HMT TECHNOLOGY CORP
8-K, 1997-02-06
MAGNETIC & OPTICAL RECORDING MEDIA
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<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 8-K

                                 CURRENT REPORT
                     Pursuant to Section 13 or 15(d) of the
                         Securities Exchange Act of 1934


       Date of Report (Date of earliest event reported): January 21, 1997




                           HMT TECHNOLOGY CORPORATION
             (Exact name of registrant as specified in its charter)



      Delaware                   0-27586                 94-3084354
(State of jurisdiction)   (Commission File No.)         (IRS Employer
                                                             Identification No.)



                                1055 Page Avenue
                                Fremont, CA 94538
              (Address of principal executive offices and zip code)



       Registrant's telephone number, including area code: (510) 490-3100










                                       1.
<PAGE>   2
Item 5.  Other Events



         On January 21, 1997, HMT Technology Corporation (the "Company") sold by
a private placement $200,000,000 aggregate principal amount of its 5-3/4%
Convertible Subordinated Notes due 2004 (the "Notes"). On January 27, 1997, the
Company completed a private placement of an additional $30,000,000 aggregate
principal amount of Notes. The Notes have an interest rate of 5-3/4%, are
convertible into shares of common stock of the Company at a conversion price of
$23.75 per share, subject to adjustment in certain events, and have a seven-year
term. The Notes are redeemable, in whole or in part, at the option of the
company, at any time on and after January 20, 2000.


Item 7.  Financial Statements, Pro Forma Financial Information and Exhibits




(c)      Exhibits.

Exhibit
Number                     Description
- ---------                  --------------

 4.5          Form of Restricted Global Convertible Subordinated Note due 2004

 4.6          Form of Unrestricted Global Convertible Subordinated Note due 2004

 4.7          Form of Certificated Convertible Subordinated Note due 2004

 4.8          Indenture, dated as of January 15, 1997, between HMT Technology
              Corporation (the "Company") and State Street Bank and Trust
              Company of California, N.A., as Trustee.

 4.9          Registration Agreement, dated as of January 15, 1997, among the
              Company, Salomon Brothers Inc, Alex. Brown & Sons Incorporated,
              Hambrecht & Quist LLC and Robertson, Stephens & Company LLC
              (collectively, the "Initial Purchasers").

 4.10         Purchase Agreement, dated January 15, 1997, between the Company
              and the Initial Purchasers.

 4.11         Amended and Restated Revolving Credit Agreement, dated as of
              August 28, 1996.

 4.12         First Amendment to Amended and Restated Revolving Credit
              Agreement, dated January 14, 1997.

 99.1         Press Release, titled "HMT Technology Corporation Announces
              Completion of Private Placement of Convertible Subordinated
              Notes," dated January 22, 1997.


                                       2.
<PAGE>   3
                                   SIGNATURES


         Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.

                                                HMT Technology Corporation



Dated:  February 6, 1997                      By: /s/ Peter S. Norris
                                                  --------------------
                                                        Peter S. Norris
                                                        Chief Financial Officer


                                       3.
<PAGE>   4
                                  EXHIBIT INDEX


Exhibit
Number                     Description
- ---------                  --------------

 4.5          Form of Restricted Global Convertible Subordinated Note due 2004

 4.6          Form of Unrestricted Global Convertible Subordinated Note due 2004

 4.7          Form of Certificated Convertible Subordinated Note due 2004

 4.8          Indenture, dated as of January 15, 1997, between HMT Technology
              Corporation (the "Company") and State Street Bank and Trust
              Company of California, N.A., as Trustee.

 4.9          Registration Agreement, dated as of January 15, 1997, among the
              Company, Salomon Brothers Inc, Alex. Brown & Sons Incorporated,
              Hambrecht & Quist LLC and Robertson, Stephens & Company LLC
              (collectively, the "Initial Purchasers").

 4.10         Purchase Agreement, dated January 15, 1997, between the Company
              and the Initial Purchasers.

 4.11         Amended and Restated Revolving Credit Agreement, dated as of
              August 28, 1996.

 4.12         First Amendment to Amended and Restated Revolving Credit
              Agreement, dated January 14, 1997.

 99.1         Press Release, titled "HMT Technology Corporation Announces
              Completion of Private Placement of Convertible Subordinated
              Notes," dated January 22, 1997.




                                       4.

<PAGE>   1
                                                                     EXHIBIT 4.5

         UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW
YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN SUCH NAME AS IS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO SUCH ENTITY
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH
AS THE REGISTERED OWNED HEREOF HAS AN INTEREST HEREIN.

         TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
INDENTURE REFERRED TO ON THE REVERSE HEREOF.

         THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING THIS
SECURITY, AGREES FOR THE BENEFIT OF THE COMPANY THAT THIS SECURITY MAY NOT BE
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED (X) PRIOR TO THE THIRD ANNIVERSARY (OR
SUCH SHORTER PERIOD AS MAY THEN BE APPLICABLE UNDER THE SECURITIES ACT REGARDING
THE HOLDING PERIOD FOR NOTES UNDER RULE 144(k) OF THE SECURITIES ACT OR ANY
SUCCESSOR RULE) OF THE ISSUANCE HEREOF (OR ANY PREDECESSOR SECURITY HERETO) OR
(Y) BY ANY HOLDER THAT WAS AN AFFILIATE OF THE COMPANY AT ANY TIME DURING THE
THREE MONTHS PRECEDING THE DATE OF SUCH TRANSFER, IN EITHER CASE OTHER THAN (1)
TO THE COMPANY, (2) SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO
RULE 144A UNDER THE SECURITIES ACT ("RULE 144A") TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF
RULE 144A PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A (AS INDICATED BY THE BOX CHECKED
BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE SIDE OF THIS
SECURITY) AND A CERTIFICATE WHICH MAY BE OBTAINED FROM THE COMPANY OR THE
TRUSTEE IS DELIVERED BY THE TRANSFEREE TO THE COMPANY AND THE TRUSTEE, (3) IN AN
OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT
(AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF
TRANSFER ON THE REVERSE OF THIS SECURITY), AND, IF SUCH TRANSFER IS BEING
EFFECTED BY CERTAIN TRANSFERORS SPECIFIED IN THE INDENTURE (AS DEFINED BELOW)
PRIOR TO THE EXPIRATION OF THE "40 DAY RESTRICTED PERIOD" (WITHIN THE MEANING OF
RULE 903(c)(3) OF REGULATION S UNDER THE SECURITIES ACT), A CERTIFICATE

 
<PAGE>   2
WHICH MAY BE OBTAINED FROM THE COMPANY OR THE TRUSTEE IS DELIVERED BY THE
TRANSFEREE TO THE COMPANY AND THE TRUSTEE, (4) TO AN INSTITUTION THAT IS AN
"ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE
SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE
CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY) THAT IS ACQUIRING THIS
SECURITY FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION, AND A CERTIFICATE
WHICH MAY BE OBTAINED FROM THE COMPANY OR THE TRUSTEE IS DELIVERED BY THE
TRANSFEREE TO THE COMPANY AND THE TRUSTEE (PROVIDED THAT CERTAIN HOLDERS
SPECIFIED IN THE INDENTURE MAY NOT TRANSFER THIS SECURITY PURSUANT TO THIS
CLAUSE (4) PRIOR TO THE EXPIRATION OF THE "40 DAY RESTRICTED PERIOD" (WITHIN THE
MEANING OF RULE 903(c)(3) OF REGULATION S UNDER THE SECURITIES ACT), (5)
PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY
RULE 144 (IF APPLICABLE) UNDER THE SECURITIES ACT AND A CERTIFICATE WHICH MAY BE
OBTAINED FROM THE COMPANY OR THE TRUSTEE IS DELIVERED BY THE TRANSFEREE TO THE
COMPANY AND THE TRUSTEE, OR (6) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND A CERTIFICATE WHICH MAY BE OBTAINED FROM THE
COMPANY OR THE TRUSTEE IS DELIVERED BY THE TRANSFEREE TO THE COMPANY AND THE
TRUSTEE, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY
STATE OF THE UNITED STATES OR OTHER JURISDICTION. AN INSTITUTIONAL ACCREDITED
INVESTOR HOLDING THIS SECURITY AGREES THAT IT WILL FURNISH TO THE COMPANY AND
THE TRUSTEE SUCH CERTIFICATES AND OTHER INFORMATION AS THEY MAY REASONABLY
REQUIRE TO CONFIRM THAT ANY TRANSFER BY IT OF THIS SECURITY COMPLIES WITH THE
FOREGOING RESTRICTIONS. THE HOLDER HEREOF, BY PURCHASING THIS SECURITY,
REPRESENTS AND AGREES FOR THE BENEFIT OF THE COMPANY THAT IT IS (1) A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A OR (2) AN INSTITUTION THAT
IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER
THE SECURITIES ACT AND THAT IT IS HOLDING THIS SECURITY FOR INVESTMENT PURPOSES
AND NOT FOR DISTRIBUTION OR (3) A NON-U.S. PERSON OUTSIDE THE UNITED STATES
WITHIN THE MEANING OF (OR AN ACCOUNT SATISFYING THE REQUIREMENTS OF PARAGRAPH
(o)(2) OF RULE 902) UNDER REGULATION S UNDER THE SECURITIES ACT.

 

                                       -2-
<PAGE>   3
No. 1

                                                             Cusip No. 403917AB3

                           HMT TECHNOLOGY CORPORATION
                      5 3/4% CONVERTIBLE SUBORDINATED NOTE

                                    DUE 2004

                           HMT TECHNOLOGY CORPORATION

         HMT Technology Corporation, a Delaware corporation (the "Company")
promises to pay to CEDE & CO. or registered assigns, the principal sum indicated
on Schedule A hereof on January 15, 2004, and to pay interest thereon accruing
from January 21, 1997 at the rate of 5 3/4% per annum.

         Interest Payment Dates: January 15 and July 15, commencing July 15,
                                 1997

         Record Date:            June 30 and December 31

         Reference is hereby made to the further provisions of this Convertible
Note set forth on the reverse hereof which further provisions shall for all
purposes have the same effect as if set forth at this place.

 
<PAGE>   4
         IN WITNESS WHEREOF, HMT Technology Corporation has caused this
Convertible Note to be signed manually or by facsimile by its duly authorized
officers and a facsimile of its corporate seal to be affixed hereto or imprinted
hereon.

Dated: January 21, 1997

                       HMT TECHNOLOGY CORPORATION

                       By:_____________________________________________________
                          Peter S. Norris, Vice President, Finance, Chief
                          Financial Officer, Treasurer and Assistant
                          Secretary

                       By:_____________________________________________________
                          James C. Kitch, Secretary

[Seal]

TRUSTEE'S CERTIFICATE OF
AUTHENTICATION

This is one of the 5 3/4% Convertible Subordinated Notes due 2004 described in
the within-mentioned Indenture.

State Street Bank and Trust Company of California, N.A.,
as Trustee

By:__________________________
    Authorized Officer

 

                                       -2-
<PAGE>   5
                           HMT TECHNOLOGY CORPORATION

                  5 3/4% CONVERTIBLE SUBORDINATED NOTE DUE 2004

         1. Interest. HMT Technology Corporation, a Delaware corporation (the
"Company"), is the issuer of this 5 3/4% Convertible Subordinated Note due 2004
(the "Convertible Note"). The Company promises to pay interest on the
Convertible Notes in cash semiannually on each January 15 and July 15,
commencing on July 15, 1997, to holders of record on the immediately preceding
June 30 and December 31.

                  Interest on the Convertible Notes will accrue from the most
recent date to which interest has been paid, or if no interest has been paid,
from January 21, 1997. Interest will be computed on the basis of a 360-day year
of 12 30-day months. To the extent lawful, the Company shall pay interest
(including post-petition interest in any proceeding under any Bankruptcy Law) on
overdue installments of interest (without regard to any applicable grace period)
at the rate borne by the Convertible Notes, compounded annually.

         2. Method of Payment. The Company will pay interest and Liquidated
Damages, if any, on the Convertible Notes (except defaulted interest) to the
persons who are registered holders of the Convertible Notes entitled to such
payments at the close of business on the record date for the next interest
payment date even though Convertible Notes are cancelled after the record date
and on or before the interest payment date. The Noteholder hereof must surrender
Convertible Notes to a Paying Agent to collect principal payments. The Company
will pay principal and interest and Liquidated Damages, if any, in money of the
United States that at the time of payment is legal tender for payment of public
and private debts. However, the Company may pay principal and interest and
Liquidated Damages, if any, by check payable in such money. It may mail an
interest check to a holder's registered Address.

         3. Paying Agent and Registrar. The Trustee will act as Paying Agent,
Registrar and Conversion Agent. The Company may change any Paying Agent,
Registrar, co-registrar or Conversion Agent without prior notice. The Company or
any of its Affiliates may act in any such capacity.

         4. Indenture. The Company issued the Convertible Notes under an
indenture, dated as of January 15, 1997 (the "Indenture"), between the Company
and State Street Bank and Trust Company of California, N.A., as Trustee. The
terms of the Convertible Notes include those stated in the Indenture (which is
incorporated hereby as though fully set forth herein) and those made part of the
Indenture by the Trust Indenture Act of 1939 (15 U.S. Code Sections
77aaa-77bbbb) as in effect on the date of the Indenture. The Convertible Notes
are subject to, and ratified by, all such terms, certain of which are summarized
hereon, and Noteholders are referred to the Indenture and such Act for a
statement of such terms. The Convertible Notes are unsecured obligations of the
Company limited to (except as otherwise provided in the Indenture) up to an
aggregate principal amount of $200,000,000 (plus up to $30,000,000 aggregate
principal amount of Convertible Notes that may be sold by the Company pursuant
to the over-allotment option granted pursuant to the Purchase Agreement), and

 
<PAGE>   6
are subordinated in right of payment to all existing and future Senior Debt of
the Company as provided in the Indenture. The Indenture does not limit the
ability of the Company or any of its Subsidiaries to incur indebtedness or to
grant security interests or liens in respect of their assets. Any holder of this
Convertible Note shall be deemed to have agreed to and be bound by all the terms
and conditions contained in the Indenture applicable to a holder of a
Convertible Note.

         5. Optional Redemption. The Convertible Notes are not subject to
redemption at the Company's option prior to January 20, 2000. On such date and
thereafter, the Convertible Notes will be subject to redemption at the option of
the Company, in whole or in part (in any integral multiple of $1,000), upon not
less than 15 nor more than 60 days' prior notice by mail at the following
redemption prices (expressed as -percentages of the principal amount set forth
below), if redeemed during the 12-month period beginning January 15 of the years
indicated:

<TABLE>
<CAPTION>
                                                            REDEMPTION
                        YEAR                                  PRICE
                        ----                                  -----
<S>                                                         <C>

2000.................................................       103.286%
2001.................................................       102.464
2002.................................................       101.643
2003.................................................       100.821
</TABLE>


and, at January 15, 2004, 100% in each case together with accrued and unpaid
interest and Liquidation Damages, if any, up to but not including the redemption
date (subject to the right of holders of record an the relevant record date to
receive interest due on an interest payment date). On or after the redemption
date, interest will cease to accrue on the Convertible Notes, or portion
thereof, called for redemption.

         6. Notice of Redemption. Notice of redemption will be mailed at least
15 days but not more than 60 days before the redemption date to each holder of
the Convertible Notes to be redeemed at his address of record. The Convertible
Notes in denominations larger than $1,000 may be redeemed in part but only in
integral multiples of $1,000. In the event of a redemption of less than all of
the Convertible Notes, the Convertible Notes will be chosen for redemption by
the Trustee in accordance with the Indenture. Unless the Company defaults in
making such redemption payment, or the Paying Agent is prohibited from making
such payment pursuant to the Indenture, interest and Liquidated Damages cease to
accrue on the Convertible Notes or portions of them called for redemption on and
after the redemption date.

                  If this Convertible Note is redeemed subsequent to a record
date with respect to any interest payment date specified above and on or prior
to such interest payment date, then any accrued interest or Liquidated Damages,
if any, payable on such interest payment date will be paid to the person in
whose name this Convertible Note is registered at the close of business on such
record date.

 

                                       -2-
<PAGE>   7
         7. Mandatory Redemption. The Company will not be required to make
mandatory redemption payments with respect to the Convertible Notes. There are
no sinking fund payments with respect to the Convertible Notes.

         8. Repurchase at Option of Holder. If there is a Designated Event, the
Company shall be required to offer to purchase on the Designated Event Payment
Date all outstanding Convertible Notes at a purchase price equal to 101% of the
principal amount thereof on the date of purchase, plus accrued and unpaid
interest and Liquidated Damages, if any, to the Designated Event Payment Date.
Holders of Convertible Notes that are subject to such a Designated Event Offer
will be mailed a notice of Designated Event Offer from the Company prior to any
related Designated Event Payment Date and, in accordance with the procedures and
terms set forth in the Indenture, may elect to have such Convertible Notes or
portions thereof in authorized denominations purchased by completing the form
entitled "Option of Noteholder To Elect Purchase." Noteholders have the right to
withdraw their election by delivering a written notice of withdrawal to the
Paying Agent in accordance with the terms of the Indenture.

         9. Subordination. The payment of the principal of, premium, if any,
interest on, Liquidated Damages, if any, or any other amounts due on the
Convertible Notes is subordinated in right of payment to all existing and future
Senior Debt of the Company, as described in the Indenture. Each Noteholder, by
accepting a Convertible Note, agrees to such subordination and authorizes and
directs the Trustee on its behalf to take such action as may be necessary or
appropriate to effectuate the subordination so provided and appoints the Trustee
as its attorney-in-fact for such purpose.

         10. Conversion. The holder of any Convertible Note has the right,
exercisable at any time after 90 days following the date of original issuance
thereof and prior to the close of business (New York time) on the date of the
Convertible Note's maturity, to convert the principal amount thereof (or any
portion thereof that is an integral multiple of $1,000) into shares of Common
Stock at the initial Conversion Price of $23.75 per share, subject to adjustment
under certain circumstances, except that if a Convertible Note is called for
redemption, the conversion right will terminate at the close of business on the
Business Day immediately preceding the date fixed for redemption.

                  To convert a Convertible Note, a holder must (1) complete and
sign a notice of election to convert substantially in the form set forth below,
(2) surrender the Convertible Note to a Conversion Agent, (3) furnish
appropriate endorsements or transfer documents if required by the Registrar or
Conversion Agent and (4) pay any transfer or similar tax, if required. Upon
conversion, no adjustment or payment will be made for interest or dividends, but
if any Noteholder surrenders a Convertible Note for conversion after the close
of business on the record date for the payment of an installment of interest and
Liquidated Damages, if any, and prior to the opening of business on the next
interest payment date, then, notwithstanding such conversion, the interest and
Liquidated Damages, if any, payable on such interest payment date will be paid
to the registered holder of such Convertible Note on such record date. In such
event, such Convertible Note, when surrendered for conversion, must be
accompanied by payment in funds acceptable to the Company of an amount equal to
the interest and Liquidated Damages, if any, payable on such interest payment
date on the portion so converted. The number of shares of Common Stock issuable
upon conversion of a

 

                                       -3-
<PAGE>   8
Convertible Note is determined by dividing the principal amount of the
Convertible Note converted by the Conversion Price in effect on the Conversion
Date. No fractional shares will be issued upon conversion but a cash adjustment
will be made for any fractional interest.

