FIRST UNION CORPORATION Charlotte, North Carolina 28288 704 374-6565 (First Union Logo appears here) Exhibit 4 CONFIDENTIAL November 15, 1994 Delcor, Inc. 1110 East Morehead Street Charlotte, NC 28204 Attention: Mr. W. D. Cornwell, Jr. President Gentlemen: First Union National Bank of North Carolina and First Union Corporation or an affiliate thereof (collectively, "First Union") are pleased to confirm to Delcor, Inc. ("Delcor"), their commitment to provide to Newco or its successor pursuant to the Merger described herein (the "Company"), a company to be formed by Delcor, on the terms, for the purposes and subject to the conditions set forth below and in the summary of certain terms attached hereto (the "Term Sheets") the following: (i) senior debt facilities (the "Senior Debt Facilities") in an aggregate amount of up to $187,500,000, (ii) a subscription to purchase Cumulative Redeemable Payment-In-Kind Preferred Stock (the "Preferred Stock") in an aggregate amount of $100,000,000 and related detachable warrants (the "Warrants") and (iii) in exchange for 784,999 shares of Non-Voting Common Stock of the Company, 784,999 shares of Common Stock (the "Rollover Equity") of a company which has been described to us under a code name "Canoe" in connection with the Company's acquisition of Canoe. As First Union understands the proposed transaction (the "Transaction"), Delcor will organize the Company, a single purpose, wholly owned subsidiary that will enter into a merger agreement (the "Merger Agreement") with Canoe, pursuant to which the Company will merge with Canoe (the "Merger"), with Canoe being the surviving corporation. In the Merger, each of the issued and outstanding shares of Canoe's common stock, par value $.01 per share, excluding any treasury shares, Rollover Equity shares or other contributed shares, will be converted into the right to receive an aggregate amount in cash consideration per share not to exceed the amount discussed between First Union and the Company (the "Merger Price"). The Senior Debt Facilities, the Preferred Stock and the Rollover Equity (collectively, the "First Union Financing") are being provided to enable the Company to (i) complete the Merger, (ii) provide for the ongoing working capital and capital spending needs of the Company, and (iii) pay certain fees and expenses related to the Merger. If the Transaction is structured as a merger of a wholly owned subsidiary of the Company into Canoe, this commitment letter and the Term Sheets shall be modified to reflect the revised structure. Delcor, Inc. November 15, 1994 Page 2 _________________________ First Union's commitment is to provide 50% of $375,000,000 of Senior Debt Facilities that will be co-agented by First Union and NationsBank of North Carolina, N.A., or an affiliate thereof (collectively, "NationsBank") . NationsBank will also purchase (i) $100,000,000 of Preferred Stock and Warrants and (ii) 784,999 shares of Non-Voting Common Stock of the Company for an amount of cash equal to the Merger Price multiplied by 784,999 shares. Our commitment to provide the First Union Financing will be funded upon the effectiveness of the Merger and is subject to the conditions set forth herein and in the attached Term Sheets, including the right to assign or transfer all or part of this commitment for the First Union Financing to any of our affiliated corporations or banks and to any third parties. Our commitment to provide the First Union Financing will terminate (i) on July 31, 1995 if the Merger shall not have closed on or prior to such date, or (ii) at any time prior to the Merger and the funding of the First Union Financing if (a) there shall have been any material adverse change in the business, assets, financial condition or results of operations of Canoe and its subsidiaries, taken as a whole, or (b) there shall exist any condition, event or occurrence which, individually or in the aggregate, could reasonably be expected to have a material adverse effect on the business, assets, financial condition or results of operations of Canoe and its subsidiaries, taken as a whole, in either case, since September 30, 1994, except as disclosed in documents filed prior to the date hereof with the Securities and Exchange Commission. The business and financial terms set forth in the attached Term Sheets have been established as a result of a review of Canoe's publicly available information (including public filings with the Securities and Exchange Commission). First Union believes that the closing conditions and other terms contained in the attached Term Sheets are customary for comparable financings. You agree that this Commitment Letter is for your confidential use only and will not be disclosed by you to any person other than your accountants, attorneys and other advisors and the Company and Canoe and such of their respective officers, directors, agents, accountants, attorneys and other