franchises,
authorizations, consents, approvals, patents and patent rights, trademarks and
trademark rights, trade names and trade name rights, copyrights, service marks,
applications, registrations and other similar rights, privileges and
authorities, used or useful and required of such Person and/or for such Person
to own and/or operate its business and Property.

 

“Lending Office” means, as to any
Bank, its Domestic Lending Office or its LIBOR Lending Office, as the context
may require.

 

“LIBOR-Business-Day” means any
Business Day on which commercial banks are open for international business in
London.

 

“LIBOR Lending Office” means, as to
any Bank, its office, branch or Affiliate identified in Annex A as its LIBOR
Lending Office or such other office, branch or Affiliate of such Bank as it may
hereafter designate as its LIBOR Lending Office by notice to each Borrower and
the Agent.

 

“LIBOR Loan” means a Loan made or
continued as or converted into such a designated Loan pursuant to the
applicable Notice of Borrowing or Continuation/Conversion Notice, as the case
may be, which bears interest at the Adjusted London Interbank Offered Rate.

 

“LIBOR Rate Borrowing” means a
Borrowing consisting of a LIBOR Loan.

 

“LIBOR Reserve Percentage” means, for
any day, that percentage (expressed as a decimal) which is in effect on such
day, as prescribed by the Board of Governors of the Federal Reserve System (or
any successor) for determining the maximum reserve requirement for a member
bank of the Federal Reserve System in New York with deposits exceeding $5
billion  in respect of ‘Eurocurrency
Liabilities’ (or in respect of any other category of liabilities which includes
deposits by reference to which the interest rate on LIBOR Loans is determined
or any category of extensions of credit or other assets which includes loans by
a non-United States office of any Bank to United States residents).

 

“Lien” means any lien, mortgage, tax
lien, pledge, encumbrance, Environmental Lien, easement, restriction,
right-of-way, charge or adverse claim affecting title or use of, or resulting
in an encumbrance against, Property of a Person, or a security interest,
conditional sale or title retention arrangement, or any other interest in
Property designed to secure the repayment of a liability or the performance of
an obligation or agreement, whether arising by agreement, under any Law or
otherwise, including, without limitation, any lease in the nature thereof, any
option, right of first refusal or other similar agreement to sell, and any
filing of, or agreement to give, any financing statement under the UCC or
equivalent statute in any jurisdiction or any other instrument that evidences
the creation, perfection, continuation, notice and/or other aspect of a present
or future Lien or asserted Lien.

 

B-11

 

“Limited Waiver” means the waiver by
the Banks of the Listed Defaults pursuant to the provisions of this Agreement
under the heading “Recitals and Waiver”.

 

“Litigation” means any proceeding,
(judicial, arbitration, mediation or otherwise) claim, complaint, demand,
lawsuit, hearing, inquiry and/or investigation conducted or threatened by or
before any Governmental Authority.

 

“Loan” or “Loans” means any
advance or advances by the Banks to any Borrower pursuant to their Revolving
Commitments, or any advances previously made pursuant to their Term
Commitments.

 

“Loan Parties” means (i) Operating
Subsidiary; (ii) Mexico Subsidiary; (iii) Parent Company; and (iv) each
Subsidiary of Parent Company which is now or hereafter becomes a party to a
Guaranty Agreement described on Annex C (including Subsidiaries of
Parent Company that may hereafter become a party thereto), and “Loan Party”
means any one of them.

 

“Loan Documents” means this Agreement,
each Note and any and all other agreements (including, without limitation,
deeds of trust, security agreements, pledge agreements and guaranty
agreements), documents, promissory notes, instruments, reports, opinions,
requests, certificates, notices, filings and all other documents, instruments,
agreements (including, without limitation, guaranty agreements) and writings,
now or hereafter executed or delivered pursuant to, or in connection with, this
Agreement, or the transactions provided for herein or contemplated hereby, or
in or by any other Loan Document, each of the foregoing being in form, scope
and substance satisfactory to the Banks.