                  A Convertible Note in respect of which a holder has delivered
an "Option of Noteholder to Elect Purchase" form appearing below exercising the
option of such holder to require the Company to purchase such Convertible Note
may be converted only if the notice of exercise is withdrawn as provided above
and in accordance with the terms of the Indenture. The above description of
conversion of the Convertible Notes is qualified by reference to, and is subject
in its entirety by, the more complete description thereof contained in the
Indenture.

         11. Registration Rights. The holder of this Convertible Note is
entitled to the benefits of a Registration Agreement, dated as of January 15,
1997, between Company and the Initial Purchasers (the "Registration Agreement").
Pursuant to the Registration Agreement the Company has agreed for the benefit of
the holders of the Convertible Notes and the Common Stock issuable upon
conversion thereof that are, in either case, Registrable Securities, that (i) it
will, at its cost, within 75 days after the first closing of the sale of the
Convertible Notes (the "Closing"), file a shelf registration statement (the
"Shelf Registration Statement") with the Securities and Exchange Commission (the
"Commission") with respect to resales of the Convertible Notes and the Common
Stock issuable upon conversion thereof, (ii) the Company will use all reasonable
efforts to cause such Shelf Registration Statement to be declared effective
under the Securities Act as soon as practicable but in any event, within 105
days after the Closing and (iii) the Company will use all reasonable efforts to
keep such Shelf Registration Statement continuously effective under the
Securities Act until the earlier of (a) the third anniversary of the last date
of original issuance of the Convertible Notes, (b) the date on which the
Convertible Notes or the Common Stock issuable upon conversion thereof may be
sold by non-affiliates of the Company pursuant to paragraph (k) of Rule 144 (or
any successor provision) promulgated by the Commission under the Securities Act
and (c) the date as of which all the Convertible Notes or the Common Stock
issuable upon conversion thereof have been sold pursuant to such Shelf
Registration Statement. Any resale of the Convertible Notes or the Common Stock
issued upon conversion thereof pursuant to the Shelf Registration Statement must
be made in accordance with the terms provided in the Registration Agreement.
Pursuant to the Registration Agreement, the Company may suspend the use of the
prospectus which is a part of the Shelf Registration Statement for one period in
any three month period or three periods in any twelve month period under certain
circumstances (each, a "Deferral Period") and no deferral shall exceed 30 days.

                  If (i) the Shelf Registration Statement has not been filed on
or prior to the date seventy-five days following the Closing Date (as defined in
the Purchase Agreement), (ii) the Shelf Registration Statement has not been
declared effective under the Securities Act on or before the date one hundred
five days following the Closing Date, (iii) prior to the end of the Shelf
Registration Period (as defined in the Registration Agreement), the Commission
shall have issued a stop order suspending the effectiveness of the Shelf
Registration Statement or proceedings have been initiated with respect to the
Shelf Registration Statement under Section 8(d) or 8(e) of the Act, (iv) the
aggregate number of days in any one Deferral Period exceeds the periods
permitted pursuant to Section 2(c) of the Registration Agreement or (v) the
number of Deferral Periods exceeds the number

 

                                       -4-
<PAGE>   9
permitted pursuant to Section 2(c) of the Registration Agreement (each of the
events of a type described in any of the foregoing clauses (i) through (v) are
individually referred to herein as an "Event"; and the date seventy-five days
following the Closing Date in the case of clause (i), the date one hundred five
days following the Closing Date in the case of clause (ii), the date on which
the effectiveness of the Shelf Registration Statement has been suspended or
proceedings with respect to the Shelf Registration Statement under Section 8(d)
or 8(e) of the Act have been commenced in the case of clause (iii), the date on
which the duration of a Deferral Period exceeds the periods permitted by Section
2(c) of the Registration Agreement in the case of clause (iv), and the date of
the commencement of a Deferral Period that causes the limit on the number of
Deferral Periods under Section 2(c) of the Registration Agreement to be exceeded
in the case of clause (v), are referred to herein as an "Event Date"). Events
shall be deemed to continue until the date of the termination of such Event,
which shall be the following date with respect to the respective types of
Events: the date the Registration Statement is filed in the case of an Event of
the type described in clause (i), the date the Registration Statement is
declared effective under the Act in the case of an Event described in clause
(ii), the date that all stop orders suspending effectiveness of the Shelf
Registration Statement have been removed and the proceedings initiated with
respect to the Shelf Registration Statement under Section 8(d) or 8(e) of the
Act have terminated, as the case may be, in the case of Events of the types
described in clause (iii), termination of the Deferral Period which caused the
aggregate number of days in any one Deferral Period to exceed the number
permitted by Section 2(c) of the Registration Agreement to be exceeded in the
case of Events of the type described in clause (iv), and termination of the
Deferral Period the commencement of which caused the number of Deferral Periods
permitted by Section 2(c)(ii) of the Registration Agreement to be exceeded in
the case of Events of the type described in clause (v).

                  Accordingly, upon the occurrence of any Event and until such
time as there are no Events which have occurred and are continuing (a "Damages
Accrual Period"), commencing on the Event Date on which such Damages Accrual
Period began, the Company agrees to pay, as liquidated damages, and not as a
penalty, an additional amount (the "Liquidated Damages"): (A) to each holder of
the Convertible Notes, during such time as such holder is a Notice Holder (as
defined in the Registration Agreement), accruing at a rate equal to one-half of
one percent per annum (50 basis points) on (s) the aggregate principal amount of
the Convertible Notes held by such Notice Holder and (t) where such Convertible
Notes have been converted into shares of Common Stock, the aggregate principal
amount of the Convertible Notes that were converted into such shares and (B) if
the Damages Accrual Period continues for a period in excess of thirty days from
the Event Date, from and after the end of such thirty day period until such time
as there are no Events which have occurred and are continuing, to each holder of
the Convertible Notes (whether or not a Notice Holder), accruing at a rate equal
to one-half of one percent per annum (50 basis points) on (u) the aggregate
principal amount of the Convertible Notes held by such Notice Holder and (v)
where such Convertible Notes have been converted into shares of Common Stock,
the aggregate principal amount of the Convertible Notes that were converted into
such shares. Notwithstanding the fore going, no Liquidated Damages shall accrue
under clause (A) of the preceding sentence during any period for which
Liquidated Damages accrue under clause (B) of the preceding sentence or as to
the Convertible Notes or shares of Common Stock from and after the earlier of
(x) the date such Convertible Notes or shares of Common Stock are no longer
Registrable Securities (as defined in the

 

                                       -5-
<PAGE>   10
Registration Agreement), and (y) the expiration of the Shelf Registration
Period. In addition, Liquidated Damages will not accrue as to any Convertible
Note or Common Stock issuable upon conversion thereof represented by the
Unrestricted Global Note (as defined in the Indenture) provided that such
securities are not subject to limitations on transfer under U.S. federal or
state securities laws and there shall have been at least six months during which
the Shelf Registration Statement was effective and available for effecting
resales of the Convertible Notes and the Common Stock issuable upon conversion
thereof. The rate of accrual of the Liquidated Damages with respect to any
period shall not exceed the rate provided for in this paragraph notwithstanding
the occurrence of multiple concurrent Events. Liquidated Damages due on any of
the Convertible Notes or Common Stock into which they have been converted shall
be payable on each interest payment date occurring during the Damages Accrual
Period and on the interest payment date immediately following (or which would
have followed) the termination of such period, and shall be considered
additional interest for all purposes of the Convertible Notes and the Indenture.

         12. Denominations, Transfer, Exchange. The Convertible Notes are in
registered form, without coupons, in denominations of $1,000 and integral
multiples of $1,000. The transfer of Convertible Notes may be registered, and
Convertible Notes may be exchanged, as provided in the Indenture. The Registrar
may require a Noteholder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and fees required by
law or permitted by the Indenture. The Registrar need not exchange or register
the transfer of any Convertible Note or portion of a Convertible Note selected
for redemption (except the unredeemed portion of any Convertible Note being
redeemed in part). Also, it need not exchange or register the transfer of any
Convertible Note for a period of 15 days before a selection of Convertible Notes
to be redeemed.

         13. Persons Deemed Owners. Except as provided in paragraph 2 of this
Convertible Note, the registered Noteholder of a Convertible Note may be treated
as its owner for all purposes.

         14. Unclaimed Money. If money for the payment of principal, interest or
Liquidated Damages, if any, remains unclaimed for the shorter of two years after
such payment was due or a period ending 10 Business Days prior to the date such
funds would escheat to the State, the Trustee and the Paying Agent shall pay the
money back to the Company at its request. After that, Noteholders of Convertible
Notes entitled to the money must look to the Company for payment unless an
abandoned property law designates another person and all liability of the
Trustee and such Paying Agent with respect to such money shall cease.

         15. Defaults and Remedies. The Convertible Notes shall have the Events
of Default as set forth in Section 8.1 of the Indenture. Subject to certain
limitations in the Indenture, if an Event of Default occurs and is continuing,
the Trustee by notice to the Company or the Noteholders of at least 25% in
aggregate principal amount of the then outstanding Convertible Notes by notice
to the Company and the Trustee may declare all the Convertible Notes to be due
and payable immediately, except that in the case of an Event of Default arising
from certain events of bankruptcy or insolvency, all unpaid principal, interest
and Liquidated Damages, if any, accrued on the Convertible Notes shall become
due and payable immediately without further action or notice. Upon acceleration
as described in either of the preceding sentences, the subordination provisions
of the Indenture preclude

 

                                       -6-
<PAGE>   11
any payment being made to Noteholders for at least 5 days except as otherwise
provided in the Indenture and may preclude payment entirely.

                  The Noteholders of a majority in principal amount of the
Convertible Notes then outstanding by written notice to the Trustee may rescind
an acceleration and its consequences if the rescission would not conflict with
any judgment or decree and if all existing Events of Default have been cured or
waived except nonpayment of principal or interest that has become due solely
because of the acceleration. Noteholders may not enforce the Indenture or the
Convertible Notes except as provided in the Indenture. Subject to certain
limitations, Noteholders of a majority in principal amount of the then
outstanding Convertible Notes issued under the Indenture may direct the Trustee
in its exercise of any trust or power. The Company must furnish compliance
certificates to the Trustee annually. The above description of Events of Default
and remedies is qualified by reference to, and subject in its entirety by, the
more complete description thereof contained in the Indenture.

         16. Amendments, Supplements and Waivers. Subject to certain exceptions,
the Indenture or the Convertible Notes may be amended or supplemented with the
consent of the Noteholders of at least a majority in principal amount of the
then outstanding Convertible Notes (including consents obtained in connection
with a tender offer or exchange offer for Convertible Notes), and any existing
default may be waived with the consent of the Noteholders of a majority in
principal amount of the then outstanding Convertible Notes including consents
obtained in connection with a tender offer or exchange offer for Convertible
Notes. Without the consent of any Noteholder, the Indenture or the Convertible
Notes may be amended, among other things, to cure any ambiguity, defect or
inconsistency, to provide for assumption of the Company's obligations to
Noteholders, to make any change that does not adversely affect the rights of any
Noteholder, to qualify the Indenture under the TIA, and to comply with the
requirements of the SEC in order to maintain the qualification of the Indenture
under the TIA.

         17. Trustee Dealings with the Company. The Trustee, in its individual
or any other capacity, may become the owner or pledgee of Convertible Notes and
may otherwise deal with the Company or an Affiliate with the same rights it
would have if it were not Trustee, subject to certain limitations provided for
in the Indenture and in the TIA. Any Agent may do the same with like rights.

         18. No Recourse Against Others. A director, officer, employee or
stockholder, as such, of the Company shall not have any liability for any
obligations of the Company under the Convertible Notes or the Indenture or for
any claim based on, in respect of or by reason of such obligations or their
creation. Each Noteholder, by accepting a Convertible Note, waives and releases
all such liability. The waiver and release are part of the consideration for the
issue of the Convertible Notes.

         19. Governing Law. THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL
GOVERN THE INDENTURE AND THE CONVERTIBLE NOTES WITHOUT REGARD TO CONFLICT OF LAW
PROVISIONS THEREOF.

         20. Authentication. The Convertible Notes shall not be valid until
authenticated by the manual signature of an authorized officer of the Trustee or
an authenticating agent.

 

                                       -7-
<PAGE>   12
         21. Abbreviations. Customary abbreviations may be used in the name of a
Noteholder or an assignee, such as: TEN COM (for tenants in common), TEN ENT
(for tenants by the entireties), JT TEN (for joint tenants with right of
survivorship and not as tenants in common), CUST (for Custodian), and U/G/M/A
(for Uniform Gifts to Minors Act).

         22. Definitions. Capitalized terms not defined in this Convertible Note
have the meaning given to them in the Indenture.

                  The Company will furnish to any Noteholder of the Convertible
Notes upon written request and without charge a copy of the Indenture and the
Registration Agreement. Request may be made to:

                  HMT Technology Corporation
                  1055 Page Avenue
                  Fremont, California 94538
                  Attention of:  Investor Relations

 

                                       -8-
<PAGE>   13
                   ASSIGNMENT FORM AND CERTIFICATE OF TRANSFER

         To assign this Convertible Note, fill in the form below:

         (I) or (we) assign and transfer this Convertible Note to

________________________________________________________________________________
               (Insert assignee's social security or tax I.D. no.)

________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
              (Print or type assignee's name, address and zip code)

and irrevocably appoint ___________________ agent to transfer this Convertible
Note on the books of the Company. The agent may substitute another to act for
him.

     Your Signature:_______________________________________________________
                    (Sign exactly as your name appears on the other side of this
                    Convertible Note)

         Date:_____________

         Signature Guarantee: (1)_____________________________________________

         In connection with any transfer of any of the Convertible Notes
evidenced by this certificate occurring prior to the date that is three years
(or such shorter period as may then be applicable under the Securities Act)
after the later of the date of original issuance of such Convertible Notes and
the last date, if any, on which such Convertible Notes were owned by the Company
or any Affiliate of the Company, the undersigned confirms that such Convertible
Notes are being transferred:

         CHECK ONE BOX BELOW

         (1)      \ \      to the Company; or

         (2)      \ \      pursuant to and in compliance with Rule 144A under 
                           the Securities Act of 1933; or
                           

         (3)      \ \      pursuant to and in compliance with Regulation S under
                           the Securities Act of 1933; or

                           

         (4)     \ \      to an institutional "accredited investor" as defined
                          in Rule 501(a) (1), (2), (3) or (7) under the       
                          Securities Act of 1933 that has furnished to the     
                          Trustee a signed letter containing certain           
                          representations and agreements (the form of which    
                          letter can be obtained from the Trustee); or         
                           
                           



 --------


 (1)     Signature must be guaranteed by a commercial bank, trust company or
         member firm of the New York Stock Exchange.

 
<PAGE>   14
         (5)      \ \     pursuant to Rule 144 of the Securities Act of 1933;
                          or                                                 
                           

         (6)      \ \     pursuant to another available exemption from the     
                          registration requirements of the Securities Act of
                          1933.                                             
                           
         Unless one of the boxes is checked, the Trustee will refuse to register
any of the Convertible Notes evidenced by this certificate in the name of any
person other than the registered holder thereof ; provided, however, that if box
(2), (3), (4), (5) or (6) is checked, the Trustee and the Company may require,
prior to registering any such transfer of the Convertible Notes such legal
opinions, certifications and other information as the Company has reasonably
requested to confirm that such transfer is being made pursuant to an exemption
from, or in a transaction not subject to, the registration requirements of the
Securities Act of 1933, such as the exemption provided by Rule 144 under such
Act.

                                                  _______________________
                                                        Signature

Signature Guarantee:(1)

____________________________________              _______________________
Signature must be guaranteed                            Signature


____________________
        
(1)       Signature must be guaranteed by a commercial bank, trust
          company or member firm of the New York Stock Exchange.

 

                                       -2-
<PAGE>   15
                                   SCHEDULE A

         The initial principal amount at maturity of this Global Security shall
be $188,650,000. The following increases or decreases in the principal amount of
this Global Security have been made:

<TABLE>
<CAPTION>
                        AMOUNT OF INCREASE
                      IN PRINCIPAL AMOUNT OF
                       THIS GLOBAL SECURITY
                      INCLUDING UPON EXERCISE      AMOUNT OF DECREASE IN        PRINCIPAL AMOUNT OF THIS     SIGNATURE OF AUTHORIZED
DATE                  OF THE OVER-ALLOTMENT        PRINCIPAL AMOUNT OF THIS     GLOBAL SECURITY FOLLOWING    OFFICER OF TRUSTEE OR
MADE                          OPTION                    GLOBAL SECURITY         SUCH DECREASE OR INCREASE    SECURITIES CUSTODIAN
<S>                  <C>                          <C>                          <C>                          <C> 
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
</TABLE>

 
<PAGE>   16
                     OPTION OF NOTEHOLDER TO ELECT PURCHASE

         If you want to elect to have this Convertible Note or a portion thereof
repurchased by the Company pursuant to Section 3.8 or 4.7 of the Indenture,
check the box: \ \

         If the purchase is in part, indicate the portion (in denominations of
$1,000 or any integral multiple thereof) to be purchased: __________

     Your Signature:_______________________________________________________
                    (Sign exactly as your name appears on the other side of this
                    Convertible Note)

         Date:__________________

         Signature Guarantee:(1)___________________________________________


_________________________
(1)      Signature must be guaranteed by a commercial bank, trust
         company or member firm of the New York Stock Exchange.

 
<PAGE>   17
                               ELECTION TO CONVERT

To:  HMT Technology Corporation

         The undersigned owner of $________ in principal of HMT Technology
Corporation's 5 3/4% Convertible Subordinated Notes due 2004 (the "Convertible
Note") hereby irrevocably exercises the option to convert the Convertible Note,
or the portion below designated, into Common Stock of HMT Technology Corporation
in accordance with the terms of the Indenture referred to in the Convertible
Note, and directs that the shares issuable and deliverable upon conversion,
together with any check in payment for fractional shares, be issued in the name
of and delivered to the undersigned, unless a different name has been indicated
in the assignment below. If shares are to be issued in the name of a person
other than the undersigned, the undersigned will pay all transfer taxes payable
with respect thereto.

         Any Noteholder, upon the exercise of its conversion rights in
accordance with the terms of the Indenture and the Convertible Note, agrees to
be bound by the terms of the Registration Agreement relating to the Common Stock
issuable upon conversion of the Convertible Note.

Date:

                              Amount of Convertible Note to be converted
                              ($1,000 or integral multiples thereof);

                              $_____________________________

                              Signature (for conversion only)

                              Please Print or Typewrite Name and Address,
                              Including Zip Code, and Social Security or
                              Other Identifying Number
                              ______________________________
                              Signature Guarantee (1)

________________
(1)        Signature must be guaranteed by a commercial bank, trust
           company or member firm of the New York Stock Exchange.

<PAGE>   1
                                                                     EXHIBIT 4.6


         UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW
YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN SUCH NAME AS IS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO SUCH ENTITY
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH
AS THE REGISTERED OWNED HEREOF HAS AN INTEREST HEREIN.

         TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
INDENTURE REFERRED TO ON THE REVERSE HEREOF.
<PAGE>   2
No. 2

                                                             Cusip No. U43339AA5

                           HMT TECHNOLOGY CORPORATION
                      5 3/4% CONVERTIBLE SUBORDINATED NOTE
                                    DUE 2004

                           HMT TECHNOLOGY CORPORATION

         HMT Technology Corporation, a Delaware corporation (the "Company")
promises to pay to CEDE & CO. or registered assigns, the principal sum indicated
on Schedule A hereof on January 15, 2004, and to pay interest thereon accruing
from January 21, 1997 at the rate of 5 3/4% per annum.