advisors as need to be provided therewith, and only then in connection with the Transaction and on a confidential basis, except that you may make public disclosure of the existence and amount of First Union's commitment and undertaking hereunder, you may file a copy of the Commitment Letter in any public record in which it is required by law to be filed, and you may make such other public disclosure of the terms and conditions hereof as you are required by law, in the reasonable opinion of your counsel, to make. Delcor agrees to indemnify each of First Union and its affiliates and their respective directors, officers, employees, agents and controlling persons (each, an "Indemnified Party") from and against any and all losses, claims (whether valid or not), damages and liabilities, joint or several, to which such Indemnified Party may become subject, related to or arising out of the Transaction and will reimburse each Indemnified Party for all expenses (including reasonable attorneys' fees and expenses) as they are incurred in connection with the investigation of, preparation for or defense of any pending or threatened claim or any action or proceeding arising therefrom. Delcor, Inc. November 15, 1994 Page 3 _________________________ Notwithstanding the foregoing, the obligation to indemnify any Indemnified Party hereunder shall not apply in respect of any loss, claim, damage or liability to the extent that a court of competent jurisdiction shall have determined by final judgment that such loss, claim, damage or liability resulted from such Indemnified Party's willful malfeasance, gross negligence or bad faith. In the event that the foregoing indemnity is unavailable or insufficient to hold an Indemnified Party harmless, then Delcor will contribute to amounts paid or payable by such Indemnified Party in respect of such Indemnified Party's losses, claims, damages or liabilities in such proportions as appropriately reflect the relative benefits received by and fault of Delcor and such Indemnified Party in connection with the matters as to which such losses, claims, damages or liabilities relate and other equitable considerations. If any action, proceeding, or investigation is commenced, as to which any Indemnified Party proposes to demand such indemnification, it shall notify Delcor with reasonable promptness; provided, however, that any failure by such Indemnified Party to notify Delcor shall not relieve Delcor from its obligations hereunder except to the extent Delcor is prejudiced thereby. Delcor shall be entitled to assume the defense of any such action, proceeding, or investigation, including the employment of counsel and the payment of all fees and expenses. The Indemnified Party shall have the right to employ separate counsel in connection with any such action, proceeding, or investigation and to participate in the defense thereof, but the fees and expenses of such counsel shall be paid by the Indemnified Party, unless (a) Delcor has failed to assume the defense and employ counsel as provided herein, (b) Delcor has agreed in writing to pay such fees and expenses of separate counsel, or (c) an action, proceeding, or investigation has been commenced against the Indemnified Party and Delcor and representation of both Delcor and the Indemnified Party by the same counsel would be inappropriate because of actual or potential conflicts of interest between the parties (in the case of First Union, the existence of any such actual or potential conflict of interest to be determined by First Union, taking into account, among other things, any relevant regulatory concerns). In the case of any circumstance described in clauses (a), (b), or (c) of the immediately preceding sentence, Delcor shall be responsible for the reasonable fees and expenses of such separate counsel; provided, however, that Delcor shall not in any event be required to pay the fees and expenses of more than one separate counsel for all Indemnified Parties. Delcor shall be liable only for settlement of any claim against an Indemnified Party made with Delcor's written consent. Delcor agrees to pay to us the fees for the Senior Debt Facilities outlined in the fee letter dated the date hereof (the "Fee Letter"). Delcor also agrees to reimburse us for all of our out-of-pocket expenses (including the reasonable fees and disbursements of our counsel) in connection with the Merger and the First Union Financing, described herein. The provisions of the three immediately preceding paragraphs shall survive any termination of this letter. Delcor acknowledges that First Union has advised Delcor that the services to be provided hereunder and the amount of fees and the obligation to reimburse expenses are in no way Delcor, Inc. November 15, 1994 Page 4 _________________________ conditioned upon Delcor's obtaining from First Union or any affiliate of First Union any other service or any loan or other financial