 

“London Interbank Offered Rate” or “LIBOR”
means, with respect to any Interest Period, the rate per annum (rounded
upwards, if necessary, to the next higher 1/16 of 1%) shown on page 3750 of the
Dow Jones & Company Telerate screen or any successor page as the composite
offered rate for London interbank deposits with a period equal to such Interest
Period two LIBOR-Business-Days before the first day of such Interest
Period.  In the event that the London
Interbank Offered Rate is no longer published or reported as specified above,
then the parties shall use the rate of interest published in the Wall Street
Journal (Southwest Edition) in the “Money Rates” section as the “London
Interbank Offered Rates (LIBOR)” for a period of time equal or comparable to
the applicable Interest Period, as of two Business Days preceding the date of
Borrowing, in which case each Borrower agrees it will no longer have the option
to choose 60 days as an Interest Period with respect thereto.

 

“Major Supplier” means each of the
companies as set forth on the Schedule 5.1(p).

 

“Material Adverse Effect” means any
circumstance or event which, individually or in the aggregate with other
circumstances or events, (i) could have any material adverse effect whatsoever
upon the validity, performance, perfection or enforceability of any Loan
Documents; or (ii) could be material and adverse to the financial condition,
business, operations or prospects of the Companies, taken as a whole, or the
Property of the Companies, taken as a whole; (iii) could impair the ability of
any Company to fulfill promptly and completely its obligations under any of the
Loan Documents to which is a party; (iv) could result in or cause a Default or
an

 

B-12

 

Event of
Default; or (v) could have any material and adverse effect whatsoever upon the
business relationship between The Coca-Cola Company and any Company.

 

“Maximum Rate” means, with respect to
each of the Agent and the Banks and on any and with respect to each day, the
maximum lawful non-usurious rate of interest (if any) which, under Applicable
Law, it is permitted or authorized to contract for, charge, collect, receive,
take or reserve from any Borrower on its Notes or other Obligations owed or
owing to it, as the case may be, from time to time in effect, including changes
in such Maximum Rate attributable to changes under Applicable Law which permit
a greater rate of interest to be contracted for, charged, collected, received,
taken or reserved as of the effective dates of the respective changes.

 

“Mexico Companies” means Mexico
Subsidiary, Servicios Lancermex, S.A. de C.V. and Industrias Lancermex, S.A. de
C.V. and means any one of them.

 

“Negative Pledge” means any term, provision,
agreement, contract or undertaking that, directly or indirectly, (i) precludes
or restricts, or purports to preclude or restrict, the imposition or voluntary
creation of, a Lien on Property; or (ii) upon the imposition or voluntary
creation of a Lien on Property, requires the owner, lessee or other interest
holder therein or thereto to incur an obligation (payment, performance,
creation of a Lien or otherwise) to a Person, or requires such owner, lessee or
other interest holder to provide, or cause to be provided, any assurances or
security to a Person, which assurances and security did not theretofore exist
and/or was not theretofore required, whether such assurances or security
consist of collateral, guaranties, modifications or supplements to then-existing
agreements, new agreements, or otherwise.

 

“Net Sales Projections Closing Certificate”
means the certificate to be delivered by Borrower to Agent stating the
consolidated net sales projections for each Fiscal Quarter beginning with the
Fiscal Quarter ending June 30, 2004 and continuing until the Fiscal Quarter
ending June 30, 2005.

 

“New Company” means any Company that
has not yet commenced operations.

 

“Non-US Company” means any Company
which is not a US Company.

 

“Note” means a Term Note or a
Revolving Note, and “Notes” means the Term Notes, the Revolving Notes or
all of them, and as otherwise provided in Section 2.3(b).

 

“Notice of Borrowing” has the meaning
set forth in Section 2.2(a).

 

“Notice of Default” has the meaning
set forth in Section 8.3.

 

“Obligations” means all obligations,
indebtedness, fees, expenses, costs, indemnities and other indemnification
obligations, and liabilities of any Borrower to the Agent and the Banks, now
existing or hereafter arising, whether direct or indirect, related or
unrelated, fixed or contingent, liquidated or unliquidated, joint, several or
joint or several, or otherwise, and all renewals, extensions, increases,
refinancings, rearrangements or modifications thereof, or any part thereof,
arising pursuant to, or in connection with, this Agreement or any other Loan
Document, and all interest accruing thereon (including, without limitation,
interest which, but for

 

B-13

 

the filing of
a petition in bankruptcy with respect to such Borrower, would accrue on such
Obligations), and attorneys’ fees incurred in the enforcement or collection
thereof.