   Interest Payment Dates:   January 15 and July 15, commencing July 15, 1997

   Record Date:              June 30 and December 31

         Reference is hereby made to the further provisions of this Convertible
Note set forth on the reverse hereof which further provisions shall for all
purposes have the same effect as if set forth at this place.

 

                                       -1-
<PAGE>   3
         IN WITNESS WHEREOF, HMT Technology Corporation has caused this
Convertible Note to be signed manually or by facsimile by its duly authorized
officers and a facsimile of its corporate seal to be affixed hereto or imprinted
hereon.

Dated: January 21, 1997

                        HMT TECHNOLOGY CORPORATION
                       
                        By:_____________________________________________________
                                 Peter S. Norris, Vice President, Finance, Chief
                                 Financial Officer, Treasurer and Assistant
                                 Secretary
                       
                        By:_____________________________________________________
                                 James C. Kitch, Secretary
                    
[Seal]

TRUSTEE'S CERTIFICATE OF
AUTHENTICATION

This is one of the 5 3/4% Convertible 
Subordinated Notes due 2004 described 
in the within-mentioned Indenture.

State Street Bank and Trust Company of California, N.A.,
as Trustee

By:___________________________
     Authorized Officer

 

                                       -2-
<PAGE>   4
                           HMT TECHNOLOGY CORPORATION

                  5 3/4% CONVERTIBLE SUBORDINATED NOTE DUE 2004

         1. Interest. HMT Technology Corporation, a Delaware corporation (the
"Company"), is the issuer of this 5 3/4% Convertible Subordinated Note due 2004
(the "Convertible Note"). The Company promises to pay interest on the
Convertible Notes in cash semiannually on each January 15 and July 15,
commencing on July 15, 1997, to holders of record on the immediately preceding
June 30 and December 31.

                  Interest on the Convertible Notes will accrue from the most
recent date to which interest has been paid, or if no interest has been paid,
from January 21, 1997. Interest will be computed on the basis of a 360-day year
of 12 30-day months. To the extent lawful, the Company shall pay interest
(including post-petition interest in any proceeding under any Bankruptcy Law) on
overdue installments of interest (without regard to any applicable grace period)
at the rate borne by the Convertible Notes, compounded annually.

         2. Method of Payment. The Company will pay interest and Liquidated
Damages, if any, on the Convertible Notes (except defaulted interest) to the
persons who are registered holders of the Convertible Notes entitled to such
payments at the close of business on the record date for the next interest
payment date even though Convertible Notes are cancelled after the record date
and on or before the interest payment date. The Noteholder hereof must surrender
Convertible Notes to a Paying Agent to collect principal payments. The Company
will pay principal and interest and Liquidated Damages, if any, in money of the
United States that at the time of payment is legal tender for payment of public
and private debts. However, the Company may pay principal and interest and
Liquidated Damages, if any, by check payable in such money. It may mail an
interest check to a holder's registered Address.

         3. Paying Agent and Registrar. The Trustee will act as Paying Agent,
Registrar and Conversion Agent. The Company may change any Paying Agent,
Registrar, co-registrar or Conversion Agent without prior notice. The Company or
any of its Affiliates may act in any such capacity.

         4. Indenture. The Company issued the Convertible Notes under an
indenture, dated as of January 15, 1997 (the "Indenture"), between the Company
and State Street Bank and Trust Company of California, N.A., as Trustee. The
terms of the Convertible Notes include those stated in the Indenture (which is
incorporated hereby as though fully set forth herein) and those made part of the
Indenture by the Trust Indenture Act of 1939 (15 U.S. Code Sections
77aaa-77bbbb) as in effect on the date of the Indenture. The Convertible Notes
are subject to, and ratified by, all such terms, certain of which are summarized
hereon, and Noteholders are referred to the Indenture and such Act for a
statement of such terms. The Convertible Notes are unsecured obligations of the
Company limited to (except as otherwise provided in the Indenture) up to an
aggregate principal amount of $200,000,000 (plus up to $30,000,000 aggregate
principal amount of Convertible Notes that may be sold by the Company pursuant
to the over-allotment option granted pursuant to the Purchase Agreement), and

 
<PAGE>   5
are subordinated in right of payment to all existing and future Senior Debt of
the Company as provided in the Indenture. The Indenture does not limit the
ability of the Company or any of its Subsidiaries to incur indebtedness or to
grant security interests or liens in respect of their assets. Any holder of this
Convertible Note shall be deemed to have agreed to and be bound by all the terms
and conditions contained in the Indenture applicable to a holder of a
Convertible Note.

         5. Optional Redemption. The Convertible Notes are not subject to
redemption at the Company's option prior to January 20, 2000. On such date and
thereafter, the Convertible Notes will be subject to redemption at the option of
the Company, in whole or in part (in any integral multiple of $1,000), upon not
less than 15 nor more than 60 days' prior notice by mail at the following
redemption prices (expressed as -percentages of the principal amount set forth
below), if redeemed during the 12-month period beginning January 15 of the years
indicated:

<TABLE>
<CAPTION>
                                                              REDEMPTION
                        YEAR                                    PRICE
                        ----                                    -----
<S>                                                           <C>


2000.................................................          103.286%
2001.................................................          102.464
2002.................................................          101.643
2003.................................................          100.821
</TABLE>


and, at January 15, 2004, 100% in each case together with accrued and unpaid
interest and Liquidation Damages, if any, up to but not including the redemption
date (subject to the right of holders of record an the relevant record date to
receive interest due on an interest payment date). On or after the redemption
date, interest will cease to accrue on the Convertible Notes, or portion
thereof, called for redemption.

         6. Notice of Redemption. Notice of redemption will be mailed at least
15 days but not more than 60 days before the redemption date to each holder of
the Convertible Notes to be redeemed at his address of record. The Convertible
Notes in denominations larger than $1,000 may be redeemed in part but only in
integral multiples of $1,000. In the event of a redemption of less than all of
the Convertible Notes, the Convertible Notes will be chosen for redemption by
the Trustee in accordance with the Indenture. Unless the Company defaults in
making such redemption payment, or the Paying Agent is prohibited from making
such payment pursuant to the Indenture, interest and Liquidated Damages cease to
accrue on the Convertible Notes or portions of them called for redemption on and
after the redemption date.

                  If this Convertible Note is redeemed subsequent to a record
date with respect to any interest payment date specified above and on or prior
to such interest payment date, then any accrued interest or Liquidated Damages,
if any, payable on such interest payment date will be paid to the person in
whose name this Convertible Note is registered at the close of business on such
record date.

 

                                       -2-
<PAGE>   6
         7. Mandatory Redemption. The Company will not be required to make
mandatory redemption payments with respect to the Convertible Notes. There are
no sinking fund payments with respect to the Convertible Notes.

         8. Repurchase at Option of Holder. If there is a Designated Event, the
Company shall be required to offer to purchase on the Designated Event Payment
Date all outstanding Convertible Notes at a purchase price equal to 101% of the
principal amount thereof on the date of purchase, plus accrued and unpaid
interest and Liquidated Damages, if any, to the Designated Event Payment Date.
Holders of Convertible Notes that are subject to such a Designated Event Offer
will be mailed a notice of Designated Event Offer from the Company prior to any
related Designated Event Payment Date and, in accordance with the procedures and
terms set forth in the Indenture, may elect to have such Convertible Notes or
portions thereof in authorized denominations purchased by completing the form
entitled "Option of Noteholder To Elect Purchase." Noteholders have the right to
withdraw their election by delivering a written notice of withdrawal to the
Paying Agent in accordance with the terms of the Indenture.

         9. Subordination. The payment of the principal of, premium, if any,
interest on, Liquidated Damages, if any, or any other amounts due on the
Convertible Notes is subordinated in right of payment to all existing and future
Senior Debt of the Company, as described in the Indenture. Each Noteholder, by
accepting a Convertible Note, agrees to such subordination and authorizes and
directs the Trustee on its behalf to take such action as may be necessary or
appropriate to effectuate the subordination so provided and appoints the Trustee
as its attorney-in-fact for such purpose.

         10. Conversion. The holder of any Convertible Note has the right,
exercisable at any time after 90 days following the date of original issuance
thereof and prior to the close of business (New York time) on the date of the
Convertible Note's maturity, to convert the principal amount thereof (or any
portion thereof that is an integral multiple of $1,000) into shares of Common
Stock at the initial Conversion Price of $23.75 per share, subject to adjustment
under certain circumstances, except that if a Convertible Note is called for
redemption, the conversion right will terminate at the close of business on the
Business Day immediately preceding the date fixed for redemption.

                  To convert a Convertible Note, a holder must (1) complete and
sign a notice of election to convert substantially in the form set forth below,
(2) surrender the Convertible Note to a Conversion Agent, (3) furnish
appropriate endorsements or transfer documents if required by the Registrar or
Conversion Agent and (4) pay any transfer or similar tax, if required. Upon
conversion, no adjustment or payment will be made for interest or dividends, but
if any Noteholder surrenders a Convertible Note for conversion after the close
of business on the record date for the payment of an installment of interest and
Liquidated Damages, if any, and prior to the opening of business on the next
interest payment date, then, notwithstanding such conversion, the interest and
Liquidated Damages, if any, payable on such interest payment date will be paid
to the registered holder of such Convertible Note on such record date. In such
event, such Convertible Note, when surrendered for conversion, must be
accompanied by payment in funds acceptable to the Company of an amount equal to
the interest and Liquidated Damages, if any, payable on such interest payment
date on the portion so converted. The number of shares of Common Stock issuable
upon conversion of a

 

                                       -3-
<PAGE>   7
Convertible Note is determined by dividing the principal amount of the
Convertible Note converted by the Conversion Price in effect on the Conversion
Date. No fractional shares will be issued upon conversion but a cash adjustment
will be made for any fractional interest.

                  A Convertible Note in respect of which a holder has delivered
an "Option of Noteholder to Elect Purchase" form appearing below exercising the
option of such holder to require the Company to purchase such Convertible Note
may be converted only if the notice of exercise is withdrawn as provided above
and in accordance with the terms of the Indenture. The above description of
conversion of the Convertible Notes is qualified by reference to, and is subject
in its entirety by, the more complete description thereof contained in the
Indenture.

         11. Registration Rights. The holder of this Convertible Note is
entitled to the benefits of a Registration Agreement, dated as of January 15,
1997, between Company and the Initial Purchasers (the "Registration Agreement").
Pursuant to the Registration Agreement the Company has agreed for the benefit of
the holders of the Convertible Notes and the Common Stock issuable upon
conversion thereof that are, in either case, Registrable Securities, that (i) it
will, at its cost, within 75 days after the first closing of the sale of the
Convertible Notes (the "Closing"), file a shelf registration statement (the
"Shelf Registration Statement") with the Securities and Exchange Commission (the
"Commission") with respect to resales of the Convertible Notes and the Common
Stock issuable upon conversion thereof, (ii) the Company will use all reasonable
efforts to cause such Shelf Registration Statement to be declared effective
under the Securities Act as soon as practicable but in any event, within 105
days after the Closing and (iii) the Company will use all reasonable efforts to
keep such Shelf Registration Statement continuously effective under the
Securities Act until the earlier of (a) the third anniversary of the last date
of original issuance of the Convertible Notes, (b) the date on which the
Convertible Notes or the Common Stock issuable upon conversion thereof may be
sold by non-affiliates of the Company pursuant to paragraph (k) of Rule 144 (or
any successor provision) promulgated by the Commission under the Securities Act
and (c) the date as of which all the Convertible Notes or the Common Stock
issuable upon conversion thereof have been sold pursuant to such Shelf
Registration Statement. Any resale of the Convertible Notes or the Common Stock
issued upon conversion thereof pursuant to the Shelf Registration Statement must
be made in accordance with the terms provided in the Registration Agreement.
Pursuant to the Registration Agreement, the Company may suspend the use of the
prospectus which is a part of the Shelf Registration Statement for one period in
any three month period or three periods in any twelve month period under certain
circumstances (each, a "Deferral Period") and no deferral shall exceed 30 days.

                  If (i) the Shelf Registration Statement has not been filed on
or prior to the date seventy-five days following the Closing Date (as defined in
the Purchase Agreement), (ii) the Shelf Registration Statement has not been
declared effective under the Securities Act on or before the date one hundred
five days following the Closing Date, (iii) prior to the end of the Shelf
Registration Period (as defined in the Registration Agreement), the Commission
shall have issued a stop order suspending the effectiveness of the Shelf
Registration Statement or proceedings have been initiated with respect to the
Shelf Registration Statement under Section 8(d) or 8(e) of the Act, (iv) the
aggregate number of days in any one Deferral Period exceeds the periods
permitted pursuant to Section 2(c) of the Registration Agreement or (v) the
number of Deferral Periods exceeds the number

 

                                       -4-
<PAGE>   8
permitted pursuant to Section 2(c) of the Registration Agreement (each of the
events of a type described in any of the foregoing clauses (i) through (v) are
individually referred to herein as an "Event"; and the date seventy-five days
following the Closing Date in the case of clause (i), the date one hundred five
days following the Closing Date in the case of clause (ii), the date on which
the effectiveness of the Shelf Registration Statement has been suspended or
proceedings with respect to the Shelf Registration Statement under Section 8(d)
or 8(e) of the Act have been commenced in the case of clause (iii), the date on
which the duration of a Deferral Period exceeds the periods permitted by Section
2(c) of the Registration Agreement in the case of clause (iv), and the date of
the commencement of a Deferral Period that causes the limit on the number of
Deferral Periods under Section 2(c) of the Registration Agreement to be exceeded
in the case of clause (v), are referred to herein as an "Event Date"). Events
shall be deemed to continue until the date of the termination of such Event,
which shall be the following date with respect to the respective types of
Events: the date the Registration Statement is filed in the case of an Event of
the type described in clause (i), the date the Registration Statement is
declared effective under the Act in the case of an Event described in clause
(ii), the date that all stop orders suspending effectiveness of the Shelf
Registration Statement have been removed and the proceedings initiated with
respect to the Shelf Registration Statement under Section 8(d) or 8(e) of the
Act have terminated, as the case may be, in the case of Events of the types
described in clause (iii), termination of the Deferral Period which caused the
aggregate number of days in any one Deferral Period to exceed the number
permitted by Section 2(c) of the Registration Agreement to be exceeded in the
case of Events of the type described in clause (iv), and termination of the
Deferral Period the commencement of which caused the number of Deferral Periods
permitted by Section 2(c)(ii) of the Registration Agreement to be exceeded in
the case of Events of the type described in clause (v).

                  Accordingly, upon the occurrence of any Event and until such
time as there are no Events which have occurred and are continuing (a "Damages
Accrual Period"), commencing on the Event Date on which such Damages Accrual
Period began, the Company agrees to pay, as liquidated damages, and not as a
penalty, an additional amount (the "Liquidated Damages"): (A) to each holder of
the Convertible Notes, during such time as such holder is a Notice Holder (as
defined in the Registration Agreement), accruing at a rate equal to one-half of
one percent per annum (50 basis points) on (s) the aggregate principal amount of
the Convertible Notes held by such Notice Holder and (t) where such Convertible
Notes have been converted into shares of Common Stock, the aggregate principal
amount of the Convertible Notes that were converted into such shares and (B) if
the Damages Accrual Period continues for a period in excess of thirty days from
the Event Date, from and after the end of such thirty day period until such time
as there are no Events which have occurred and are continuing, to each holder of
the Convertible Notes (whether or not a Notice Holder), accruing at a rate equal
to one-half of one percent per annum (50 basis points) on (u) the aggregate
principal amount of the Convertible Notes held by such Notice Holder and (v)
where such Convertible Notes have been converted into shares of Common Stock,
the aggregate principal amount of the Convertible Notes that were converted into
such shares. Notwithstanding the fore going, no Liquidated Damages shall accrue
under clause (A) of the preceding sentence during any period for which
Liquidated Damages accrue under clause (B) of the preceding sentence or as to
the Convertible Notes or shares of Common Stock from and after the earlier of
(x) the date such Convertible Notes or shares of Common Stock are no longer
Registrable Securities (as defined in the

 

                                       -5-
<PAGE>   9
Registration Agreement), and (y) the expiration of the Shelf Registration
Period. In addition, Liquidated Damages will not accrue as to any Convertible
Note or Common Stock issuable upon conversion thereof represented by the
Unrestricted Global Note (as defined in the Indenture) provided that such
securities are not subject to limitations on transfer under U.S. federal or
state securities laws and there shall have been at least six months during which
the Shelf Registration Statement was effective and available for effecting
resales of the Convertible Notes and the Common Stock issuable upon conversion
thereof. The rate of accrual of the Liquidated Damages with respect to any
period shall not exceed the rate provided for in this paragraph notwithstanding
the occurrence of multiple concurrent Events. Liquidated Damages due on any of
the Convertible Notes or Common Stock into which they have been converted shall
be payable on each interest payment date occurring during the Damages Accrual
Period and on the interest payment date immediately following (or which would
have followed) the termination of such period, and shall be considered
additional interest for all purposes of the Convertible Notes and the Indenture.

         12. Denominations, Transfer, Exchange. The Convertible Notes are in
registered form, without coupons, in denominations of $1,000 and integral
multiples of $1,000. The transfer of Convertible Notes may be registered, and
Convertible Notes may be exchanged, as provided in the Indenture. The Registrar
may require a Noteholder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and fees required by
law or permitted by the Indenture. The Registrar need not exchange or register
the transfer of any Convertible Note or portion of a Convertible Note selected
for redemption (except the unredeemed portion of any Convertible Note being
redeemed in part). Also, it need not exchange or register the transfer of any
Convertible Note for a period of 15 days before a selection of Convertible Notes
to be redeemed.

         13. Persons Deemed Owners. Except as provided in paragraph 2 of this
Convertible Note, the registered Noteholder of a Convertible Note may be treated
as its owner for all purposes.

         14. Unclaimed Money. If money for the payment of principal, interest or
Liquidated Damages, if any, remains unclaimed for the shorter of two years after
such payment was due or a period ending 10 Business Days prior to the date such
funds would escheat to the State, the Trustee and the Paying Agent shall pay the
money back to the Company at its request. After that, Noteholders of Convertible
Notes entitled to the money must look to the Company for payment unless an
abandoned property law designates another person and all liability of the
Trustee and such Paying Agent with respect to such money shall cease.

         15. Defaults and Remedies. The Convertible Notes shall have the Events
of Default as set forth in Section 8.1 of the Indenture. Subject to certain
limitations in the Indenture, if an Event of Default occurs and is continuing,
the Trustee by notice to the Company or the Noteholders of at least 25% in
aggregate principal amount of the then outstanding Convertible Notes by notice
to the Company and the Trustee may declare all the Convertible Notes to be due
and payable immediately, except that in the case of an Event of Default arising
from certain events of bankruptcy or insolvency, all unpaid principal, interest
and Liquidated Damages, if any, accrued on the Convertible Notes shall become
due and payable immediately without further action or notice. Upon acceleration
as described in either of the preceding sentences, the subordination provisions
of the Indenture preclude

 

                                       -6-
<PAGE>   10
any payment being made to Noteholders for at least 5 days except as otherwise
provided in the Indenture and may preclude payment entirely.