product. If you are in agreement with the foregoing, please sign and return the enclosed copy of this letter and the Fee Letter to First Union no later than 5:00 p.m. Eastern Standard Time, on or before November 15, 1994. This commitment shall terminate at such time unless a signed copy of this letter and the Fee Letter have been delivered to us. Very Truly Yours, FIRST UNION CORPORATION By: /s/ Daniel W. Mathis Daniel W. Mathis Executive Vice President FIRST UNION NATIONAL BANK OF NORTH CAROLINA By: /s/ David M. Roberts David M. Roberts Senior Vice President Agreed to and accepted this 15th day of November, 1994 DELCOR, INC. By: /s/ W. D. Cornwell, Jr. W. D. Cornwell, Jr. President Confidential November 15, 1994 PROJECT CANOE Summary of Certain Terms Senior Debt Facilities
Borrower: Newco and, following the Merger, Canoe (the "Company"). Facilities: Will include a six year Revolving Credit Facility (the "Revolver") and a six year Term Loan (the "Term Loan") (together, the "Senior Debt Facilities"). Amount: Revolver: Up to $75,000,000 Term Loan: $300,000,000 The aggregate amount available under the Revolver will be based on the lesser of $75,000,000 or the aggregate of certain percentages of the Company's eligible accounts receivable and eligible inventory (as defined in the Company's existing senior credit agreement), subject to reasonable reserves. Maturity Dates: The later of June 30, 2001 or six years from the Closing Date. Agents: First Union National Bank of North Carolina ("First Union") and NationsBank of North Carolina, N.A., ("NationsBank") (collectively, the "Agents"). Administrative Agent: NationsBank Lenders: First Union and NationsBank, and a group of other financial institutions reasonably acceptable to the Agents and the Company (the "Lenders"). Use of Proceeds: To consummate the Merger described in the Commitment Letter, to pay certain fees and expenses related to the Merger and to provide for the Company's ongoing working capital and capital spending requirements. Interest Rates: The interest rates on the Senior Debt Facilities will be a function of the Company's Total Funded Debt to Operating Cash Flow ("Leverage Ratio") as determined quarterly on a Confidential November 15, 1994 rolling four quarters basis. Operating Cash Flow will equal the Company's earnings before interest, taxes, depreciation and amortization ("EBITDA"). The Company will have the option of borrowing at a spread over the Base Rate (defined as the higher of the Administrative Agent's Prime Rate, the Three Month CD Rate plus .50%, and the Federal Funds Rate plus .50%) or the Adjusted London Interbank Offered Rate ("LIBOR"). The applicable rates will be based on the following table Revolver Term Loan Spread Over Spread Over Spread Over Spread Over Leverage Base LIBOR Base LIBOR Ratio > 2.0x 1.25% 2.75% 1.50% 3.00% 1.50x - 1.99x 0.75% 2.25% 1.00% 2.50% 1.00x - 1.49x 0.25% 1.75% 0.50% 2.00% 0.50x - .99x 0.00% 1.25% 0.00% 1.50% < .50x 0.00% 1.00% 0.00% 1.00% The interest rates on the Senior Debt Facilities will increase by two (2) percentage points per annum upon the occurrence and during the continuance of any payment default under the Loan Agreement. The Loan Agreement shall include the Agents' standard protective provisions for such matters as increased costs, funding losses, illegality and withholding taxes. Interest Payments: At the end of each applicable Interest Period or quarterly, if earlier, calculated on an actual 360 day basis for both Base Rate and LIBOR Loans. Interest Periods: LIBOR interest period: 30, 60, or 90 days, subject to availability. Interest Rate Protection: Within 90 days following the closing, the Company must obtain reasonably acceptable interest rate protection through interest rate swaps, caps or other instruments reasonably satisfactory to the Agents, against increases in interest rates for a minimum of 50% of the Term Loan or such lesser amount as the Agents may agree, for a period of at least three years. In the event the Company obtains Interest Rate Protection from any Lender, then such Lender may secure the Company's obligations there under on a pari-passu basis with the Senior Debt Facilities. -2- Confidential November 15, 1994 Facility Fees: 1/2 of 1% per annum, on the unutilized portion of the Revolver commitment, payable quarterly in arrears. Security: A perfected first priority security interest in all of the post-Merger Company's assets, including the pledge of the stock of all the Company's subsidiaries. Mandatory Payments: Revolver: Payable in full at maturity. Term Loan: Payable quarterly beginning September 30, 1995 in the following amounts: Fiscal year Number Ended Quarterly of Annual Dec. 31 Amortization Payments Amortization 1995 $10,000,000 2 $20,000,000 1996 10,000,000 4 40,000,000 1997 10,000,000 4 40,000,000 1998 12,500,000 4 50,000,000 1999 15,000,000 4 60,000,000 2000 15,000,000 4 60,000,000 2001 15,000,000 2 30,000,000 $300,000,000 The principal amount of the Term Loan shall be repaid in quarterly installments beginning on September 30, 1995 and ending June 30, 2001. In addition to the required amortization, the Company will be required to make repayments on the Term Loan on an annual basis in an amount equal to 75% of the Company's Excess Cash Flow (defined as net income plus depreciation, amortization and all other non-cash charges, adjusted for changes in working capital, minus capital expenditures, principal payments and permitted dividends) for such period, beginning with the period ending December 31, 1995. The Company will be required to make prepayments with the net cash proceeds in excess of $5,000,000 from the sale of any of the Company's assets outside the normal course of business. In addition, the Company will be required to prepay the Senior Debt Facilities upon any change of control which results in Delcor, Inc. or its affiliates owning less than 51% of the voting Common Stock of the Company. The Company will also be -3- Confidential November 15, 1994 required to make prepayments in an amount equal to the net proceeds of any additional issuance of equity. Mandatory Prepayments shall be applied in inverse order of maturity. Voluntary Prepayments: The Company may reduce the amount outstanding under the Revolver at any time and thereafter reborrow. In addition, the Company may, at its option, upon five business days' notice to the Agents, permanently reduce the unutilized portion of the Revolver in part (in principal amounts of at least $1,000,000 or, if greater, an integral multiple thereof) or in whole. The Company may, at its option, upon five business days' notice to the Agents, prepay the Term Loan in part (in principal amounts of at least $1,000,000 or, if greater, an integral multiple thereof) or in whole, without premium or penalty, with interest accrued through the date of prepayment. Any voluntary prepayments above and beyond those required under the Excess Cash Flow provision shall be applied in the manner designated by the Company. All other prepayments shall be applied in inverse order of maturity. Conditions Precedent to Closing: The funding of the Senior Debt Facilities will be subject to satisfaction of customary conditions precedent for similar financings and for this transaction in particular, including but not limited to each of the following: (i) All documentation relating to the Senior Debt Facilities shall have been completed and reviewed to the Agents' and their counsels' satisfaction (including with respect to bankruptcy, environmental and asbestos matters); (ii) The Company and Canoe shall have entered into a definitive merger agreement (the "Merger Agreement"), on terms acceptable to the Agents in their sole discretion and the Merger contemplated thereby shall be consummated simultaneously with the funding of the Senior Debt Facilities; (iii) The Agents shall have determined to their satisfaction and in their sole discretion that the possible financial impact on Canoe of the administration of the NGC -4- Confidential November 15, 1994 Settlement Trust, and Canoe's actual or potential liabilities with respect to property damage and bodily injury asbestos claims, will not have a material adverse effect on the prospective business, assets, financial condition or results of operations of Canoe and its subsidiaries, taken as a whole; (iv) The Agents shall have received an environmental survey (or audit if so requested) prepared by the Company (or an environmental assessment firm acceptable to the Agents) addressing the Company's compliance with, and liability under, all related environmental laws, rules and regulations, and the Agents shall have determined to their satisfaction and in their sole discretion that the possible financial impact on Canoe of environmental matters will not have a material adverse effect on the prospective business, assets, financial condition or results of operations of Canoe and its subsidiaries, taken as a whole; (v) The Company shall have received commitments for $187,500,000 of Senior Debt Facilities from NationsBank on the same terms and conditions as outlined herein; (vi) The Company shall have received a minimum of $300,000,000 in cash proceeds from the issuance of Cumulative Redeemable Payment-In-Kind Preferred Stock and Warrants on terms and conditions reasonably acceptable to the Agents; (vii) The Company shall have received $50,000,000 in cash proceeds from the issuance of voting Common Stock to Delcor, Inc. on terms and conditions reasonably acceptable to the Agents; (viii) The Company shall have received cash proceeds from the issuance of Non-Voting Common Stock to NationsBank in an amount equal to the Merger Price multiplied by 784,999 shares on terms and conditions reasonably acceptable to the Agents; (ix) The Company shall have received a minimum of 3,872,235 shares of Canoe Common Stock from -5- Confidential November 15, 1994 Delcor, Inc. and 784,999 shares of Canoe Common Stock from First Union as "contributed" equity to Newco; (x) All governmental, regulatory, shareholder and third party consents and approvals, if any, necessary to effect the Merger and related financing shall have been obtained and remain in effect; (xi) No material adverse change shall have occurred in the business, assets, financial condition or results of operations of Canoe and its subsidiaries, taken as a whole, and there shall exist no condition, event or occurrence which, individually or in the aggregate, could reasonably be expected to have a material adverse effect on the business, assets, financial condition or results of operations of Canoe and its subsidiaries, taken as a whole, since September 30, 1994, except as disclosed in documents filed prior to the date hereof with the Securities and Exchange Commission; (xii) All of the Company's existing senior indebtedness shall be repaid in full at closing; (xiii) There shall not be any material pending litigation, injunction, order or claim with respect to the Merger or the First Union Financing; (xiv) The final order of the bankruptcy court entered in March 1993 in connection with Canoe's emergence from its Chapter 11 reorganization shall remain in full force and effect; Canoe shall be in compliance with each of its continuing obligations specified therein; and no proceedings shall be pending or threatened that in any manner challenges such final bankruptcy court order; (xv) If requested, the Agents shall have received appraisals in satisfactory form on certain of the Company's fixed assets prepared by an independent valuation firm acceptable to the Agents; and -6- Confidential November 15, 1994 (xvi) The Agents shall have received such other documents, opinions, certificates and agreements in connection with the Merger and the Senior Debt Facilities, all in form and substance satisfactory to the Agents as they shall reasonably request. Representations and Warranties: The Loan Agreement will include representations and warranties customarily found in the Agents' loan agreements for similar financings and any additional representations and warranties appropriate in the context of the proposed Merger (including with respect to bankruptcy, environmental and asbestos matters). Covenants: The Loan Agreement will include covenants customarily found in the Agents' loan agreements for similar financings and any additional covenants appropriate in the context of the proposed Merger. Such covenants shall in any event include: (1) Limitations on Liens; (2) Limitations on Cash Dividends, Distributions and Stock Repurchases; (3) Limitations on Additional Indebtedness; (4) Limitations on Transactions with Shareholders and Affiliates; (5) Limitations on Capital Expenditures and Cash Acquisitions; and (6) Certain other covenants, including financial covenants (such as fixed charge and interest coverage ratio tests, leverage tests, and minimum current ratio tests) acceptable to the Agents. Permitted Dividends: So long as no Event of Default has occurred and is continuing, the Company will be permitted to pay cash dividends on the Preferred Stock and Common Stock in amounts of up to 75% of the Company's net income calculated prior to giving effect to the dividend for such period (the "Permitted Dividends") after such time as (i) the Senior Debt Facilities have been paid down below $200,000,000 and (ii) the Company's ratio of -7- Confidential November 15, 1994 Total Funded Debt to Operating Cash Flow on a trailing four quarters basis is less than 1.0x. Permitted Dividends may be paid on a quarterly basis no sooner than 15 days after receipt by the Lenders of the Company's quarterly financial statements confirming compliance with the above conditions. Cash dividends shall not be permitted if after giving effect to such payment, the Company would be in default of the Senior Debt Facilities or the conditions outlined above. Events of Default: Those customarily found in the Agents' loan agreements for similar financings and any additional events of default appropriate in the context of the proposed Merger. Syndication: Following the signing of a definitive Merger Agreement between the Company and Canoe, the Company shall use its best efforts to assist the Agents in syndicating the Senior Debt Facilities. The initial syndication shall be a coordinated process under which both Agents shall reduce their commitments on a pro-rata basis until such time as they reach their desired hold level or mutually agree to terminate the joint syndication process. Assignments and Participation: After completion of the initial syndication process, any Lender may participate or assign its interest in the Senior Debt Facilities in minimum amounts of at least $5,000,000 subject to the approval of the Company and the Agents, which shall not be unreasonably withheld. In