 

“Other Taxes” has the meaning set
forth in Section 2.14.

 

“PBGC” means the Pension Benefit
Guaranty Corporation, and any successor to all or any of the Pension Benefit
Guaranty Corporation’s functions under ERISA.

 

“Participant” has the meaning set
forth in Section 10.7(c).

 

“Permitted Acquisition” has the
meaning set forth in Section 6.11.

 

“Permitted Indebtedness” has the
meaning stated in Section 6.2.

 

“Permitted Liens” means: (i) Liens
imposed by mandatory provisions of Law such as carrier’s, materialmen’s,
mechanics’, warehousemen’s, landlord’s and other like Liens arising in the
ordinary course of business, securing Indebtedness not yet due; (ii) Liens for
Taxes, if the same are not yet due and payable or qualify as a Contested Claim;
(iii) encumbrances consisting of minor zoning restrictions, easements or other
restrictions on the use of real Property, provided that such items do not or
will not impair or interfere with the use of such Property for the purposes
intended or the value thereof; and (iv) pledges or deposits in connection with
or to secure worker’s compensation, unemployment insurance, pensions or other
employee benefits, or public or statutory obligations.

 

“Person” includes any individual,
corporation, company, joint venture, general or limited partnership, trust,
organization, association, limited liability partnership, limited liability
company or other entity (whether or not incorporated), or Governmental
Authority.

 

“Plan” means any plan subject to Title
IV of ERISA and maintained at any time since January 1, 1986 for employees of
any Company or of any member of a “controlled group of corporations” or “trade
or business,” as such terms are defined in Section 414(b) or (c) of the Code,
of which any Company is a member, or any plan subject to Title IV of ERISA to
which any Company is required to contribute, or has been required to contribute
at any time since January 1, 1986, on behalf of its employees.

 

“Property” means any interest in any
kind of property or asset, whether real, personal or mixed, or tangible or
intangible (including, without limitation, Legal Rights).

 

“Purchaser” has the meaning set forth
in Section 10.7(d).

 

“Qualified Bank” means any commercial
bank located in the USA, which is organized under the laws of the USA or any
state thereof, insures its deposits with the Federal Deposit Insurance
Corporation (or any successor) and has capital, surplus and undivided profits
aggregating at least $100 million as of the date of such commercial bank’s most
recent financial report.

 

B-14

 

“Quarter Review Adjustments” means
adjustments made for the quarterly period ended on a Quarterly Date upon
completion of a Statement of Accounting Standards 100 review by independent
auditors.

 

“Quarterly Date” means each September
30, December 31, March 31, and June 30.

 

“Regulation D”, Regulation G”, Regulation
T”, “Regulation U” and “Regulation X” mean Regulation D, G, T, U or X, as
the case may be, of the Board of Governors of the Federal Reserve System, or
any successor or other regulation hereafter promulgated by said Board to
replace the prior Regulation D, G, T, U or X and having substantially the same
function.

 

“Required Banks” means, as of the date
of any determination, Banks that hold at least 66 2/3% of the Commitments
or, if the Commitments shall have been terminated, holding Notes evidencing 66
2/3% of the sum of the aggregate unpaid principal amount of the Loans.

 

“Revolving Availability Period” means
the period from and including the Closing Date to but not including the
Revolving Commitment Termination Date.

 

“Revolving Commitment” means, as to
any Bank and on each relevant date of determination, the obligation of such
Bank to make Revolving Loans to Operating Subsidiary in an aggregate principal
amount at any one time outstanding not exceeding the amount set forth opposite
such Bank’s name in Annex A under the caption “Revolving Commitment”,
as the same may be reduced from time to time pursuant to this Agreement.

 

“Revolving Commitment Termination Date”
means the date upon which the Revolving Commitments of all Banks have been
terminated pursuant to the terms of this Agreement.

 

“Revolving Loan” has the meaning set
forth in Section 2.1(b).

 

“Revolving Note” means a promissory
note executed by Operating Subsidiary, in form and substance satisfactory to
the Agent, payable to the order of each Bank and evidencing the obligation of
Operating Subsidiary to repay Revolving Loans made to it by such Bank.

 

“Rights” means rights, remedies,
powers and privileges.