                  The Noteholders of a majority in principal amount of the
Convertible Notes then outstanding by written notice to the Trustee may rescind
an acceleration and its consequences if the rescission would not conflict with
any judgment or decree and if all existing Events of Default have been cured or
waived except nonpayment of principal or interest that has become due solely
because of the acceleration. Noteholders may not enforce the Indenture or the
Convertible Notes except as provided in the Indenture. Subject to certain
limitations, Noteholders of a majority in principal amount of the then
outstanding Convertible Notes issued under the Indenture may direct the Trustee
in its exercise of any trust or power. The Company must furnish compliance
certificates to the Trustee annually. The above description of Events of Default
and remedies is qualified by reference to, and subject in its entirety by, the
more complete description thereof contained in the Indenture.

         16. Amendments, Supplements and Waivers. Subject to certain exceptions,
the Indenture or the Convertible Notes may be amended or supplemented with the
consent of the Noteholders of at least a majority in principal amount of the
then outstanding Convertible Notes (including consents obtained in connection
with a tender offer or exchange offer for Convertible Notes), and any existing
default may be waived with the consent of the Noteholders of a majority in
principal amount of the then outstanding Convertible Notes including consents
obtained in connection with a tender offer or exchange offer for Convertible
Notes. Without the consent of any Noteholder, the Indenture or the Convertible
Notes may be amended, among other things, to cure any ambiguity, defect or
inconsistency, to provide for assumption of the Company's obligations to
Noteholders, to make any change that does not adversely affect the rights of any
Noteholder, to qualify the Indenture under the TIA, and to comply with the
requirements of the SEC in order to maintain the qualification of the Indenture
under the TIA.

         17. Trustee Dealings with the Company. The Trustee, in its individual
or any other capacity, may become the owner or pledgee of Convertible Notes and
may otherwise deal with the Company or an Affiliate with the same rights it
would have if it were not Trustee, subject to certain limitations provided for
in the Indenture and in the TIA. Any Agent may do the same with like rights.

         18. No Recourse Against Others. A director, officer, employee or
stockholder, as such, of the Company shall not have any liability for any
obligations of the Company under the Convertible Notes or the Indenture or for
any claim based on, in respect of or by reason of such obligations or their
creation. Each Noteholder, by accepting a Convertible Note, waives and releases
all such liability. The waiver and release are part of the consideration for the
issue of the Convertible Notes.

         19. Governing Law. THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL
GOVERN THE INDENTURE AND THE CONVERTIBLE NOTES WITHOUT REGARD TO CONFLICT OF LAW
PROVISIONS THEREOF.

         20. Authentication. The Convertible Notes shall not be valid until
authenticated by the manual signature of an authorized officer of the Trustee or
an authenticating agent.

 

                                       -7-
<PAGE>   11
         21. Abbreviations. Customary abbreviations may be used in the name of a
Noteholder or an assignee, such as: TEN COM (for tenants in common), TEN ENT
(for tenants by the entireties), JT TEN (for joint tenants with right of
survivorship and not as tenants in common), CUST (for Custodian), and U/G/M/A
(for Uniform Gifts to Minors Act).

         22. Definitions. Capitalized terms not defined in this Convertible Note
have the meaning given to them in the Indenture.

                  The Company will furnish to any Noteholder of the Convertible
Notes upon written request and without charge a copy of the Indenture and the
Registration Agreement. Request may be made to:

                  HMT Technology Corporation
                  1055 Page Avenue
                  Fremont, California 94538
                  Attention of:  Investor Relations

 

                                       -8-
<PAGE>   12
                   ASSIGNMENT FORM AND CERTIFICATE OF TRANSFER

         To assign this Convertible Note, fill in the form below:

         (I) or (we) assign and transfer this Convertible Note to

________________________________________________________________________________
               (Insert assignee's social security or tax I.D. no.)

________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
              (Print or type assignee's name, address and zip code)

and irrevocably appoint ___________________ agent to transfer this Convertible
Note on the books of the Company. The agent may substitute another to act for
him.

   Your Signature:________________________________________________________
                  (Sign exactly as your name appears on the other side of this
                  Convertible Note)

         Date:_______________

         Signature Guarantee:(1)____________________________________________

         In connection with any transfer of any of the Convertible Notes
evidenced by this certificate occurring prior to the date that is three years
(or such shorter period as may then be applicable under the Securities Act)
after the later of the date of original issuance of such Convertible Notes and
the last date, if any, on which such Convertible Notes were owned by the Company
or any Affiliate of the Company, the undersigned confirms that such Convertible
Notes are being transferred:

         CHECK ONE BOX BELOW

         (1)     \ \       to the Company; or

         (2)     \ \        pursuant to and in compliance with Rule 144A under
                            the Securities Act of 1933; or                    
                           
                          

         (3)      \ \       pursuant to and in compliance with Regulation S 
                            under the Securities Act of 1933; or  
                            
                           

         (4)      \ \       to an institutional "accredited investor" as defined
                            in Rule 501(a) (1), (2), (3) or (7) under the       
                            Securities Act of 1933 that has furnished to the    
                            Trustee a signed letter containing certain          
                            representations and agreements (the form of which   
                            letter can be obtained from the Trustee); or        
                            
                           


____________________
(1)        Signature must be guaranteed by a commercial bank, trust
           company or member firm of the New York Stock Exchange.
<PAGE>   13
  (5)      \ \      pursuant to Rule 144 of the Securities Act of 1933; or

  (6)      \ \      pursuant to another available exemption from the 
                    registration requirements of the Securities Act of 1933.
                    

         Unless one of the boxes is checked, the Trustee will refuse to register
any of the Convertible Notes evidenced by this certificate in the name of any
person other than the registered holder thereof ; provided, however, that if box
(2), (3), (4), (5) or (6) is checked, the Trustee and the Company may require,
prior to registering any such transfer of the Convertible Notes such legal
opinions, certifications and other information as the Company has reasonably
requested to confirm that such transfer is being made pursuant to an exemption
from, or in a transaction not subject to, the registration requirements of the
Securities Act of 1933, such as the exemption provided by Rule 144 under such
Act.
                                        
                                                  _______________________
                                                         Signature

Signature Guarantee:(1)
                                                  _______________________
Signature must be guaranteed                             Signature

_______________________________________________________________________________

- ------------
(1)        Signature must be guaranteed by a commercial bank, trust
           company or member firm of the New York Stock Exchange.

 

                                       -2-
<PAGE>   14
                                   SCHEDULE A

         The initial principal amount at maturity of this Global Security shall
be $8,900,000. The following increases or decreases in the principal amount of
this Global Security have been made:

<TABLE>
<CAPTION>
                        AMOUNT OF INCREASE
                      IN PRINCIPAL AMOUNT OF
                       THIS GLOBAL SECURITY
                      INCLUDING UPON EXERCISE      AMOUNT OF DECREASE IN        PRINCIPAL AMOUNT OF THIS     SIGNATURE OF AUTHORIZED
DATE                  OF THE OVER-ALLOTMENT        PRINCIPAL AMOUNT OF THIS     GLOBAL SECURITY FOLLOWING    OFFICER OF TRUSTEE OR
MADE                          OPTION                    GLOBAL SECURITY         SUCH DECREASE OR INCREASE    SECURITIES CUSTODIAN
<S>                  <C>                          <C>                          <C>                          <C> 
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
</TABLE>


 
<PAGE>   15
                     OPTION OF NOTEHOLDER TO ELECT PURCHASE

         If you want to elect to have this Convertible Note or a portion thereof
repurchased by the Company pursuant to Section 3.8 or 4.7 of the Indenture,
check the box: \ \

         If the purchase is in part, indicate the portion (in denominations of
$1,000 or any integral multiple thereof) to be purchased: __________

   Your Signature:______________________________________________________
                  (Sign exactly as your name appears on the other side of this
                  Convertible Note)

         Date:__________________

         Signature Guarantee:(1)________________________________________

- --------
(1)    Signature must be guaranteed by a commercial bank, trust
       company or member firm of the New York Stock Exchange.

 
<PAGE>   16
                               ELECTION TO CONVERT

To:  HMT Technology Corporation

         The undersigned owner of $________ in principal of HMT Technology
Corporation's 5 3/4% Convertible Subordinated Notes due 2004 (the "Convertible
Note") hereby irrevocably exercises the option to convert the Convertible Note,
or the portion below designated, into Common Stock of HMT Technology Corporation
in accordance with the terms of the Indenture referred to in the Convertible
Note, and directs that the shares issuable and deliverable upon conversion,
together with any check in payment for fractional shares, be issued in the name
of and delivered to the undersigned, unless a different name has been indicated
in the assignment below. If shares are to be issued in the name of a person
other than the undersigned, the undersigned will pay all transfer taxes payable
with respect thereto.

         Any Noteholder, upon the exercise of its conversion rights in
accordance with the terms of the Indenture and the Convertible Note, agrees to
be bound by the terms of the Registration Agreement relating to the Common Stock
issuable upon conversion of the Convertible Note.

Date:

                                   Amount of Convertible Note to be converted
                                   ($1,000 or integral multiples thereof);

                                   $______________________________

                                   Signature (for conversion only)

                                   ___________________________________________
                                   Please Print or Typewrite Name and Address,
                                   Including Zip Code, and Social Security or
                                   Other Identifying Number
                                   ___________________________________________
                                   Signature Guarantee(1)

__________________
(1)       Signature must be guaranteed by a commercial bank, trust
          company or member firm of the New York Stock Exchange.

 

<PAGE>   1
                                                                    EXHIBIT 4.7


         THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933,
AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING THIS
SECURITY, AGREES FOR THE BENEFIT OF THE COMPANY THAT THIS SECURITY MAY NOT BE
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED (X) PRIOR TO THE THIRD ANNIVERSARY (OR
SUCH SHORTER PERIOD AS MAY THEN BE APPLICABLE UNDER THE SECURITIES ACT REGARDING
THE HOLDING PERIOD FOR NOTES UNDER RULE 144(k) OF THE SECURITIES ACT OR ANY
SUCCESSOR RULE) OF THE ISSUANCE HEREOF (OR ANY PREDECESSOR SECURITY HERETO) OR
(Y) BY ANY HOLDER THAT WAS AN AFFILIATE OF THE COMPANY AT ANY TIME DURING THE
THREE MONTHS PRECEDING THE DATE OF SUCH TRANSFER, IN EITHER CASE OTHER THAN (1)
TO THE COMPANY, (2) SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO
RULE 144A UNDER THE SECURITIES ACT ("RULE 144A") TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF
RULE 144A PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A (AS INDICATED BY THE BOX CHECKED
BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE SIDE OF THIS
SECURITY) AND A CERTIFICATE WHICH MAY BE OBTAINED FROM THE COMPANY OR THE
TRUSTEE IS DELIVERED BY THE TRANSFEREE TO THE COMPANY AND THE TRUSTEE, (3) IN AN
OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT
(AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF
TRANSFER ON THE REVERSE OF THIS SECURITY), AND, IF SUCH TRANSFER IS BEING
EFFECTED BY CERTAIN TRANSFERORS SPECIFIED IN THE INDENTURE (AS DEFINED BELOW)
PRIOR TO THE EXPIRATION OF THE "40 DAY RESTRICTED PERIOD" (WITHIN THE MEANING OF
RULE 903(c)(3) OF REGULATION S UNDER THE SECURITIES ACT), A CERTIFICATE WHICH
MAY BE OBTAINED FROM THE COMPANY OR THE TRUSTEE IS DELIVERED BY THE TRANSFEREE
TO THE COMPANY AND THE TRUSTEE, (4) TO AN INSTITUTION THAT IS AN "ACCREDITED
INVESTOR" AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT
(AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF
TRANSFER ON THE REVERSE OF THIS SECURITY) THAT IS ACQUIRING THIS SECURITY FOR
INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION, AND A CERTIFICATE WHICH MAY BE
OBTAINED FROM THE COMPANY OR THE TRUSTEE IS DELIVERED BY THE TRANSFEREE TO THE
COMPANY AND THE TRUSTEE (PROVIDED THAT CERTAIN HOLDERS SPECIFIED IN THE
INDENTURE MAY NOT TRANSFER THIS SECURITY PURSUANT TO THIS CLAUSE (4) PRIOR TO
THE EXPIRATION OF THE "40 DAY RESTRICTED PERIOD" (WITHIN THE MEANING OF RULE
903(c)(3) OF REGULATION S UNDER THE SECURITIES ACT), (5) PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 (IF
APPLICABLE) UNDER THE SECURITIES ACT AND A CERTIFICATE WHICH MAY BE OBTAINED
FROM THE COMPANY OR THE TRUSTEE IS DELIVERED BY THE TRANSFEREE TO THE COMPANY
AND THE TRUSTEE, OR (6) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE

 
<PAGE>   2
SECURITIES ACT AND A CERTIFICATE WHICH MAY BE OBTAINED FROM THE COMPANY OR THE
TRUSTEE IS DELIVERED BY THE TRANSFEREE TO THE COMPANY AND THE TRUSTEE, IN EACH
CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR OTHER JURISDICTION. AN INSTITUTIONAL ACCREDITED INVESTOR
HOLDING THIS SECURITY AGREES THAT IT WILL FURNISH TO THE COMPANY AND THE TRUSTEE
SUCH CERTIFICATES AND OTHER INFORMATION AS THEY MAY REASONABLY REQUIRE TO
CONFIRM THAT ANY TRANSFER BY IT OF THIS SECURITY COMPLIES WITH THE FOREGOING
RESTRICTIONS. THE HOLDER HEREOF, BY PURCHASING THIS SECURITY, REPRESENTS AND
AGREES FOR THE BENEFIT OF THE COMPANY THAT IT IS (1) A QUALIFIED INSTITUTIONAL
BUYER WITHIN THE MEANING OF RULE 144A OR (2) AN INSTITUTION THAT IS AN
"ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE
SECURITIES ACT AND THAT IT IS HOLDING THIS SECURITY FOR INVESTMENT PURPOSES AND
NOT FOR DISTRIBUTION OR (3) A NON-U.S. PERSON OUTSIDE THE UNITED STATES WITHIN
THE MEANING OF (OR AN ACCOUNT SATISFYING THE REQUIREMENTS OF PARAGRAPH (o)(2) OF
RULE 902) UNDER REGULATION S UNDER THE SECURITIES ACT.

 

                                       -2-
<PAGE>   3
No. 3

                                                             Cusip No. 403917AC1

                           HMT TECHNOLOGY CORPORATION
                      5 3/4% CONVERTIBLE SUBORDINATED NOTE
                                    DUE 2004

                           HMT TECHNOLOGY CORPORATION

         HMT Technology Corporation, a Delaware corporation (the "Company")
promises to pay to T FINN & CO or registered assigns, the principal sum of
$1,575,000 Dollars on January 15, 2004, and to pay interest thereon accruing
from January 21, 1997 at the rate of 5 3/4% per annum.

   Interest Payment Dates:  January 15 and July 15, commencing July 15, 1997

   Record Date:             June 30 and December 31

         Reference is hereby made to the further provisions of this Convertible
Note set forth on the reverse hereof which further provisions shall for all
purposes have the same effect as if set forth at this place.

 

                                       -1-
<PAGE>   4
         IN WITNESS WHEREOF, HMT Technology Corporation has caused this
Convertible Note to be signed manually or by facsimile by its duly authorized
officers and a facsimile of its corporate seal to be affixed hereto or imprinted
hereon.

Dated: January 21, 1997

                       HMT TECHNOLOGY CORPORATION

                 By:___________________________________________________________
                    Peter S. Norris, Vice President, Finance, Chief
                    Financial Officer, Treasurer and Assistant
                    Secretary

                 By:___________________________________________________________
                    James C. Kitch, Secretary

[Seal]

TRUSTEE'S CERTIFICATE OF
AUTHENTICATION

This is one of the 5 3/4% Convertible
Subordinated Notes due 2004 described in
the within-mentioned Indenture.

State Street Bank and Trust Company of California, N.A.,
as Trustee

By:_____________________________
         Authorized Officer

 

                                       -2-
<PAGE>   5
                           HMT TECHNOLOGY CORPORATION

                  5 3/4% Convertible Subordinated Note Due 2004

         1. Interest. HMT Technology Corporation, a Delaware corporation (the
"Company"), is the issuer of this 5 3/4% Convertible Subordinated Note due 2004
(the "Convertible Note"). The Company promises to pay interest on the
Convertible Notes in cash semiannually on each January 15 and July 15,
commencing on July 15, 1997, to holders of record on the immediately preceding
June 30 and December 31.

                  Interest on the Convertible Notes will accrue from the most
recent date to which interest has been paid, or if no interest has been paid,
from January 21, 1997. Interest will be computed on the basis of a 360-day year
of 12 30-day months. To the extent lawful, the Company shall pay interest
(including post-petition interest in any proceeding under any Bankruptcy Law) on
overdue installments of interest (without regard to any applicable grace period)
at the rate borne by the Convertible Notes, compounded annually.

         2. Method of Payment. The Company will pay interest and Liquidated
Damages, if any, on the Convertible Notes (except defaulted interest) to the
persons who are registered holders of the Convertible Notes entitled to such
payments at the close of business on the record date for the next interest
payment date even though Convertible Notes are cancelled after the record date
and on or before the interest payment date. The Noteholder hereof must surrender
Convertible Notes to a Paying Agent to collect principal payments. The Company
will pay principal and interest and Liquidated Damages, if any, in money of the
United States that at the time of payment is legal tender for payment of public
and private debts. However, the Company may pay principal and interest and
Liquidated Damages, if any, by check payable in such money. It may mail an
interest check to a holder's registered Address.

         3. Paying Agent and Registrar. The Trustee will act as Paying Agent,
Registrar and Conversion Agent. The Company may change any Paying Agent,
Registrar, co-registrar or Conversion Agent without prior notice. The Company or
any of its Affiliates may act in any such capacity.

         4. Indenture. The Company issued the Convertible Notes under an
indenture, dated as of January 15, 1997 (the "Indenture"), between the Company
and State Street Bank and Trust Company of California, N.A., as Trustee. The
terms of the Convertible Notes include those stated in the Indenture (which is
incorporated hereby as though fully set forth herein) and those made part of the
Indenture by the Trust Indenture Act of 1939 (15 U.S. Code Sections
77aaa-77bbbb) as in effect on the date of the Indenture. The Convertible Notes
are subject to, and ratified by, all such terms, certain of which are summarized
hereon, and Noteholders are referred to the Indenture and such Act for a
statement of such terms. The Convertible Notes are unsecured obligations of the
Company limited to (except as otherwise provided in the Indenture) up to an
aggregate principal amount of $200,000,000 (plus up to $30,000,000 aggregate
principal amount of Convertible Notes that may be sold by the Company pursuant
to the over-allotment option granted pursuant to the Purchase Agreement), and

 

                       
<PAGE>   6
are subordinated in right of payment to all existing and future Senior Debt of
the Company as provided in the Indenture. The Indenture does not limit the
ability of the Company or any of its Subsidiaries to incur indebtedness or to
grant security interests or liens in respect of their assets. Any holder of this
Convertible Note shall be deemed to have agreed to and be bound by all the terms
and conditions contained in the Indenture applicable to a holder of a
Convertible Note.