addition, at any time, any Lender may transfer all or part of its commitment under the Senior Debt Facilities to an affiliate. Miscellaneous: (1) North Carolina state law to govern; (2) All terms and conditions contained in the Agreements to be reasonably satisfactory to the Agents and to their counsel. The Company shall reimburse the Agents for all reasonable out- of pocket expenses including, but not limited to, the reasonable fees and disbursements of their counsel in connection with the preparation and execution of the Agreements and the reasonable fees and expenses of any third party consultants retained to assist the Agents in analyzing any environmental or asbestos related issues, in each case whether or not the transactions herein contemplated shall be consummated -8- Confidential November 15, 1994 or the Senior Debt Facilities shall be executed or closed; (3) Usual provisions regarding survival of Agreements, waiver and delay, extensions of maturity, modifications of agreements, severability, counterparts and enforcements, headings, definition of accounting terms in accordance with GAAP, waiver of jury trial; and (4) The Loan Agreement shall contain voting requirements that shall allow 66 2/3% in principal amount to approve certain waivers, modifications and amendments subject to customary unanimity requirements.
-9- Cumulative Pay-In-Kind (PIK) Preferred Stock Issuer: Newco and, following the Merger, Canoe (the "Company"). Facility: Cumulative Redeemable Pay-In-Kind (PIK) Preferred Stock (the "Preferred Stock"). Amount: $100,000,000 (the "Purchase Price"). Shares Issued: 100,000. Price Per Share: $1,000 (the "Purchase Price Per Share"). Purchaser: First Union Corporation or an affiliate thereof ("First Union"). Use of Proceeds: To facilitate the consummation of the Merger as described in the Commitment Letter. Redemption Date: 8 years from closing. Dividend Rate: 10.0% Dividend Payments: Semi-annual; to be paid in cash or in-kind for the first three years at the option of the Company; thereafter, dividends will be payable in cash, subject to the terms of the Senior Debt Facilities. Call Protection: None. Warrants: The Preferred Stock will carry detachable warrants exercisable into Non-Voting Common Stock of the Company, which represents 5.1337% of all Common Stock on a fully- diluted basis. Conditions Precedent: The purchase of the Preferred Stock will be subject to the execution of a satisfactory Preferred Stock and Warrant Purchase Agreement, and any necessary related documents; as well as the satisfaction of conditions precedent as outlined in the Senior Debt Facilities, which are hereby incorporated by reference, and any other conditions deemed appropriate by the Purchaser for similar financings and for this transaction in particular. -10- Confidential November 15, 1994 Protective Provisions: The Company shall not, without first obtaining consent or approval of the holders of at least two-thirds of the Preferred Stock, do any of the following: (i) Create any senior stock having preference or priority over the Preferred Stock as to dividends or upon redemption, liquidation, winding up or dissolution; (ii) Adversely amend or alter any preferences, rights or powers of the Preferred Stock; (iii) Pay other than Permitted Dividends, provided, however, that once all dividends have been paid on the Preferred Stock in cash and the Company has redeemed all prior in- kind dividends, the Company may pay cash dividends on the Common Stock in an annual amount not to exceed (i) 2.5% multiplied by (ii) an amount equal to (x) the Merger Price Per Share multiplied by (y) the total Shares of voting and Non- Voting Common Stock outstanding; and (iv) Except as contemplated by the Merger Agreement, redeem or repurchase any junior stock, warrants or other parity stock. Certain Events: The following shall constitute an Event: (i) Failure to declare and pay semi-annual dividends on the Preferred Stock in full; (ii) Failure to redeem or pay the Redemption Price in full when required; (iii) Certain events of bankruptcy, receivership or similar proceedings; and (iv) Failure to observe any Protective Provisions. Rights Upon an Event: Upon and during the continuance of an Event, the Purchaser may elect one representative to the Board of Directors of the Company. -11- Confidential November 15, 1994 Change in Control/ Sale of Assets: In the event there occurs a Change of Control (an event which results in Delcor, Inc. or its affiliates owning less than 51% of the voting Common Stock of the Company) or sale of substantially all of the Company's assets, any holder of Preferred Stock may require the Company to redeem all of the shares of Preferred Stock held by such holder at a price equal to the Purchase Price per share plus all Accrued Dividends thereon to the date of redemption. Transfer Rights: Beginning eighteen months after the consummation of the Merger, any holder