 

“Specified Person” means (i) the
President, the Chief Executive Officer, the Chief Operating Officer, the Chief
Financial Officer, the Treasurer, the General Counsel and the Secretary, of
Parent Company; (ii) any Vice President, any Assistant Treasurer and any
Assistant Secretary of Parent Company whose primary office or place of work is
located at Parent Company’s corporate headquarters in San Antonio, Texas; and
(iii) Chris Hughes, Mark Freitas, Stonewall Fisher, Scott Adams, George
Schroeder and Alfred Schroeder so long as such individual is employed by Parent
Company or by any Affiliate of Parent Company.

 

“Subsidiary” means, for any Person,
any corporation or other entity (including, without limitation, any partnership
or joint venture) (i) of which at least a majority of the securities or other
ownership interests having by the terms thereof ordinary voting power to elect
a majority of the board of directors or other Persons having similar powers
and/or performing similar functions of such corporation or other entity
(irrespective of whether or not at any time securities

 

B-15

 

or other
ownership interests of any class or classes of such corporation or other entity
shall have or might have voting power by reason of the happening of any
contingency) is at the time directly or indirectly owned or controlled by such
Person or one or more Subsidiaries of such Person; or (ii) of which such Person
is a general partner, joint venturer or similar capacity.

 

“Taxes” means all taxes, assessments,
fees, levies, imposts, duties, penalties or other charges of any nature whatsoever
from time to time or at any time imposed by any Law or any Governmental
Authority, whether on income, profits, Property, sales, use, excise,
franchises, capital, ownership, operations or otherwise, excluding (i) in the
case of each Bank and the Agent, taxes imposed on its income and franchise
taxes imposed on it by the jurisdiction under the laws of which such Bank or
the Agent, as the case may be, is organized or any political subdivision of the
jurisdiction; and (ii) with respect to each Bank, taxes imposed on its income
and franchise taxes imposed on it by the jurisdiction of such Bank’s applicable
Lending Office or any political subdivision of such jurisdiction.

 

“Temporary Cash Investment” means any
Investment in (i) direct obligations of the USA or any agency thereof, or
obligations fully guaranteed by the USA or any agency thereof (including
indirect investments in such obligations through repurchase agreements with the
Agent or any Qualified Bank), provided that such obligations mature within 30
days of the date of acquisition thereof; (ii) commercial paper rated in the
highest grade by two or more national credit rating agencies and maturing not
more than 30 days from the date of acquisition thereof; (iii) time deposits
with, and certificates of deposit and banker’s acceptances issued by, the
Agent; (iv) commercial paper maturing not more than 30 days from the
acquisition thereof issued by any Bank (or the parent of any Bank); and (v)
Eurodollar investments made available through any Bank.

 

 “Term
A Commitment” means, as to any Bank and on each relevant date of
determination, the obligation of such Bank to make Term A Loans to Operating
Subsidiary in an aggregate principal amount at any one time outstanding not
exceeding the amount set forth opposite such Bank’s name in Annex A
under the caption “Term A Commitment.”

 

“Term A Loan” has the meaning set
forth in Section 2.1(a)(1).

 

“Term A Note” means a promissory note
executed by Operating Subsidiary in form and substance satisfactory to the Agent,
payable to the order of each Bank and evidencing the obligation of Operating
Subsidiary to repay Term A Loans made to it by such Bank.

 

 “Term
Availability Period” means the period from and including July 15, 1996 to
but not including the Term Commitment Termination Date.

 

 “Term
B Commitment” means, as to any Bank and on each relevant date of
determination, the obligation of such Bank to make Term B Loans to Mexico
Subsidiary in an aggregate principal amount at any one time outstanding not
exceeding the amount set forth opposite such Bank’s name in Annex A
under the caption “Term B Commitment”.

 

“Term B Loan” has the meaning set
forth in Section 2.1(a)(2).

 

B-16

 

“Term B Note” means a promissory note
executed by Mexico Subsidiary substantially in form and substance satisfactory
to the Agent, payable to the order of each Bank and evidencing the obligation
of Mexico Subsidiary to repay Term B Loans made to it by such Bank.

 

 “Term
Commitment” means the Term A Commitment and the Term B Commitment.