         5. Optional Redemption. The Convertible Notes are not subject to
redemption at the Company's option prior to January 20, 2000. On such date and
thereafter, the Convertible Notes will be subject to redemption at the option of
the Company, in whole or in part (in any integral multiple of $1,000), upon not
less than 15 nor more than 60 days' prior notice by mail at the following
redemption prices (expressed as -percentages of the principal amount set forth
below), if redeemed during the 12-month period beginning January 15 of the years
indicated:

<TABLE>
<CAPTION>
                                                            Redemption
                        Year                                   Price
                        ----                                   -----
<S>                                                         <C>

2000.................................................       103.286%
2001.................................................       102.464
2002.................................................       101.643
2003.................................................       100.821
</TABLE>


and, at January 15, 2004, 100% in each case together with accrued and unpaid
interest and Liquidation Damages, if any, up to but not including the redemption
date (subject to the right of holders of record an the relevant record date to
receive interest due on an interest payment date). On or after the redemption
date, interest will cease to accrue on the Convertible Notes, or portion
thereof, called for redemption.

         6. Notice of Redemption. Notice of redemption will be mailed at least
15 days but not more than 60 days before the redemption date to each holder of
the Convertible Notes to be redeemed at his address of record. The Convertible
Notes in denominations larger than $1,000 may be redeemed in part but only in
integral multiples of $1,000. In the event of a redemption of less than all of
the Convertible Notes, the Convertible Notes will be chosen for redemption by
the Trustee in accordance with the Indenture. Unless the Company defaults in
making such redemption payment, or the Paying Agent is prohibited from making
such payment pursuant to the Indenture, interest and Liquidated Damages cease to
accrue on the Convertible Notes or portions of them called for redemption on and
after the redemption date.

                  If this Convertible Note is redeemed subsequent to a record
date with respect to any interest payment date specified above and on or prior
to such interest payment date, then any accrued interest or Liquidated Damages,
if any, payable on such interest payment date will be paid to the person in
whose name this Convertible Note is registered at the close of business on such
record date.

 

                                       -2-
<PAGE>   7
         7. Mandatory Redemption. The Company will not be required to make
mandatory redemption payments with respect to the Convertible Notes. There are
no sinking fund payments with respect to the Convertible Notes.

         8. Repurchase at Option of Holder. If there is a Designated Event, the
Company shall be required to offer to purchase on the Designated Event Payment
Date all outstanding Convertible Notes at a purchase price equal to 101% of the
principal amount thereof on the date of purchase, plus accrued and unpaid
interest and Liquidated Damages, if any, to the Designated Event Payment Date.
Holders of Convertible Notes that are subject to such a Designated Event Offer
will be mailed a notice of Designated Event Offer from the Company prior to any
related Designated Event Payment Date and, in accordance with the procedures and
terms set forth in the Indenture, may elect to have such Convertible Notes or
portions thereof in authorized denominations purchased by completing the form
entitled "Option of Noteholder To Elect Purchase." Noteholders have the right to
withdraw their election by delivering a written notice of withdrawal to the
Paying Agent in accordance with the terms of the Indenture.

         9. Subordination. The payment of the principal of, premium, if any,
interest on, Liquidated Damages, if any, or any other amounts due on the
Convertible Notes is subordinated in right of payment to all existing and future
Senior Debt of the Company, as described in the Indenture. Each Noteholder, by
accepting a Convertible Note, agrees to such subordination and authorizes and
directs the Trustee on its behalf to take such action as may be necessary or
appropriate to effectuate the subordination so provided and appoints the Trustee
as its attorney-in-fact for such purpose.

         10. Conversion. The holder of any Convertible Note has the right,
exercisable at any time after 90 days following the date of original issuance
thereof and prior to the close of business (New York time) on the date of the
Convertible Note's maturity, to convert the principal amount thereof (or any
portion thereof that is an integral multiple of $1,000) into shares of Common
Stock at the initial Conversion Price of $23.75 per share, subject to adjustment
under certain circumstances, except that if a Convertible Note is called for
redemption, the conversion right will terminate at the close of business on the
Business Day immediately preceding the date fixed for redemption.

                  To convert a Convertible Note, a holder must (1) complete and
sign a notice of election to convert substantially in the form set forth below,
(2) surrender the Convertible Note to a Conversion Agent, (3) furnish
appropriate endorsements or transfer documents if required by the Registrar or
Conversion Agent and (4) pay any transfer or similar tax, if required. Upon
conversion, no adjustment or payment will be made for interest or dividends, but
if any Noteholder surrenders a Convertible Note for conversion after the close
of business on the record date for the payment of an installment of interest and
Liquidated Damages, if any, and prior to the opening of business on the next
interest payment date, then, notwithstanding such conversion, the interest and
Liquidated Damages, if any, payable on such interest payment date will be paid
to the registered holder of such Convertible Note on such record date. In such
event, such Convertible Note, when surrendered for conversion, must be
accompanied by payment in funds acceptable to the Company of an amount equal to
the interest and Liquidated Damages, if any, payable on such interest payment
date on the portion so converted. The number of shares of Common Stock issuable
upon conversion of a

 

                                       -3-
<PAGE>   8
Convertible Note is determined by dividing the principal amount of the
Convertible Note converted by the Conversion Price in effect on the Conversion
Date. No fractional shares will be issued upon conversion but a cash adjustment
will be made for any fractional interest.

                  A Convertible Note in respect of which a holder has delivered
an "Option of Noteholder to Elect Purchase" form appearing below exercising the
option of such holder to require the Company to purchase such Convertible Note
may be converted only if the notice of exercise is withdrawn as provided above
and in accordance with the terms of the Indenture. The above description of
conversion of the Convertible Notes is qualified by reference to, and is subject
in its entirety by, the more complete description thereof contained in the
Indenture.

         11. Registration Rights. The holder of this Convertible Note is
entitled to the benefits of a Registration Agreement, dated as of January 15,
1997, between Company and the Initial Purchasers (the "Registration Agreement").
Pursuant to the Registration Agreement the Company has agreed for the benefit of
the holders of the Convertible Notes and the Common Stock issuable upon
conversion thereof that are, in either case, Registrable Securities, that (i) it
will, at its cost, within 75 days after the first closing of the sale of the
Convertible Notes (the "Closing"), file a shelf registration statement (the
"Shelf Registration Statement") with the Securities and Exchange Commission (the
"Commission") with respect to resales of the Convertible Notes and the Common
Stock issuable upon conversion thereof, (ii) the Company will use all reasonable
efforts to cause such Shelf Registration Statement to be declared effective
under the Securities Act as soon as practicable but in any event, within 105
days after the Closing and (iii) the Company will use all reasonable efforts to
keep such Shelf Registration Statement continuously effective under the
Securities Act until the earlier of (a) the third anniversary of the last date
of original issuance of the Convertible Notes, (b) the date on which the
Convertible Notes or the Common Stock issuable upon conversion thereof may be
sold by non-affiliates of the Company pursuant to paragraph (k) of Rule 144 (or
any successor provision) promulgated by the Commission under the Securities Act
and (c) the date as of which all the Convertible Notes or the Common Stock
issuable upon conversion thereof have been sold pursuant to such Shelf
Registration Statement. Any resale of the Convertible Notes or the Common Stock
issued upon conversion thereof pursuant to the Shelf Registration Statement must
be made in accordance with the terms provided in the Registration Agreement.
Pursuant to the Registration Agreement, the Company may suspend the use of the
prospectus which is a part of the Shelf Registration Statement for one period in
any three month period or three periods in any twelve month period under certain
circumstances (each, a "Deferral Period") and no deferral shall exceed 30 days.

                  If (i) the Shelf Registration Statement has not been filed on
or prior to the date seventy-five days following the Closing Date (as defined in
the Purchase Agreement), (ii) the Shelf Registration Statement has not been
declared effective under the Securities Act on or before the date one hundred
five days following the Closing Date, (iii) prior to the end of the Shelf
Registration Period (as defined in the Registration Agreement), the Commission
shall have issued a stop order suspending the effectiveness of the Shelf
Registration Statement or proceedings have been initiated with respect to the
Shelf Registration Statement under Section 8(d) or 8(e) of the Act, (iv) the
aggregate number of days in any one Deferral Period exceeds the periods
permitted pursuant to Section 2(c) of the Registration Agreement or (v) the
number of Deferral Periods exceeds the number

 

                                       -4-
<PAGE>   9
permitted pursuant to Section 2(c) of the Registration Agreement (each of the
events of a type described in any of the foregoing clauses (i) through (v) are
individually referred to herein as an "Event"; and the date seventy-five days
following the Closing Date in the case of clause (i), the date one hundred five
days following the Closing Date in the case of clause (ii), the date on which
the effectiveness of the Shelf Registration Statement has been suspended or
proceedings with respect to the Shelf Registration Statement under Section 8(d)
or 8(e) of the Act have been commenced in the case of clause (iii), the date on
which the duration of a Deferral Period exceeds the periods permitted by Section
2(c) of the Registration Agreement in the case of clause (iv), and the date of
the commencement of a Deferral Period that causes the limit on the number of
Deferral Periods under Section 2(c) of the Registration Agreement to be exceeded
in the case of clause (v), are referred to herein as an "Event Date"). Events
shall be deemed to continue until the date of the termination of such Event,
which shall be the following date with respect to the respective types of
Events: the date the Registration Statement is filed in the case of an Event of
the type described in clause (i), the date the Registration Statement is
declared effective under the Act in the case of an Event described in clause
(ii), the date that all stop orders suspending effectiveness of the Shelf
Registration Statement have been removed and the proceedings initiated with
respect to the Shelf Registration Statement under Section 8(d) or 8(e) of the
Act have terminated, as the case may be, in the case of Events of the types
described in clause (iii), termination of the Deferral Period which caused the
aggregate number of days in any one Deferral Period to exceed the number
permitted by Section 2(c) of the Registration Agreement to be exceeded in the
case of Events of the type described in clause (iv), and termination of the
Deferral Period the commencement of which caused the number of Deferral Periods
permitted by Section 2(c)(ii) of the Registration Agreement to be exceeded in
the case of Events of the type described in clause (v).

                  Accordingly, upon the occurrence of any Event and until such
time as there are no Events which have occurred and are continuing (a "Damages
Accrual Period"), commencing on the Event Date on which such Damages Accrual
Period began, the Company agrees to pay, as liquidated damages, and not as a
penalty, an additional amount (the "Liquidated Damages"): (A) to each holder of
the Convertible Notes, during such time as such holder is a Notice Holder (as
defined in the Registration Agreement), accruing at a rate equal to one-half of
one percent per annum (50 basis points) on (s) the aggregate principal amount of
the Convertible Notes held by such Notice Holder and (t) where such Convertible
Notes have been converted into shares of Common Stock, the aggregate principal
amount of the Convertible Notes that were converted into such shares and (B) if
the Damages Accrual Period continues for a period in excess of thirty days from
the Event Date, from and after the end of such thirty day period until such time
as there are no Events which have occurred and are continuing, to each holder of
the Convertible Notes (whether or not a Notice Holder), accruing at a rate equal
to one-half of one percent per annum (50 basis points) on (u) the aggregate
principal amount of the Convertible Notes held by such Notice Holder and (v)
where such Convertible Notes have been converted into shares of Common Stock,
the aggregate principal amount of the Convertible Notes that were converted into
such shares. Notwithstanding the fore going, no Liquidated Damages shall accrue
under clause (A) of the preceding sentence during any period for which
Liquidated Damages accrue under clause (B) of the preceding sentence or as to
the Convertible Notes or shares of Common Stock from and after the earlier of
(x) the date such Convertible Notes or shares of Common Stock are no longer
Registrable Securities (as defined in the

 

                                       -5-
<PAGE>   10
Registration Agreement), and (y) the expiration of the Shelf Registration
Period. In addition, Liquidated Damages will not accrue as to any Convertible
Note or Common Stock issuable upon conversion thereof represented by the
Unrestricted Global Note (as defined in the Indenture) provided that such
securities are not subject to limitations on transfer under U.S. federal or
state securities laws and there shall have been at least six months during which
the Shelf Registration Statement was effective and available for effecting
resales of the Convertible Notes and the Common Stock issuable upon conversion
thereof. The rate of accrual of the Liquidated Damages with respect to any
period shall not exceed the rate provided for in this paragraph notwithstanding
the occurrence of multiple concurrent Events. Liquidated Damages due on any of
the Convertible Notes or Common Stock into which they have been converted shall
be payable on each interest payment date occurring during the Damages Accrual
Period and on the interest payment date immediately following (or which would
have followed) the termination of such period, and shall be considered
additional interest for all purposes of the Convertible Notes and the Indenture.

         12. Denominations, Transfer, Exchange. The Convertible Notes are in
registered form, without coupons, in denominations of $1,000 and integral
multiples of $1,000. The transfer of Convertible Notes may be registered, and
Convertible Notes may be exchanged, as provided in the Indenture. The Registrar
may require a Noteholder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and fees required by
law or permitted by the Indenture. The Registrar need not exchange or register
the transfer of any Convertible Note or portion of a Convertible Note selected
for redemption (except the unredeemed portion of any Convertible Note being
redeemed in part). Also, it need not exchange or register the transfer of any
Convertible Note for a period of 15 days before a selection of Convertible Notes
to be redeemed.

         13. Persons Deemed Owners. Except as provided in paragraph 2 of this
Convertible Note, the registered Noteholder of a Convertible Note may be treated
as its owner for all purposes.

         14. Unclaimed Money. If money for the payment of principal, interest or
Liquidated Damages, if any, remains unclaimed for the shorter of two years after
such payment was due or a period ending 10 Business Days prior to the date such
funds would escheat to the State, the Trustee and the Paying Agent shall pay the
money back to the Company at its request. After that, Noteholders of Convertible
Notes entitled to the money must look to the Company for payment unless an
abandoned property law designates another person and all liability of the
Trustee and such Paying Agent with respect to such money shall cease.

         15. Defaults and Remedies. The Convertible Notes shall have the Events
of Default as set forth in Section 8.1 of the Indenture. Subject to certain
limitations in the Indenture, if an Event of Default occurs and is continuing,
the Trustee by notice to the Company or the Noteholders of at least 25% in
aggregate principal amount of the then outstanding Convertible Notes by notice
to the Company and the Trustee may declare all the Convertible Notes to be due
and payable immediately, except that in the case of an Event of Default arising
from certain events of bankruptcy or insolvency, all unpaid principal, interest
and Liquidated Damages, if any, accrued on the Convertible Notes shall become
due and payable immediately without further action or notice. Upon acceleration
as described in either of the preceding sentences, the subordination provisions
of the Indenture preclude

 

                                       -6-
<PAGE>   11
any payment being made to Noteholders for at least 5 days except as otherwise
provided in the Indenture and may preclude payment entirely.

                  The Noteholders of a majority in principal amount of the
Convertible Notes then outstanding by written notice to the Trustee may rescind
an acceleration and its consequences if the rescission would not conflict with
any judgment or decree and if all existing Events of Default have been cured or
waived except nonpayment of principal or interest that has become due solely
because of the acceleration. Noteholders may not enforce the Indenture or the
Convertible Notes except as provided in the Indenture. Subject to certain
limitations, Noteholders of a majority in principal amount of the then
outstanding Convertible Notes issued under the Indenture may direct the Trustee
in its exercise of any trust or power. The Company must furnish compliance
certificates to the Trustee annually. The above description of Events of Default
and remedies is qualified by reference to, and subject in its entirety by, the
more complete description thereof contained in the Indenture.

         16. Amendments, Supplements and Waivers. Subject to certain exceptions,
the Indenture or the Convertible Notes may be amended or supplemented with the
consent of the Noteholders of at least a majority in principal amount of the
then outstanding Convertible Notes (including consents obtained in connection
with a tender offer or exchange offer for Convertible Notes), and any existing
default may be waived with the consent of the Noteholders of a majority in
principal amount of the then outstanding Convertible Notes including consents
obtained in connection with a tender offer or exchange offer for Convertible
Notes. Without the consent of any Noteholder, the Indenture or the Convertible
Notes may be amended, among other things, to cure any ambiguity, defect or
inconsistency, to provide for assumption of the Company's obligations to
Noteholders, to make any change that does not adversely affect the rights of any
Noteholder, to qualify the Indenture under the TIA, and to comply with the
requirements of the SEC in order to maintain the qualification of the Indenture
under the TIA.

         17. Trustee Dealings with the Company. The Trustee, in its individual
or any other capacity, may become the owner or pledgee of Convertible Notes and
may otherwise deal with the Company or an Affiliate with the same rights it
would have if it were not Trustee, subject to certain limitations provided for
in the Indenture and in the TIA. Any Agent may do the same with like rights.

         18. No Recourse Against Others. A director, officer, employee or
stockholder, as such, of the Company shall not have any liability for any
obligations of the Company under the Convertible Notes or the Indenture or for
any claim based on, in respect of or by reason of such obligations or their
creation. Each Noteholder, by accepting a Convertible Note, waives and releases
all such liability. The waiver and release are part of the consideration for the
issue of the Convertible Notes.

         19. Governing Law. THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL
GOVERN THE INDENTURE AND THE CONVERTIBLE NOTES WITHOUT REGARD TO CONFLICT OF LAW
PROVISIONS THEREOF.

         20. Authentication. The Convertible Notes shall not be valid until
authenticated by the manual signature of an authorized officer of the Trustee or
an authenticating agent.

 

                                       -7-
<PAGE>   12
         21. Abbreviations. Customary abbreviations may be used in the name of a
Noteholder or an assignee, such as: TEN COM (for tenants in common), TEN ENT
(for tenants by the entireties), JT TEN (for joint tenants with right of
survivorship and not as tenants in common), CUST (for Custodian), and U/G/M/A
(for Uniform Gifts to Minors Act).

         22. Definitions. Capitalized terms not defined in this Convertible Note
have the meaning given to them in the Indenture.

                  The Company will furnish to any Noteholder of the Convertible
Notes upon written request and without charge a copy of the Indenture and the
Registration Agreement. Request may be made to:

                  HMT Technology Corporation
                  1055 Page Avenue
                  Fremont, California 94538
                  Attention of:  Investor Relations

 

                                       -8-
<PAGE>   13
                   ASSIGNMENT FORM AND CERTIFICATE OF TRANSFER

         To assign this Convertible Note, fill in the form below:

         (I) or (we) assign and transfer this Convertible Note to

________________________________________________________________________________
               (Insert assignee's social security or tax I.D. no.)

________________________________________________________________________________

________________________________________________________________________________

________________________________________________________________________________
              (Print or type assignee's name, address and zip code)

and irrevocably appoint ___________________ agent to transfer this Convertible
Note on the books of the Company. The agent may substitute another to act for
him.

Your Signature:_______________________________________________________
               (Sign exactly as your name appears on the other side of this
                Convertible Note)

         Date:____________________

         Signature Guarantee: (1)_________________________________________

         In connection with any transfer of any of the Convertible Notes
evidenced by this certificate occurring prior to the date that is three years
(or such shorter period as may then be applicable under the Securities Act)
after the later of the date of original issuance of such Convertible Notes and
the last date, if any, on which such Convertible Notes were owned by the Company
or any Affiliate of the Company, the undersigned confirms that such Convertible
Notes are being transferred:

         CHECK ONE BOX BELOW

         (1)      \ \    to the Company; or

         (2)      \ \    pursuant to and in compliance with Rule 144A under the
                         Securities Act of 1933; or
                        

         (3)      \ \    pursuant to and in compliance with Regulation S under 
                         the Securities Act of
                         1933; or

         (4)     \ \     to an institutional "accredited investor" as defined 
                         in Rule 501(a) (1), (2), (3) or (7) under the       
                         Securities Act of 1933 that has furnished to the      
                         Trustee a signed letter containing certain            
                         representations and agreements (the form of which     
                         letter can be obtained from the Trustee); or          
                           
                           

_______________
(1)     Signature must be guaranteed by a commercial bank, trust company or
        member firm of the New York Stock Exchange.