of the Preferred Stock may sell or transfer in whole or in part, any shares of Preferred Stock held by such holder subject to (i) the Company's consent, which shall not be unreasonably withheld and (ii) the Company's first right of refusal. Attendance Rights: Following the Merger, the Company will permit a representative of the Purchaser to attend all meetings of the Company's Board of Directors or committees. Reimbursement of Expenses: The Purchaser shall be reimbursed for reasonable out-of-pocket expenses (including fees and disbursements for counsel) incurred in connection with the issuance of the Preferred Stock and the Warrants. Information Requirements: The Company will provide the Purchaser with: (i) annual financial statements audited by a nationally recognized "Big Six" independent accounting firm, (ii) monthly internal financial statements, (iii) an annual budget for the next fiscal year prior to the end of the previous fiscal year, and (iv) any other information as reasonably requested by such Purchaser. Representations and Warranties: Those customarily found in purchase agreements for similar financings and any additional representations and warranties appropriate in the context of the proposed financing. -12- Confidential November 15, 1994 Warrants Issuer: Newco and, following the Merger, Canoe (the "Company"). Facility: Warrants. Purchaser: First Union Corporation or an affiliate thereof ("First Union"). Amount: In conjunction with the Cumulative Redeemable Payment-In-Kind (PIK) Preferred Stock (the "Preferred Stock"), detachable Warrants will be issued sufficient to provide the Purchaser with 5.1337% of the Common Stock of the Company on a fully-diluted basis (subject only to dilution by management options in an amount to be mutually agreed upon). Exercise Price: Nominal. Exercise Period: At any time. Maturity: Ten years from the date of issuance. Put Provisions: Subject to the terms of the Senior Debt Facilities and the Preferred Stock, the Purchaser shall have the right to sell all or part of the Warrants to the Company at a cash price (the "Put Price") as described below at any time after the earliest to occur of the following: (i) Six years after the closing date; (ii) An event which results in Delcor, Inc. or its affiliates owning less than 51% of the voting Common Stock of the Company; (iii) Any merger in which the Company is not the surviving corporation, or sale or other transfer of substantially all of the Company's assets; (iv) Acceleration of any outstanding credit facility of the Company; and (v) A qualified public equity offering by the Company; -13- Confidential November 15, 1994 provided, however, that if not exercised upon the occurrence of the event described in Section (v), the put right of the Purchaser shall terminate. The Put Price shall be the fair market value as mutually agreed upon by the Company and the Purchaser. For the purposes of this paragraph, fair market value will not include any discount for minority interest or lack of liquidity. If the parties are not able to agree on a fair market value, they will agree to engage a mutually acceptable investment banker to determine the fair market value of the Warrants. Transfer Rights: Beginning eighteen months after consummation of the Merger, any holder of the Warrants may sell or transfer in whole or in part, any Warrant shares held by such holder subject to (i) the Company's consent, which shall not be unreasonably withheld and (ii) the Company's first right of refusal. If necessary to facilitate the sale of the Warrants, the Company will amend its charter provisions to make the Warrants exchangeable into voting Common Stock of the Company. Any change in the Warrant shares from non-voting to voting will be subject to Federal Reserve guidelines. Call Provisions: Subject to the terms of the Senior Debt Facilities and the Preferred Stock and beginning seven years after the closing date, the Company shall have the right to purchase for cash all or part of the Warrants, on a pro-rata basis with all other Warrant holders, at a price equal to 100% of the Put Price determined at that time. Other Rights: In addition to the above rights, the Warrants will provide for: (i) Customary anti-dilution provisions; (ii) Piggyback rights for the Warrant shares on any public or private sale of the Company's equity securities; (iii) Two demand registration rights for the Warrant shares (taken together with Purchaser's demand registration rights for Non-Voting Common Stock) beginning January 1, 1999 or at any earlier time that the Put Provision is exercisable; and (iv) 30 days' prior notice of the record date of any cash dividendon the Common Stock. -14- Confidential November 15, 1994 Non-Voting Common Stock Issuer: Newco and, following the Merger, Canoe (the "Company"). Facility: Non-Voting Common Stock (the "Non-Voting Common Stock"). Rollover Value: $34,147,456.50 assuming the Merger