 

“Term Commitment Termination Date”
means the earlier to occur of (i) July 15, 1998; and (ii) the date upon which
the Term Commitments of all Banks have been terminated pursuant to the terms of
this Agreement.

 

 “Term
Loans” means the Term A Loans and the Term B Loans.

 

  “Term
Notes” means the Term A Notes and the Term B Notes.

 

“Total Funded Debt” means, as of any
time, the outstanding principal balance of (i) the Notes; plus (ii) any other
borrowed-money Indebtedness of any Company determined on a consolidated basis.

 

“Transferee” has the meaning set forth
in Section 10.7(e).

 

“Type” has the meaning set forth in Section
1.2(f).

 

“UCC” means the Business and Commerce
Code of the State of Texas and of any other state to the extent Texas Law
requires application of the same.

 

“USA” means the United States of
America.

 

“US Companies” means Parent Company
and each Subsidiary of Parent Company that is incorporated or organized under
the Laws of any state in the USA.

 

 “Voting
Shares” of any corporation means shares of any class or classes (however
designated) having ordinary voting power for the election of at least a
majority of the members of the Board of Directors (or other governing bodies)
of such corporation.

 

B-17

 

ANNEX
C

 

CONDITIONS
PRECEDENT: INITIAL LOAN

 

(a)           Agreement and
Schedules.  This Agreement duly
executed by each Borrower and Parent Company, and all Schedules, duly and fully
completed, that are provided for in this Agreement.

 

(b)           Revolving Notes.  A Renewal Revolving Note duly executed by
Operating Subsidiary in favor of each Bank in the respective amount of such
Bank’s Revolving Commitment.

 

(c)           Term A Notes.  A Renewal Term A Note duly executed by
Operating Subsidiary in favor of each Bank in the respective amount of such
Bank’s Term A Commitment.

 

(d)           Term B Notes.  A Renewal Term B Note duly executed by
Mexico Subsidiary in favor of each Bank in the respective amount of such Bank’s
Term B Commitment.

 

(e)           Security
Documents.  (i) A Guaranty
Agreement, or at the option of Banks, a Reaffirmation of existing Guaranty
Agreements, executed by each Subsidiary of Parent Company other than Operating
Subsidiary, the Mexico Companies, in form and substance acceptable to the
Banks, securing the obligations described therein, including the Obligations;
(ii) a Guaranty Agreement, or at the option of Banks, a Reaffirmation of the
existing Guaranty Agreement, executed by Parent Company in form and substance
acceptable to the Banks, securing the obligations described therein, including
the Obligations; (iii) a Guaranty Agreement executed by each Mexico Company
(other than the Mexico Subsidiary), or at the option of Banks, a Reaffirmation
of existing Guaranty Agreements in form and substance acceptable to the Banks,
securing the obligations described therein; (iv) a Guaranty Agreement executed
by ABS in form and substance acceptable to the Banks; (v) an amendment of the
existing Security Agreement to describe certain existing claims as part of the
pledged collateral; and (vi) a Security Agreement and a Financing Statement,
executed by ABS in form and substance acceptable to the Banks, securing the
obligations described therein, including the Obligations.

 

(f)            Opinion of
Counsel to the Companies.  Opinion
of legal counsel for the Companies in form and substance acceptable to the
Banks and their respective legal counsel.

 

(g)           Opinion of
Counsel to the Mexico Companies. 
Opinion of legal counsel for each of the Mexico Companies in form, scope
and substance satisfactory to the Banks.

 

(h)           Compliance
Certificate.  A Compliance
Certificate in the form of Exhibit M duly completed and executed by Parent
Company.

 

(i)            Secretary
Certificate, Charter and Bylaws. 
With respect to each Company, a Certificate signed by the secretary of
such Company, which secretary’s office and signature shall be confirmed by
another officer of such Company, dated and effective as of the Closing Date
attaching thereto or containing therein, and certifying as to the following:
(i) corporate resolutions, as in effect and neither revoked nor rescinded, duly
adopted by the board of directors

 

C-1

 

of such Company authorizing the execution,
delivery and performance of the Loan Documents to which it is or will be a
party, and the transactions contemplated thereby; (ii) true and correct copies
of the charter, bylaws and other internal governance documents, as amended and
in effect, of such Company; and (iii) names, incumbency and specimen signatures
of the officers of such Company authorized to execute and deliver the Loan
Documents to which such Company is a party.