 
<PAGE>   14
         (5)     \ \       pursuant to Rule 144 of the Securities Act of 1933;  
                           or                                                 

         (6)     \ \       pursuant to another available exemption from the  
                           registration requirements of the Securities Act of
                           1933.                                             
                                                     

         Unless one of the boxes is checked, the Trustee will refuse to register
any of the Convertible Notes evidenced by this certificate in the name of any
person other than the registered holder thereof ; provided, however, that if box
(2), (3), (4), (5) or (6) is checked, the Trustee and the Company may require,
prior to registering any such transfer of the Convertible Notes such legal
opinions, certifications and other information as the Company has reasonably
requested to confirm that such transfer is being made pursuant to an exemption
from, or in a transaction not subject to, the registration requirements of the
Securities Act of 1933, such as the exemption provided by Rule 144 under such
Act.

                                                       _________________________
                                                                 Signature

Signature Guarantee:(1)

_________________________________                      _________________________
Signature must be guaranteed                                     Signature

_________________
(1)        Signature must be guaranteed by a commercial bank, trust
           company or member firm of the New York Stock Exchange.

 

                                       -2-
<PAGE>   15
                     OPTION OF NOTEHOLDER TO ELECT PURCHASE

         If you want to elect to have this Convertible Note or a portion thereof
repurchased by the Company pursuant to Section 3.8 or 4.7 of the Indenture,
check the box: \ \

         If the purchase is in part, indicate the portion (in denominations of
$1,000 or any integral multiple thereof) to be purchased: __________

   Your Signature:______________________________________________________
                  (Sign exactly as your name appears on the other side of this
                  Convertible Note)

         Date:___________________

         Signature Guarantee:(1)__________________________________________

_______________
(1)        Signature must be guaranteed by a commercial bank, trust
           company or member firm of the New York Stock Exchange.

 
<PAGE>   16
                               ELECTION TO CONVERT

To:  HMT Technology Corporation

         The undersigned owner of $________ in principal of HMT Technology
Corporation's 5 3/4% Convertible Subordinated Notes due 2004 (the "Convertible
Note") hereby irrevocably exercises the option to convert the Convertible Note,
or the portion below designated, into Common Stock of HMT Technology Corporation
in accordance with the terms of the Indenture referred to in the Convertible
Note, and directs that the shares issuable and deliverable upon conversion,
together with any check in payment for fractional shares, be issued in the name
of and delivered to the undersigned, unless a different name has been indicated
in the assignment below. If shares are to be issued in the name of a person
other than the undersigned, the undersigned will pay all transfer taxes payable
with respect thereto.

         Any Noteholder, upon the exercise of its conversion rights in
accordance with the terms of the Indenture and the Convertible Note, agrees to
be bound by the terms of the Registration Agreement relating to the Common Stock
issuable upon conversion of the Convertible Note.

Date:

                                     Amount of Convertible Note to be converted
                                     ($1,000 or integral multiples thereof);

                                     $______________________

                                     Signature (for conversion only)

                                     ________________________________________
                                     Please Print or Typewrite Name and Address,
                                     Including Zip Code, and Social Security or
                                     Other Identifying Number

                                     ________________________________________
                                     Signature Guarantee(1)

_____________________
(1)       Signature must be guaranteed by a commercial bank, trust
          company or member firm of the New York Stock Exchange.

 

<PAGE>   1
                                                                    EXHIBIT 4.8



         INDENTURE dated as of January 15, 1997 between HMT Technology
Corporation, a Delaware corporation (the "Company") and State Street Bank and
Trust Company of California, N.A., a national banking association organized
under the laws of the United States of America, as trustee (the "Trustee").

         Each party agrees as follows for the benefit of the other party and for
the equal and ratable benefit of the Noteholders of the Company's 5 3/4%
Convertible Subordinated Notes due 2004 (the "Securities"):


                                    ARTICLE I

                   DEFINITIONS AND INCORPORATION BY REFERENCE

         SECTION 1.1 Definitions.

         "Affiliate" of any specified person means any other person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified person. For the purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling",
"controlled by" and "under common control with"), as used with respect to any
person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such person,
whether through the ownership of voting securities or by agreement or otherwise;
provided, however, that beneficial ownership of 10% or more of the voting
securities of a person shall be deemed to be control.

         "Agent" means any Registrar, Paying Agent, Conversion Agent or
co-registrar.

         "Board of Directors" means the Board of Directors of the Company or any
authorized committee of the Board.

         "Board Resolution" means a duly authorized resolution of the Board of
Directors.

         "Business Day" means any day that is not a Legal Holiday.

         "Capital Stock" means any and all shares, interests, participations,
rights or other equivalents (however designated) of equity interests in any
entity, including, without limitation, corporate stock and partnership
interests.

         "Change of Control", means any event where: (i) any "person" or "group"
(as such terms are used in Section 13(d) and 14(d) of the Exchange Act) is or
becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act) of shares representing more than 50% of the combined voting power
of the then outstanding securities entitled to vote generally in elections of
directors of the Company ("Voting Stock"), (ii) the Company consolidates with or
merges into any other corporation, or any other corporation merges into the
Company, and, in the case of any such
<PAGE>   2
transaction, the outstanding Common Stock of the Company is reclassified into or
exchanged for any other property or security, unless the stockholders of the
Company immediately before such transaction own, directly or indirectly
immediately following such transaction, at least a majority of the combined
voting power of the outstanding voting securities of the corporation resulting
from such transaction in substantially the same proportion as their ownership of
the Voting Stock immediately before such transaction, (iii) the Company conveys,
transfers or leases all or substantially all of its assets (other than to a
wholly-owned subsidiary of the Company) or (iv) any time the Continuing
Directors do not constitute a majority of the Board of Directors of the Company
(or, if applicable, a successor corporation to the Company); provided, that a
Change of Control shall not be deemed to have occurred if at least 90% of the
consideration (excluding cash payments for fractional shares) in the transaction
or transactions constituting the Change of Control consists of shares of common
stock that are, or upon issuance will be, traded on a United States national
securities exchange or approved for trading on an established automated
over-the-counter trading market in the United States.

         "Common Stock" means the common stock of the Company as the same exists
at the date of the execution of this Indenture or as such stock may be
constituted from time to time.

         "Company" means the party named as such above until a successor
replaces it in accordance with Article VII and thereafter means the successor.

         "Continuing Directors" means as of any date of determination, any
member of the Board of Directors of the Company who (i) was a member of such
Board of Directors on the date of this Indenture or (ii) was nominated for
election or elected to such Board of Directors with the approval of a majority
of the Continuing Directors who were members of such board at the time of such
nomination or election.

         "Credit Agreement" means that certain Amended and Restated Revolving
Credit Agreement dated as of August 28, 1996, (as amended by that certain First
Amendment to Amended and Restated Revolving Credit Agreement dated as of January
14, 1997) by and among (i) the Company, (ii) the lending institutions listed on
Schedule 1.1 thereto, (iii) The First National Bank of Boston, as administrative
agent for itself, the lending institutions listed on Schedule 1.1 thereto and
the other Bank Agents (as defined therein), and (iv) Banque Paribas, as
co-syndication agent for itself, the lenders listed on Schedule 1.1 thereto and
the other Bank Agents, as the same may be amended, modified or supplemented from
time to time and any replacement facility so designated as the "Credit
Agreement" in the instrument related thereto.

         "Custodian" means State Street Bank and Trust Company of California,
N.A., as custodian with respect to the Global Securities, or any successor
entity thereto.

         "Daily Market Price" means the price of a share of Common Stock on the
relevant date, determined (a) on the basis of the last reported sale price
regular way of the Common Stock as reported on the NNM, or if the Common Stock
is not then listed on the NNM, as reported on such national securities exchange
upon which the Common Stock is listed, or (b) if there is no such reported sale
on the day in question, on the basis of the average of the closing bid and asked

                                       -2-
<PAGE>   3
quotations regular way as so reported, or (c) if the Common Stock is not listed
on the NNM or on any national securities exchange, on the basis of the average
of the high bid and low asked quotations regular way on the day in question in
the over-the-counter market as reported by the National Association of
Securities Dealers Automated Quotation System, or if not so quoted, as reported
by National Quotation Bureau, Incorporated, or a similar organization.

         "Default" means any event that is, or with the passage of time or the
giving of notice or both, would be an Event of Default.

         "Depositary" means The Depository Trust Company, its nominees and their
respective successors.

         "Designated Event" means the occurrence of a Change of Control or a
Termination of Trading.

         "Designated Senior Debt" means (i) all obligations of the Company under
the Credit Agreement, and (ii) any other Senior Debt which, at the date of
determination, has an aggregate principal amount outstanding of, or commitments
to lend up to, at least $10 million and is specifically designated by the
Company in the instrument evidencing or governing such Senior Debt as
"Designated Senior Debt" for purposes of this Indenture (provided, that such
instrument may place limitations and conditions on the right of such Senior Debt
to exercise the rights of Designated Senior Debt).

         "Excess Payment" means the excess of (a) the aggregate of the cash and
fair market value of other consideration paid by the Company or any of its
Subsidiaries with respect to the shares acquired in a tender offer or other
negotiated transaction over (b) the Daily Market Price of such acquired shares
on the Trading Day immediately after giving effect to the completion of such
tender offer or other negotiated transaction.

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

         "40 day restricted period" shall have the meaning specified in Rule
902(m) and Rule 903(c) of Regulation S.

         "GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as approved by a significant segment of the accounting profession,
which are in effect on the Issuance Date.

         "Global Securities" means, individually and collectively, the
Unrestricted Global Securities and the Restricted Global Securities.

                                       -3-
<PAGE>   4
         "Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.

         "Indebtedness" means, with respect to any person, all obligations,
whether or not contingent, of such person (i)(a) for borrowed money (including,
but not limited to, any indebtedness secured by a security interest, mortgage or
other lien on the assets of such person which is (1) given to secure all or part
of the purchase price of property subject thereto, whether given to the vendor
of such property or to another, or (2) existing on property at the time of
acquisition thereof), (b) evidenced by a note, debenture, bond or other written
instrument, (c) under a lease required to be capitalized on the balance sheet of
the lessee under GAAP or under any lease or related document (including a
purchase agreement) which provides that such person is contractually obligated
to purchase or to cause a third party to purchase such leased property, (d) in
respect of letters of credit, bank guarantees or bankers' acceptances, (e) with
respect to Indebtedness secured by a mortgage, pledge, lien, encumbrance, charge
or adverse claim affecting title or resulting in an encumbrance to which the
property or assets of such person are subject, whether or not the obligation
secured thereby shall have been assumed or Guaranteed by or shall otherwise be
such person's legal liability, (f) in respect of the balance of deferred and
unpaid purchase price of any property or assets, and (g) under interest rate or
currency swap agreements, cap, floor and collar agreements, spot and forward
contracts and similar agreements and arrangements; (ii) with respect to any
obligation of others of the type described in the preceding clause (i) or under
clause (iii) below, assumed by or guaranteed in any manner by such person or in
effect guaranteed by such person through an agreement to purchase (including,
without limitation, "take or pay" and similar arrangements), contingent or
otherwise (and the obligations of such person under any such assumptions,
Guarantees or other such arrangements); and (iii) any and all deferrals,
renewals, extensions, refinancings and refundings of, or amendments,
modifications or supplements to, any of the foregoing.

         "Indenture" means this Indenture, as amended from time to time.

         "Initial Purchasers" means, collectively Salomon Brothers Inc, Alex.
Brown & Sons Incorporated, Hambrecht & Quist LLC and Robertson, Stephens &
Company LLC.

         "Issuance Date" means the date on which the Securities are first
authenticated and issued.

         "Liquidated Damages" means any liquidated damages payable pursuant to
the Registration Agreement.

         "Material Subsidiary" means any Subsidiary of the Company which is a
"significant subsidiary" as defined in Rule 1-02(w) of Regulation S-X under the
Securities Act and the Exchange Act (as such Regulation is in effect on the date
hereof).

         "Noteholder" or "holder" means a person in whose name a Security is
registered.

                                       -4-
<PAGE>   5
         "NNM" means the Nasdaq National Market.

         "Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.

         "Offering Memorandum" means the offering memorandum relating to the
Securities dated January 15, 1997.

         "Officers' Certificate" means a certificate signed by two Officers, one
of whom must be the Chairman of the Board, the President, the Treasurer or a
Vice-President of the Company. See Sections 12.4 and 12.5 hereof.

         "Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company or the Trustee. See Sections 12.4 and 12.5 hereof.

         "person" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.

         "principal" of a debt security means the principal of the security plus
the premium, if any, on the security.

         "Registration Agreement" means the Registration Agreement relating to
the Securities dated as of January 15, 1996, between the Company and the Initial
Purchasers.

         "Regulation S" means Regulation S promulgated under the Securities Act
(or any successor provision), as amended from time to time.

         "Representative" means the trustee, agent or representative (if any)
for an issue of Senior Debt.

         "Restricted Global Security" means a permanent global note that
contains the applicable clause referred to in footnote 1 and Schedule A to the
form of Security attached hereto as Exhibit A, and that is deposited with and
registered in the name of the Depositary, representing the Securities sold in
reliance on Rule 144A, which shall bear the Restricted Securities Legend set
forth in Exhibit A hereto.

         "Rule 144" means Rule 144 promulgated under the Securities Act (or any
successor provision), as amended from time to time.

         "Rule 144A" means Rule 144A promulgated under the Securities Act (or
any successor provision), as amended from time to time.

                                       -5-
<PAGE>   6
         "SEC" means the Securities and Exchange Commission.

         "Securities" means the Company's 5 3/4% Convertible Subordinated Notes
due 2004 issued, authenticated and delivered under this Indenture.

         "Securities Act" means the Securities Act of 1933, as amended.

         "Senior Debt" means the principal of, interest on, fees costs and
expenses in connection with and other amounts due on Indebtedness of the
Company, whether outstanding on the date of the Indenture or thereafter created,
incurred, assumed or Guaranteed by the Company, unless, in the instrument
creating or evidencing or pursuant to which Indebtedness is outstanding, it is
expressly provided that such Indebtedness is not senior in right of payment to
the Securities. Senior Debt includes, with respect to the obligations described
above, interest accruing, pursuant to the terms of such Senior Debt, on or after
the filing of any petition in bankruptcy or for reorganization relating to the
Company, whether or not post-filing interest is allowed in such proceeding, at
the rate specified in the instrument governing the relevant obligation.
Notwithstanding anything to the contrary in the foregoing, Senior Debt shall not
include: (a) Indebtedness of or amounts owed by the Company for compensation to
employees, or for goods, services or materials purchased in the ordinary course
of business; (b) Indebtedness of the Company to a Subsidiary of the Company; (c)
any liability for Federal, state, local or other taxes owed or owing by the
Company; or (d) the Company's 12% Subordinated Notes issued November 30, 1995.

         "Shelf Registration Statement" shall have the meaning set forth in the
Registration Agreement.

         "Subsidiary" means any corporation, association or other business
entity of which more than 50% of the total voting power of shares of Capital
Stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by any person or one or more of the other
Subsidiaries of that person or a combination thereof.

         "Termination of Trading" means an event where the Common Stock (or
other common stock into which the Securities are then convertible) is neither
listed for trading on a United States national securities exchange nor approved
for trading on an established automated over-the-counter trading market in the
United States.

         "TIA" means the Trust Indenture Act of 1939 (15 U.S. Code
Sections 77aaa-77bbbb) as in effect on the date of execution of this
Indenture.

         "Trading Day" shall mean (A) if the applicable security is listed or
admitted for trading on the New York Stock Exchange or another national
securities exchange, a day on which the New York Stock Exchange or another
national securities exchange is open for business, (B) if the applicable
security is quoted on the NNM, a day on which trades may be made thereon or (c)
if the applicable security is not so listed, admitted for trading or quoted, any
day other than a Saturday or Sunday or a

                                       -6-
<PAGE>   7
day on which banking institutions in either the State of New York or the State
of California are authorized or obligated by law or executive order to close.

         "Transfer Restricted Securities" means (i) the Restricted Global
Security and certificated Securities that bear or are required to bear the
legend set forth in Exhibit A as the "Restricted Securities Legend" and (ii)
prior to the expiration of the "40 day restricted period," the Unrestricted
Global Security.

         "Trustee" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means the successor.

         "Trust Officer", when used with respect to the Trustee, means the
chairman or any vice chairman of the board of directors, the chairman or any
vice chairman of the executive committee of the board of directors, the chairman
of the trust committee, the president, any senior vice president, any vice
president, any assistant vice president, the secretary, the treasurer, any
assistant treasurer, the cashier, any assistant cashier, any senior trust
officer, any trust officer, the controller, any assistant controller, or any
other officer of the Trustee customarily performing functions similar to those
performed by the persons who at the time are such officers, respectively, and
also means, with respect to a particular corporate trust matter, any officer to
whom such corporate trust matter is referred because of his knowledge of and
familiarity with the particular subject.

         "Unrestricted Global Security" means a permanent global note that
contains the applicable clause referred to in footnote 1 and Schedule A to the
form of Security attached hereto as Exhibit A, and that is deposited with and
registered in the name of the Depositary, representing the Securities sold in
reliance on Regulation S.

         SECTION 1.2           Other Definitions.


<TABLE>
<CAPTION>
                                                                DEFINED IN
                     TERM                                         SECTION
- ----------------------------------------------------------- ------------------
<S>                                                                 <C>
"Agent Members"                                                     2.1
"Applicable Procedures"                                             2.6
"Bankruptcy Law"                                                    8.1
"Bankruptcy Custodian"                                              8.1
"Cedel"                                                             2.1
"Commencement Date"                                                 3.8
"Conversion Agent"                                                  2.3
"Conversion Date"                                                   5.2
"Conversion Price"                                                  5.1
"Conversion Shares"                                                 5.6
"Current Market Price"                                              5.6
"Designated Event Offer"                                            4.7
"Designated Event Payment"                                          4.7
"Designated Event Payment Date"                                     3.8
</TABLE>

                                       -7-
<PAGE>   8
<TABLE>
<CAPTION>
                                                                DEFINED IN
                     TERM                                         SECTION
- ----------------------------------------------------------- ------------------
<S>                                                                 <C>
"Distribution Date"                                                  5.6
"Distribution Record Date"                                           5.6
"Euroclear"                                                          2.1
"Event of Default"                                                   8.1
"Institutional Accredited Investor"                                  2.1
"Legal Holiday"                                                     12.7
"Notice of Default"                                                  8.1
"Offer Amount"                                                       3.8
"Officer"                                                           12.10
"Paying Agent"                                                       2.3
"Payment Blockage Notice"                                            6.2
"Payment Blockage Period"                                            6.2
"Payment Default"                                                    8.1
"Purchase Agreement"                                                 2.1
"Purchase Date"                                                      5.6
"QIBs"                                                               2.1
"Registrar"                                                          2.3
"Rights"                                                             5.6
"Tender Period"                                                      3.8
</TABLE>

         SECTION 1.3 Incorporation by Reference of Trust Indenture Act. Whenever
this Indenture refers to a provision of the TIA, the provision is incorporated
by reference in and made a part of this Indenture.