Price Per Share shown below. Shares Contributed: 784,999 existing shares of Canoe. Merger Price Per Share: $43.50 (the "Merger Price Per Share"). Purchaser: First Union Corporation or an affiliate thereof ("First Union"). Use of Proceeds: To facilitate the consummation of the Merger as described in the Commitment Letter. Dividend Rights: To the extent cash dividends on Common Stock are permitted by the Senior Debt Facilities and the Preferred Stock, each holder of voting Common Stock and Non- Voting Common Stock shall share ratably in any such dividends. Put Provisions: Subject to the terms of the Senior Debt Facilities and the Preferred Stock, the Purchaser shall have the right to sell all or part of the Non-Voting Common Stock to the Company at a cash price (the "Put Price") as described below at any time after the earliest to occur of the following: (i) Six years after the closing date; (ii) An event which results in Delcor, Inc. or its affiliates ("Delcor") owning less than 51% of the voting Common Stock of the Company; (iii) Any merger in which the Company is not the surviving corporation, or any sale or other transfer of substantially all of the Company's assets; -15- Confidential November 15, 1994 (iv) Acceleration of any outstanding credit facility of the Company; and (v) A qualified public equity offering by the Company; provided, however, that if not exercised upon the occurrence of the event described in Section (v), the put right of the Purchaser shall terminate. The Put Price shall be the fair market value as mutually agreed upon by the Company and the Purchaser. For the purposes of this paragraph, fair market value will not include any discount for minority interest, lack of liquidity or lack of voting rights. If the parties are not able to agree on a fair market value, they will agree to engage a mutually acceptable investment banker to determine the fair market value of the Non- Voting Common Stock. Transfer Rights: Beginning eighteen months after consummation of the Merger, any holder of the Non-Voting Common Stock may sell or transfer, in whole or in part, any Non-Voting Common Stock held by such holder subject to (i) the Company's consent, which shall not be unreasonably withheld and (ii) the Company's first right of refusal. If necessary to facilitate the sale of the Non-Voting Common Stock, the Company will amend its charter provisions to make the Non- Voting Common Stock exchangeable into voting Common Stock of the Company. Any such right to have the Company's charter amended shall be subject to Federal Reserve guidelines. Call Provisions: Subject to the terms of the Senior Debt Facilities and the Preferred Stock and beginning seven years after the closing date, the Company shall have the right to purchase for cash all or part of the Non-Voting Common Stock, on a pro-rata basis with all other Non-Voting Common Stock holders, at a price equal to 100% of the Put Price determined at that time. Conditions Precedent: The purchase of the Non-Voting Common Stock will be subject to the execution of a satisfactory Non-Voting Common Stock Purchase Agreement, and any necessary related documents; as well as the satisfaction of conditions precedent as outlined in the Senior Debt Facilities, which are hereby incorporated by reference, and any other conditions deemed appropriate by the Purchaser for similar financings and for this transaction in particular. -16- Confidential November 15, 1994 Attendance Rights: Following the Merger, and provided that the Preferred Stock has been redeemed in full, the Company will permit a representative of the Purchaser to attend all meetings of the Company's Board of Directors or committees. Other Rights: In addition to the above rights, the Non- Voting Common Stock will provide for: (i) Customary anti-dilution provisions; (ii) Piggyback rights on any public or private sale of the Company's equity securities; and (iii) Two demand registration rights (taken together with Purchaser's demand registration rights for Warrant shares) beginning January 1, 1999 or at any earlier time that the Put Provision is exercisable. Reimbursement of Expenses: The Purchaser shall be reimbursed for reasonable out-of-pocket expenses (including fees and disbursements for counsel) incurred in connection with the issuance of the Non-Voting Common Stock. Information Requirements: The Company will provide the Purchaser with: (i) annual financial statements audited by a nationally recognized "Big Six" independent accounting firm, (ii) monthly internal financial statements, (iii) an annual budget for the next fiscal year prior to the end of the previous fiscal year, and (iv) any other information as reasonably requested by such Purchaser. Representations and Warranties: Those customarily found in purchase agreements for similar financings and any additional representations and warranties appropriate in the context of the proposed financing. -17-