 

(j)            Official
Certificates.  With respect to each
Company, Certificates as to incorporation, existence and good standing for such
Company issued by the Secretary of State (and/or other appropriate official) of
the state of incorporation of such Company and certificates of foreign
qualification and good standing (or other similar instruments) for such Company,
issued by the Secretary of State (and/or other appropriate official) of each of
the states wherein such Company is or should be qualified to do business as a
foreign corporation, each of the foregoing certificates being dated within ten
days prior to the date of the Closing Date.

 

(k)           Articles of
Incorporation.  A copy of the
Certificate or Articles of Incorporation of each Company and all amendments
thereto, certified by the Secretary of State of the state of incorporation of
such Company as being true, correct and complete, and being dated within ten
days prior to the Closing Date.

 

(l)            Contract with
BDO Seidman LLP.  A copy of all
contracts between any Company and BDO Seidman LLP.

 

(m)          Litigation Report.  A report of counsel to each Company
describing all pending or threatened Litigation by or against any Company or
any of its Property (including Litigation for which any Company will be
responsible after the Closing Date). 
There shall be no outstanding order or injunction of any Governmental
Authority which would prohibit (i) the execution, delivery or performance, now
or hereafter, of any Loan Document; or (ii) any of the transactions
contemplated by the Loan Documents.

 

(n)           Environmental
Reports.  Copies of all
environmental surveys or reports relating to real Property owned or leased by
any Company (i) which have heretofore been performed or prepared (each of which
is described in Schedule 4.20 hereof); and (ii) additional reports or
surveys in form, scope and substance satisfactory to the Agent.

 

(o)           Insurance
Certificates.  A certificate from
each insurer or duly authorized insurer’s Agent of each Company setting forth a
listing of all insurance coverage of such Company and reflecting that the
policies evidencing such coverage conforms to the requirements of this
Agreement and each of the other Loan Documents, including, without limitation,
loss payable endorsements in favor of the Agent and notification of
cancellation and modification endorsements as specified in Section 5.10.  In addition, each Company shall deliver a
certificate executed by an Authorized Officer of such Company setting forth the
insurance obtained by such Company in accordance with the requirements of Section
5.10 and certifying that such insurance is in full force and effect and that
all premiums then due and payable thereon have been paid.

 

(p)           Financial
Statements.  Copies of financial
statements of the Companies for the most recent period required under Section
5.1.

 

C-1

 

(q)           Net Sales
Projections Closing Certificate. 
The Net Sales Projections Closing Certificate in form and substance
acceptable to the Banks.

 

(r)            UCC Reports.  Copies of the results of Uniform Commercial
Code searches showing all financing statements and other documents or
instruments on file against each Company in the appropriate central and local
offices of the relevant jurisdictions, each such search to be through a search
period ending as of a date no more than ten days prior to the Closing Date.

 

(s)           Regulatory and
Other Approvals.  Evidence that all
necessary approvals or consents of Governmental Authorities and all other
Persons have been obtained.

 

(t)            Compliance with
Laws.  Evidence that each Company
has complied with all Laws necessary to consummate the transactions
contemplated by this Agreement and each of the other Loan Documents.

 

(u)           Amendment and
Waiver Fee.  Payment of amendment
and waiver fee in the amount of $100,000.00, payable to Agent on the Closing
Date for the ratable benefit of the Banks.

 

(v)           Other Fees.  Payment of (i) the facility fees payable to
the Agent on the Closing Date by Operating Subsidiary and Mexico Subsidiary,
respectively; and (ii) fees and other costs (including, without limitation,
fees of counsel to the Agent and each of the Banks, respectively) payable by
each Borrower in connection with the preparation, negotiation and closing of
the transactions contemplated by this Agreement.

 

(w)          Additional
Documentation.  Such additional
approvals, opinions, documents, instruments, reports, certifications and/or
agreements as the Agent, the Banks or their counsel may reasonably request.

 

C-1

 

ANNEX
D-1

 

LISTED
DEFAULTS

 

[To be attached]

 

D-1-1

 

ANNEX
D-2

 

BACKGROUND

 

[To be attached]

 

D-2-1

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