         The following TIA terms used in this Indenture have the following
meanings:

         "indenture securities" means the Securities;

         "indenture security holder" means a Noteholder;

         "indenture to be qualified" means this Indenture;

         "indenture trustee" or "institutional trustee" means the Trustee; and

         "obligor" on the Securities means the Company or any other obligor on
the Securities.

         All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings so assigned to them.

         SECTION 1.4 Rules of Construction. Unless the context otherwise
requires:

         (a)      a term has the meaning assigned to it;

                                       -8-
<PAGE>   9
         (b) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP consistently applied;

         (c) references to "GAAP" shall mean GAAP in effect as of the time when
and for the period as to which such accounting principles are to be applied;

         (d) "or" is not exclusive;

         (e) words in the singular include the plural, and words in the plural
include the singular; and

         (f) provisions apply to successive events and transactions.


                                   ARTICLE II

                                 THE SECURITIES

         SECTION 2.1 Form and Dating. The Securities and the Trustee's
certificate of authentication shall be substantially in the form of Exhibit A
which is hereby incorporated in and expressly made a part of this Indenture. The
Securities may have notations, legends or endorsements required by law, stock
exchange rule, agreements to which the Company is subject, if any, or usage
(provided that any such notation, legend or endorsement is in a form acceptable
to the Company). The Company shall furnish any such legend not contained in
Exhibit A to the Trustee in writing. Each Security shall be dated the date of
its authentication. The terms and provisions of the Securities set forth in
Exhibit A are part of the terms of this Indenture and to the extent applicable,
the Company and the Trustee, by their execution and delivery of this Indenture,
expressly agree to such terms and provisions and to be bound thereby.

         (a) Global Securities. The Securities are being offered and sold by the
Company pursuant to a Purchase Agreement relating to the Securities, dated
January 15, 1997, among the Company and the Initial Purchasers (the "Purchase
Agreement").

         Securities offered and sold to Qualified Institutional Buyers as
defined in Rule 144A ("QIBs") in reliance on Rule 144A shall be issued initially
in the form of one or more Restricted Global Securities in definitive, fully
registered form without interest coupons, which shall be deposited on behalf of
the purchasers of the Securities represented thereby with the Trustee, at its
office in Los Angeles, California, as Custodian for the Depositary, and
registered in the name of the Depositary or a nominee of the Depositary, duly
executed by the Company and authenticated by the Trustee as hereinafter
provided. The aggregate principal amount of the Restricted Global Security may
from time to time be increased or decreased by adjustments made on the records
of the Trustee and the Depositary or its nominee as hereinafter provided.

                                       -9-
<PAGE>   10
         Securities offered and sold in reliance on Regulation S shall be issued
initially in the form of one or more Unrestricted Global Securities in
definitive, fully registered form without interest coupons, which shall be
deposited on behalf of the purchasers of the Securities represented thereby with
the Trustee, at its office in Los Angeles, California, as Custodian for the
Depositary, and registered in the name of the Depositary or a nominee of the
Depositary for the accounts of designated agents holding on behalf of the
Euroclear System ("Euroclear") or Cedel Bank Societe Anonyme ("Cedel") duly
executed by the Company and authenticated by the Trustee as hereinafter
provided. The aggregate principal amount of the Unrestricted Global Security may
from time to time be increased or decreased by adjustments made on the records
of the Trustee and the Depositary or its nominee as hereinafter provided.

         Each Global Security shall represent such of the outstanding Securities
as shall be specified therein and each shall provide that it shall represent the
aggregate amount of outstanding Securities from time to time endorsed thereon
and that the aggregate amount of outstanding Securities represented thereby may
from time to time be reduced or increased, as appropriate, to reflect exchanges
and redemptions. Any endorsement of a Global Security to reflect the amount of
any increase or decrease in the amount of outstanding Securities represented
thereby shall be made by the Trustee or the Custodian, at the direction of the
Trustee, in accordance with instructions given by the holder thereof as required
by Section 2.6 hereof.

         The provisions of the "Operating Procedures of the Euroclear System"
and "Terms and Conditions Governing Use of Euroclear" and the "Management
Regulations" and "Instructions to Participants" of Cedel shall be applicable to
interests in the Unrestricted Global Security that are held by the Agent Member
through Euroclear or Cedel.

         In the event that the Custodian ceases to hold the Global Security or
Securities on behalf of the Depositary and such Global Security or Securities
are then held by the Depositary and the Depositary will not accept such Global
Security or Securities because it bears the Restricted Securities Legend, the
Company will promptly arrange for cancellation of such Global Security or
Securities and for a new Global Security or Securities to be delivered to the
Depositary in accordance with this Indenture that does not contain such
Restricted Securities Legend, and such Global Security or Securities, to the
extent that such Global Security or Securities are still Transfer Restricted
Securities, will remain subject to the provisions of the Restricted Securities
Legend as if such legend was set forth thereon.

         (b) Book-Entry Provisions. This Section 2.1(b) shall apply only to a
Global Security deposited with or on behalf of the Depositary.

         The Company shall execute and the Trustee shall, in accordance with
this Section 2.1(b), authenticate and deliver initially one or more Global
Securities that (a) shall be registered in the name of the Depositary or nominee
of the Depositary and (b) shall be delivered by the Trustee to such Depositary
or pursuant to such Depositary's instructions or held by the Trustee as
Custodian for the Depositary pursuant to a FAST Balance Certificate Agreement
between the Depositary and the Trustee.

                                      -10-
<PAGE>   11
         Members of, or participants in, the Depositary ("Agent Members") shall
have no rights under this Indenture with respect to any Global Security held on
their behalf by the Depositary or by the Trustee as the Custodian of the
Depositary or under such Global Security, and the Depositary may be treated by
the Company, the Trustee and any agent of the Company or the Trustee as the
absolute owner of such Global Security for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Trustee or any agent of the Company or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by the Depositary
or impair, as between the Depositary and its Agent Members, the operation of
customary practices of such Depositary governing the exercise of the rights of a
holder of a beneficial interest in any Global Security.

         (c) Certificated Securities. Except as provided in Sections 2.6(c) and
2.6(f), owners of beneficial interests in Global Securities will not be entitled
to receive physical delivery of certificated Securities. Purchasers of
Securities who are institutional "accredited investors" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act and are referred to as
"Institutional Accredited Investors") who are not QIBs will receive certificated
Securities bearing the Restricted Securities Legend set forth in Exhibit A
hereto.

         After a sale of any Securities during the period of the effectiveness
of a Shelf Registration Statement with respect to the Securities, all
requirements pertaining to legends on such Security will cease to apply, the
requirements requiring any such Security issued to certain holders be issued in
global form will cease to apply, and a certificated Security without legends
will be available to the holder of such Securities.

         SECTION 2.2 Execution and Authentication. Two Officers shall sign the
Securities for the Company by manual or facsimile signature. The Company's seal
shall be reproduced on the Securities.

         If an Officer whose signature is on a Security no longer holds that
office at the time the Security is authenticated, the Security shall
nevertheless be valid.

         A Security shall not be valid until authenticated by the manual
signature of an authorized officer of the Trustee. The signature shall be
conclusive evidence that the Security has been authenticated under this
Indenture.

         Upon a written order of the Company signed by two Officers, the Trustee
shall authenticate the Securities for original issue up to an aggregate
principal amount of $200,000,000 (plus up to $30,000,000 aggregate principal
amount of Securities that may be sold by the Company pursuant to the
over-allotment option granted pursuant to the Purchase Agreement). The aggregate
principal amount of Securities outstanding at any time shall not exceed such
amount except as provided in Section 2.7.

         The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Securities. An authenticating agent may authenticate
Securities whenever the Trustee may do so.

                                      -11-
<PAGE>   12
Each reference in this Indenture to authentication by the Trustee includes
authentication by such agent. An authenticating agent has the same rights as an
Agent to deal with the Company or an Affiliate.

         SECTION 2.3 Registrar, Paying Agent and Conversion Agent. The Company
shall maintain in the Borough of Manhattan, City of New York, State of New York
(i) an office or agency where Securities may be presented for registration of
transfer or for exchange ("Registrar"), (ii) an office or agency where
Securities may be presented for payment ("Paying Agent") and (iii) an office or
agency where Securities may be presented for conversion ("Conversion Agent").
The Registrar shall keep a register of the Securities and of their transfer and
exchange. The Company may appoint the Registrar, the Paying Agent and the
Conversion Agent. The Company may appoint one or more co-registrars, one or more
additional paying agents and one or more additional conversion agents in such
other locations as it shall determine; provided that no such designation shall
in any manner relieve the Company of its obligation to maintain an office or
agency in the Borough of Manhattan, The City of New York, State of New York, for
such purposes. The term "Paying Agent" includes any additional paying agent and
the term "Conversion Agent" includes any additional conversion agent. The
Company may change any Paying Agent, Registrar, co-registrar or Conversion Agent
without prior notice to any Noteholder. The Company shall notify the Trustee of
the name and address of any Agent not a party to this Indenture. If the Company
fails to appoint or maintain another entity as Registrar, Paying Agent or
Conversion Agent, the Trustee shall act as such. The Company or any of its
Affiliates may act as Paying Agent, Registrar, co-registrar or Conversion Agent.
The Company initially appoints the Trustee as Paying Agent, Registrar,
Conversion Agent and Custodian and the Trustee hereby accepts such appointments
and each of the corporate trust office of the Trustee in Los Angeles, California
and the office or agency of the Trustee in the Borough of Manhattan, The City of
New York, State of New York (which shall initially be State Street Bank and
Trust Company, N.A., an Affiliate of the Trustee located at 61 Broadway,
Concourse Level, Corporate Trust Window, New York, New York 10006), shall be
considered as one such office or agency of the Company for the aforesaid
purposes.

         SECTION 2.4 Paying Agent to Hold Money in Trust. The Company shall
require each Paying Agent other than the Trustee to agree in writing that the
Paying Agent will hold in trust for the benefit of Noteholders or the Trustee
all money held by the Paying Agent for the payment of principal of, premium, if
any, or interest or Liquidated Damages on the Securities, and will notify the
Trustee of any default by the Company in making any such payment. While any such
default continues, the Trustee may require a Paying Agent to pay all money held
by it to the Trustee. The Company at any time may require a Paying Agent to pay
all money held by it to the Trustee and to account for any money disbursed by
it. Upon payment over to the Trustee, the Paying Agent (if other than the
Company or any Affiliate of the Company) shall have no further liability for the
money. If the Company or an Affiliate of the Company acts as Paying Agent, it
shall segregate and hold in a separate trust fund for the benefit of the
Noteholders all money held by it as Paying Agent.

         SECTION 2.5 Noteholder Lists. The Trustee shall preserve in as current
a form as is reasonably practicable the most recent list available to it of the
names and addresses of Noteholders. If the Trustee is not the Registrar, the
Company shall furnish to the Trustee on or before each interest

                                      -12-
<PAGE>   13
payment date and at such other times as the Trustee may request in writing a
list in such form and as of such date as the Trustee may reasonably require of
the names and addresses of Noteholders.

         SECTION 2.6 Transfer and Exchange. Where Securities are presented to
the Registrar or a co-registrar with a request to register a transfer or to
exchange them for an equal principal amount of Securities of other
denominations, the Registrar shall register the transfer or make the exchange if
its requirements for such transactions are met. To permit registrations of
transfers and exchanges, the Company shall issue and the Trustee shall
authenticate Securities at the Registrar's request. No service charge shall be
made for any registration of transfer or exchange (except as otherwise expressly
permitted herein), but the Company may require payment of a sum sufficient to
cover any transfer tax or similar governmental charge payable in connection
therewith (other than any such transfer tax or similar governmental charge
payable upon exchanges pursuant to Sections 2.6(f), 2.10, 3.6 or 11.5 hereof).

         The Company and the Registrar shall not be required (i) to issue,
register the transfer of, or exchange Securities during a period beginning at
the opening of business 15 days before the day of any selection of Securities
for redemption under Section 3.2 hereof and ending at the close of business on
the day of selection, (ii) to exchange or register the transfer of any Security
so selected for redemption in whole or in part, except the unredeemed portion of
any Security being redeemed in part or (iii) to issue, register the transfer of
or exchange Securities submitted for repurchase (and not withdrawn) under
Section 4.7 hereof.

         (a) Transfer and Exchange of Global Securities. The transfer and
exchange of Global Securities or beneficial interests therein shall be effected
through the Depositary, in accordance with this Indenture and the procedures of
the Depositary therefor, which shall include, to the extent such Global Security
is a Transfer Restricted Security, restrictions on transfer comparable to those
set forth herein and in the "Restricted Securities Legend" set forth on Exhibit
A hereto to the extent required by the Securities Act. Beneficial interests in a
Global Security may be transferred to persons who take delivery thereof in the
form of a beneficial interest in the same Global Security in accordance with the
transfer restrictions set forth in the "Restricted Securities Legend" set forth
on Exhibit A hereto. Transfers of beneficial interests in the Global Securities
to persons required to take delivery thereof in the form of an interest in
another Global Security shall be permitted as follows:

                  (i) Restricted Global Security to Unrestricted Global
Security. If, at any time, an owner of a beneficial interest in a Restricted
Global Security deposited with the Depositary (or the Trustee as Custodian for
the Depositary) wishes to transfer its interest in such Restricted Global
Security to a person who is required or permitted to take delivery thereof in
the form of an interest in an Unrestricted Global Security, such owner shall,
subject to compliance with the applicable procedures described herein (the
"Applicable Procedures"), exchange or cause the exchange of such interest for an
equivalent beneficial interest in an Unrestricted Global Security as provided in
this Section 2.6(a)(i). Upon receipt by the Trustee of (1) instructions given in
accordance with the Applicable Procedures from an Agent Member directing the
Trustee to credit

                                      -13-
<PAGE>   14
or cause to be credited a beneficial interest in the Unrestricted Global
Security in an amount equal to the beneficial interest in the Restricted Global
Security to be exchanged, (2) a written order given in accordance with the
Applicable Procedures containing information regarding the participant account
of the Depositary and the Euroclear or Cedel account to be credited with such
increase, and (3) a certificate in the form of Exhibit B-1 hereto given by the
owner of such beneficial interest stating that the transfer of such interest has
been made in compliance with the transfer restrictions applicable to the Global
Securities and pursuant to and in accordance with Rule 903 or Rule 904 of
Regulation S or Rule 144, then the Trustee, as Registrar, shall instruct the
Depositary to reduce or cause to be reduced the aggregate principal amount at
maturity of the applicable Restricted Global Security and to increase or cause
to be increased the aggregate principal amount at maturity of the applicable
Unrestricted Global Security by the principal amount at maturity of the
beneficial interest in the Restricted Global Security to be exchanged, to credit
or cause to be credited to the account of the person specified in such
instructions a beneficial interest in the Unrestricted Global Security equal to
the reduction in the aggregate principal amount at maturity of the Restricted
Global Security, and to debit, or cause to be debited, from the account of the
person making such exchange or transfer the beneficial interest in the
Restricted Global Security that is being exchanged or transferred.

                  (ii) Unrestricted Global Security to Restricted Global
Security. If, at any time, an owner of a beneficial interest in an Unrestricted
Global Security deposited with the Depositary or with the Trustee as Custodian
for the Depositary wishes to transfer its interest in such Unrestricted Global
Security to a person who is required or permitted to take delivery thereof in
the form of an interest in a Restricted Global Security, such owner shall,
subject to the Applicable Procedures, exchange or cause the exchange of such
interest for an equivalent beneficial interest in a Restricted Global Security
as provided in this Section 2.6(a)(ii). Upon receipt by the Trustee of (1)
instructions from Euroclear or Cedel, if applicable, and the Depositary,
directing the Trustee, as Registrar, to credit or cause to be credited a
beneficial interest in the Restricted Global Security equal to the beneficial
interest in the Unrestricted Global Security to be exchanged, such instructions
to contain information regarding the participant account with the Depositary to
be credited with such increase, (2) a written order given in accordance with the
Applicable Procedures containing information regarding the participant account
of the Depositary and (3) if such transfer is being effected prior to the
expiration of the "40 day restricted period," a certificate in the form of
Exhibit B-2 attached hereto given by the owner of such beneficial interest
stating (A) if the transfer is pursuant to Rule 144A, that the person
transferring such interest in an Unrestricted Global Security reasonably
believes that the person acquiring such interest in a Restricted Global Security
is a QIB and is obtaining such beneficial interest in a transaction meeting the
requirements of Rule 144A and any applicable blue sky or securities laws of any
state of the United States or any other jurisdiction or (B) if the transfer is
pursuant to any other exemption from the registration requirements of the
Securities Act, that the transfer of such interest has been made in compliance
with the transfer restrictions applicable to the Global Securities and pursuant
to and in accordance with the requirements of the exemption claimed and in
accordance with any applicable blue sky or securities laws of any state of the
nited States or any other jurisdiction, such statement to be supported by an
Opinion of Counsel from the 

                                      -14-
<PAGE>   15
transferee or the transferor in form reasonably acceptable to the Company and to
the Registrar then the Trustee, as Registrar, shall instruct the Depositary to
reduce or cause to be reduced the aggregate principal amount at maturity of such
Unrestricted Global Security and to increase or cause to be increased the
aggregate principal amount at maturity of the applicable Restricted Global
Security by the principal amount at maturity of the beneficial interest in the
Unrestricted Global Security to be exchanged, and the Trustee, as Registrar,
shall instruct the Depositary, concurrently with such reduction, to credit or
cause to be credited to the account of the person specified in such instructions
a beneficial interest in the applicable Restricted Global Security equal to the
reduction in the aggregate principal amount at maturity of such Unrestricted
Global Security and to debit or cause to be debited from the account of the
person making such transfer the beneficial interest in the Unrestricted Global
Security that is being transferred.

         (b) Transfer and Exchange of Certificated Securities. When certificated
Securities are presented by a holder to the Registrar with a request:

                  (x) to register the transfer of the certificated Securities;
or

                  (y) to exchange such certificated Securities for an equal
principal amount of certificated Securities of other authorized denominations,

the Registrar shall register the transfer or make the exchange as requested;
provided, however, that the certificated Securities presented or surrendered for
register of transfer or exchange:

                  (i) shall be duly endorsed or accompanied by a written
         instruction of transfer in form satisfactory to the Registrar duly
         executed by such holder or by his attorney, duly authorized in writing;
         and

                  (ii) in the case of a certificated Security that is a Transfer
         Restricted Security, such request shall be accompanied by the following
         additional information and documents, as applicable:

                           (A) if such Transfer Restricted Security is being
                  delivered to the Registrar by a holder for registration in the
                  name of such holder, without transfer, or such Transfer
                  Restricted Security is being transferred to the Company, no
                  certification is required;

                           (B) if such Transfer Restricted Security is being
                  transferred to a QIB in accordance with Rule 144A under the
                  Securities Act or pursuant to an exemption from registration
                  in accordance with Rule 144 or Rule 903 or Rule 904 under the
                  Securities Act or pursuant to an effective registration
                  statement under the Securities Act, a certification to that
                  effect from such holder (in substantially the form of Exhibit
                  B-3 hereto) and, in the case of a transfer pursuant to Rule
                  903 or Rule 904, 

                                      -15-
<PAGE>   16
                  a certificate from the transferee the form of which may be
                  obtained from the Trustee or the Company; or

                           (C) if such Transfer Restricted Security is being
                  transferred in reliance on any other exemption from the
                  registration requirements of the Securities Act, a
                  certification to that effect from such holder (in
                  substantially the form of Exhibit B-3 hereto) and an Opinion
                  of Counsel from such holder or the transferee reasonably
                  acceptable to the Company and to the Registrar to the effect
                  that such transfer is in compliance with the Securities Act
                  and applicable state law.

Any certificated Security issued upon transfer or exchange that is a Transfer
Restricted Security will bear the "Restricted Securities Legend" set forth on
Exhibit A hereto.

         (c)      Transfer of a Beneficial Interest in a Restricted Global
                  Security or Unrestricted Global Security for a Certificated
                  Security.

                  (i) Any person having a beneficial interest in a Restricted
Global Security or Unrestricted Global Security may upon request, subject to the
Applicable Procedures, exchange such beneficial interest for a certificated
Security. Upon receipt by the Trustee of written instructions or such other form
of instructions as is customary for the Depositary (or Euroclear or Cedel, if
applicable), from the Depositary or its nominee on behalf of any person having a
beneficial interest in a Restricted Global Security or Unrestricted Global
Security, and, in the case of a Transfer Restricted Security, the following
additional information and documents (all of which may be submitted by
facsimile):

                           (A) if such beneficial interest is being transferred
                  to the person designated by the Depositary as being the
                  beneficial owner, a certification to that effect from such
                  person (in substantially the form of Exhibit B-4 hereto);

                           (B) if such beneficial interest is being transferred
                  to a QIB in accordance with Rule 144A under the Securities Act
                  or pursuant to an exemption from registration in accordance
                  with Rule 144 or Rule 903 or 904 under the Securities Act or
                  pursuant to an effective registration statement under the
                  Securities Act, a certification to that effect from the
                  transferor (in substantially the form of Exhibit B-4 hereto);
                  or

                           (C) if such beneficial interest is being transferred
                  in reliance on any other exemption from the registration
                  requirements of the Securities Act, a certification to that
                  effect from the transferor (in substantially the form of
                  Exhibit B-4 hereto) and an Opinion of Counsel from the
                  transferee or the transferor reasonably acceptable to the
                  Company and to the Registrar to the effect that such transfer
                  is in compliance with the Securities Act and applicable state
                  law,

                                      -16-
<PAGE>   17
in which case the Trustee or the Custodian, at the direction of the Trustee,
shall, in accordance with the standing instructions and procedures existing
between the Depositary and the Custodian, cause the aggregate principal amount
of Restricted Global Securities or Unrestricted Global Securities, as
applicable, to be reduced accordingly and to debit, or cause to be debited, from
the account of the person making such exchange or transfer the beneficial
interest in the Global Security that is being exchanged or transferred and,
following such reduction, the Company shall execute and the Trustee shall
authenticate and deliver to the transferee a certificated Security in a
principal amount equal to such reduction in the aggregate principal amount of
Restricted Global Securities or Unrestricted Global Securities; provided,
however, that any person transferring a beneficial interest in a Unrestricted
Global Security during the "40 day restricted period" shall deliver a
certificate substantially the form of Exhibit B-2 attached hereto given by the
owner of such beneficial interest stating (A) if the transfer is pursuant to
Rule 144A, that the person transferring such interest in an Unrestricted Global
Security reasonably believes that the person acquiring such interest in a
Restricted Global Security is a QIB and is obtaining such beneficial interest in
a transaction meeting the requirements of Rule 144A and any applicable blue sky
or securities laws of any state of the United States or any other jurisdiction
or (B) if the transfer is pursuant to any other exemption from the registration
requirements of the Securities Act, that the transfer of such interest has been
made in compliance with the transfer restrictions applicable to the Global
Securities and pursuant to and in accordance with the requirements of the
exemption claimed and in accordance with any applicable blue sky or securities
laws of any state of the United States or any other jurisdiction, such statement
to be supported by an Opinion of Counsel from the transferee or the transferor
in form reasonably acceptable to the Company and to the Registrar.

                  (ii) Certificated Securities issued in exchange for a
         beneficial interest in a Restricted Global Security or Unrestricted
         Global Security, as applicable, pursuant to this Section 2.6(c) shall
         be registered in such names and in such authorized denominations as the
         Depositary, pursuant to instructions from its direct or indirect
         participants or otherwise, shall instruct the Trustee. The Trustee
         shall deliver such certificated Securities to the persons in whose
         names such Securities are so registered. Following any such issuance of
         certificated Securities, the Trustee, as Registrar, shall instruct the
         Depositary to reduce or cause to be reduced the aggregate principal
         amount at maturity of the applicable Global Security to reflect the
         transfer.

         Any certificated Security issued upon transfer or exchange that is a
Transfer Restricted Security will bear the "Restricted Securities Legend" set
forth on Exhibit A hereto.

         (d) Restrictions on Transfer and Exchange of Global Securities.
Notwithstanding any other provision of this Indenture (other than the provisions
set forth in subsection (f) of this Section 2.6), a Global Security may not be
transferred as a whole except by the Depositary to a nominee of the Depositary
or by a nominee of the Depositary to the Depositary or another nominee of the
Depositary or by the Depositary or any such nominee to a successor Depositary or
a nominee of such successor Depositary.

                                      -17-
<PAGE>   18
         (e) Transfer and Exchange of a Certificated Security for a Beneficial
Interest in a Global Security. A certificated Security may not be transferred or
exchanged for a beneficial interest in a Global Security except upon
satisfaction of the following requirements. Any holder having a certificated
Security may upon request, subject to the Applicable Procedures, exchange such
certificated Security for a beneficial interest in a Global Security. Upon
receipt by the Registrar of a certificated Security, duly endorsed or
accompanied by a written instruction of transfer in form satisfactory to the
Registrar duly executed by such holder or his attorney, duly authorized in
writing, and the following additional information and documents (all of which
may be submitted by facsimile):

                  (1) If such certificated Security is a Transfer Restricted
         Security and is being transferred to a QIB in accordance with Rule 144A
         under the Securities Act for a beneficial interest in the Restricted
         Global Security a certification to that effect from such holder that
         such transfer is pursuant to Rule 144A (in substantially the form of
         Exhibit B-3 hereto);

                  (2) If such certificated Security is a Transfer Restricted
         Security and is being transferred for a beneficial interest in the
         Unrestricted Global Security, a certification to the effect from such
         holder that such transfer is in accordance with Rule 903 or 904 of
         Regulation S or Rule 144 (in substantially the form of Exhibit B-3);
         provided, in the case of such transfer pursuant to Regulation S, a
         certificate which may be obtained from the Company or the Trustee shall
         be provided by the transferee; provided further, in the case of such
         transfer in reliance on any other exemption from the registration
         requirements of the Securities Act, a certificate to that effect from
         the transferor (in substantially the form of Exhibit B-3 hereto) and an
         Opinion of Counsel for the transferor or transferee reasonably
         acceptable to the Company and to the Registrar to the effect that such
         transfer is in compliance with the Securities Act and applicable state
         law shall also be provided.

                  (3) Whether or not such certificated Security is a Transfer
         Restricted Security, written instructions of the holder directing the
         Trustee or the Custodian, at the direction of the Trustee, to make an
         endorsement on the applicable Global Security to reflect an increase in
         the aggregate principal amount of the Securities represented by such
         Global Security,

then the Registrar shall cancel such certificated Security and the Trustee or
the Custodian, at the direction of the Trustee, shall, in accordance with the
standing instructions and procedures existing between the Depositary and the
Custodian, cause the aggregate principal amount of Restricted Global Securities
or Unrestricted Global Securities, as applicable, to be increased accordingly
and the Trustee, as Registrar, shall instruct the Depositary to credit or cause
to be credited to the account of the person specified in the instructions a
beneficial interest in the applicable Global Security. If no Global Securities
are then outstanding, the Company shall issue and the Trustee shall authenticate
a new Global Security in the appropriate principal amount.

                                      -18-
<PAGE>   19
         (f) Authentication of Certificated Security in Absence of Depositary.
If at any time:

                  (i) the Depositary for the Securities notifies the Company
         that the Depositary is unwilling or unable to continue as Depositary
         for the Global Securities and a successor Depositary for the Global
         Securities is not appointed by the Company within 90 days after
         delivery of such notice; or

                  (ii)     an Event of Default has occurred and is continuing

then the Company shall execute, and the Trustee shall, upon receipt of an
authentication order in accordance with Section 2.2 hereof, authenticate and
deliver, certificated Securities in an aggregate principal amount equal to the
principal amount of the Global Securities in exchange for such Global
Securities, which shall, in the case of Transfer Restricted Securities, bear any
applicable legends.

         In the event of the occurrence of either of the events specified in
this Section, the Company will promptly make available to the Trustee a
reasonable supply of certificated Securities in definitive, fully registered
form without interest coupons.

         (g) Legends.

                  (i) Subject the provisions of this Section 2.6(g), each
Security certificate evidencing the Global Securities and the certificated
Securities (other than the Unrestricted Global Security) and all Securities
issued in exchange therefor or substitution therefor) shall bear a legend in
substantially the form set forth in Exhibit A as the "Restricted Securities
Legend"; provided that during the "40 day restricted period" the Unrestricted
Global Security shall be subject to the provisions of the legend set forth in
Exhibit A hereto as if such legend was set forth on the Unrestricted Global
Security and shall be a Transfer Restricted Security, provided further that from
and after the end of the "40 day restricted period" the Unrestricted Global
Security shall not be subject to the provisions of the legend set forth in
Exhibit A hereto and shall not be a Transfer Restricted Security.

                  (ii) Upon any sale or transfer of a Transfer Restricted
Security (whether in certificated or global form) pursuant to Rule 144 under the
Securities Act, the Registrar shall permit the holder thereof to exchange such
Transfer Restricted Security for a Security that does not bear the "Restricted
Securities Legend" set forth in Exhibit A hereto upon receipt of applicable
certification from the transferring holder substantially in the form of Exhibit
B-3 hereto (including any opinions required hereby or thereby).

                  (iii) Upon any sale or transfer of a Transfer Restricted
Security (whether in certificated or global form) in reliance on any exemption
from the registration requirements of the Securities Act (other than Rule 144
under the Securities Act) that permits such holder to remove the "Restricted
Securities Legend" set forth in Exhibit A hereto in compliance with federal and
state securities law, the Registrar shall permit the holder thereof to exchange
such Transfer Restricted Security for a Security that does not bear the
"Restricted Securities Legend" set forth in Exhibit A

                                      -19-
<PAGE>   20
hereto upon receipt from such holder or transferee of an Opinion of
Counsel to the Company and the Registrar in form reasonably acceptable to the
Company and the Registrar (which Opinion of Counsel shall also state that the
transfer restrictions in the Restrictive Securities Legend are no longer
applicable);

                  (iv) Notwithstanding any other provisions set forth in this
Indenture, upon any sale of a Transfer Restricted Security (whether in
certificated or global form) pursuant to registration statement that is
effective at such time of transfer, the Registrar shall permit the holder
thereof to exchange such Transfer Restricted Security for a Security that does
not bear the "Restricted Securities Legend" set forth in Exhibit A hereto.

                  (v) Any Security that is a Transfer Restricted Security
(whether in certificated form or global form) sold or transferred pursuant to
(ii), (iii) or (iv) above will not bear, or be subject to the provisions of (in
the case of a beneficial interest in a Global Security), the "Restricted
Securities Legend" and will not be subject to any restrictions on transfer.
Transfers of beneficial interests in any Global Security will remain subject to
the procedures of the Depositary.

         (h) Initial Purchasers. The Initial Purchasers shall not be required to
deliver, and neither the Company nor the Trustee shall demand therefrom, any of
the certifications or opinions described in this Section 2.6 in connection with
the initial issuance and delivery by the Company of the Securities on the
effective date hereof or on the date of any settlement in connection with the
exercise of the overallotment option granted to the Initial Purchasers in the
Purchase Agreement, including with respect to the issuance and delivery of
Securities that are Transfer Restricted Securities.

         SECTION 2.7 Replacement Securities. If the holder of a Security claims
that the Security has been lost, destroyed or wrongfully taken or if such
Security is mutilated and is surrendered to the Trustee, the Company shall issue
and the Trustee shall authenticate a replacement Security if the Trustee's and
the Company's requirements are met. If required by the Trustee or the Company,
an indemnity bond must be sufficient in the judgment of both to protect and hold
harmless the Company, the Trustee, any Agent or any authenticating agent from
any loss, liability or expense which any of them may suffer if a Security is
replaced. The Company may charge for its expenses in replacing a Security.

         In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, or is about to be redeemed or
purchased by the Company pursuant to Article III hereof or converted into shares
of Common Stock pursuant to Article V hereof, the Company in its discretion may,
instead of issuing a new Security, pay, redeem, purchase or convert such
Security, as the case may be.

         Every replacement Security is an additional obligation of the Company
and shall be entitled to all the benefits provided under this Indenture equally
and proportionately with all other Securities duly issued hereunder.

                                      -20-
<PAGE>   21
         SECTION 2.8 Outstanding Securities. The Securities outstanding at any
time are all the Securities authenticated by the Trustee except for those
canceled by it, those delivered to it for cancellation, and those described in
this Section as not outstanding.

         If a Security is replaced (including pursuant to Section 2.1(a)), paid
or purchased pursuant to Section 2.7 hereof, it ceases to be outstanding unless
the Trustee receives proof satisfactory to it that the replaced, paid or
purchased Security is held by a bona fide purchaser.

         If Securities are considered paid under Section 4.1 hereof, they cease
to be outstanding and interest on them ceases to accrue.

         A Security does not cease to be outstanding because the Company or an
Affiliate of the Company holds the Security.

         SECTION 2.9 Treasury Securities. In determining whether the Noteholders
of the required principal amount of Securities have concurred in any direction,
waiver or consent, Securities owned by the Company or an Affiliate of the
Company shall be considered as though they are not outstanding, except that for
the purposes of determining whether the Trustee shall be protected in relying on
any such direction, waiver or consent, only Securities which a Trust Officer of
the Trustee actually knows are so owned shall be so disregarded.

         SECTION 2.10 Temporary Securities. Until definitive Securities are
ready for delivery, the Company may prepare and the Trustee shall authenticate
temporary Securities. Temporary Securities shall be substantially in the form of
definitive Securities but may have variations that the Company considers
appropriate for temporary Securities. Without unreasonable delay, the Company
shall prepare and the Trustee shall authenticate definitive Securities in
exchange for temporary Securities.

         SECTION 2.11 Cancellation. The Company at any time may deliver
Securities to the Trustee for cancellation. The Registrar, Paying Agent and
Conversion Agent shall forward to the Trustee any Securities surrendered to them
for registration of transfer, redemption, conversion, exchange or payment. The
Trustee shall promptly cancel all Securities surrendered for registration of
transfer, redemption, conversion, exchange, payment, replacement or
cancellation, shall destroy such canceled Securities and deliver to the Company
a certificate of a Trust Officer certifying as to such destruction. The Company
may not issue new Securities to replace Securities that it has paid or that have
been delivered to the Trustee for cancellation or that any holder has converted.

         SECTION 2.12          Transfer of Interests in Global Securities.

         (a) Any Global Security that is transferable to the beneficial owners
thereof in the form of certificated Securities pursuant to Section 2.6 shall be
surrendered by the Depositary to the Trustee located in New York, New York or
Los Angeles, California, to be so transferred, in whole or from time to time in
part, without charge, and the Trustee shall authenticate and deliver, upon such
transfer of each portion of such Global Security, an equal aggregate principal
amount at maturity of Securities of authorized denominations in the form of
certificated Securities. Any portion of a Global Security 

                                      -21-
<PAGE>   22
transferred pursuant to this Section shall be executed, authenticated and
delivered only in denominations of $1,000 and any integral multiple thereof and
registered in such names as the Depositary shall direct. Any Securities in the
form of certificated Securities delivered in exchange for an interest in the
Global Security shall, except as otherwise provided by Section 2.6(b), bear the
Restricted Securities Legend set forth in Exhibit A hereto.

         (b) Subject to the provisions of Section 2.12(a), the registered holder
of a Global Security may grant proxies and otherwise authorize any person,
including Agent Members and persons that may hold interests through Agent
Members, to take any action which a holder is entitled to take under this
Indenture or the Securities.

         SECTION 2.13 Defaulted Interest or Liquidated Damages. If the Company
fails to make a payment of interest or Liquidated Damages on the Securities, it
shall pay such defaulted interest or Liquidated Damages plus any interest
payable on the defaulted interest, in any lawful manner. It may pay such
defaulted interest or Liquidated Damages, plus any such interest payable on it,
to the persons who are Noteholders on a subsequent special record date. The
Company shall fix any such record date and payment date. At least 15 days before
any such record date, the Company shall cause to be mailed to Noteholders a
notice that states the record date, payment date, and amount of such interest or
Liquidated Damages to be paid.


                                   ARTICLE III

                            REDEMPTION AND REPURCHASE

         SECTION 3.1 Notices to Trustee. If the Company elects to redeem
Securities pursuant to the optional redemption provision of Section 3.7 hereof,
it shall notify the Trustee of the redemption date and the principal amount of
Securities to be redeemed. The Company shall give each notice provided for in
this Section 3.1 at least 20 days before the redemption date (unless a shorter
notice period shall be satisfactory to the Trustee).

         SECTION 3.2 Selection of Securities to be Redeemed. If less than all
the Securities are to be redeemed, the Trustee shall select the Securities to be
redeemed in compliance with the requirements of the principal national
securities exchange, if any, on which the Securities are listed, or, if the
Securities are not so listed, on a pro rata basis. The Trustee shall make the
selection not more than 60 days and not less than 15 days before the redemption
date from Securities outstanding not previously called for redemption. The
Trustee may select for redemption portions of the principal of Securities that
have denominations larger than $1,000. Securities and portions of them it
selects shall be in amounts of $1,000 or integral multiples of $1,000.
Provisions of this Indenture that apply to Securities called for redemption also
apply to portions of Securities called for redemption. The Trustee shall notify
the Company promptly of the Securities or portions of Securities to be called
for redemption.

                                      -22-
<PAGE>   23
         If any Security selected for partial redemption is converted in part
after such selection, the converted portion of such Security shall be deemed (so
far as may be) to be the portion to be selected for redemption. The Securities
(or portions thereof) so selected shall be deemed duly selected for redemption
for all purposes hereof, notwithstanding that any such Security is converted in
whole or in part before the mailing of the notice of redemption. Upon any
redemption of less than all the Securities, the Company and the Trustee may
treat as outstanding any Securities surrendered for conversion during the period
15 days next preceding the mailing of a notice of redemption and need not treat
as outstanding any Security authenticated and delivered during such period in
exchange for the unconverted portion of any Security converted in part during
such period.

         SECTION 3.3 Notice of Redemption. At least 15 days but not more than 60
days before a redemption date, the Company shall mail a notice of redemption to
each holder whose Securities are to be redeemed at such holder's registered
address.

         The notice shall identify the Securities to be redeemed and shall
state:

         (a) the redemption date;

         (b) the redemption price;

         (c) if any Security is being redeemed in part, the portion of the
principal amount of such Security to be redeemed and that, after the redemption
date, upon cancellation of such Security, a new Security or Securities in
principal amount equal to the unredeemed portion will be issued in the name of
the holder thereof;

         (d) the name and address of the Paying Agent;

         (e) that Securities called for redemption must be surrendered to the
Paying Agent to collect the redemption price plus accrued interest and
Liquidated Damages, if any;

         (f) that, unless the Company defaults in making such redemption payment
or the Paying Agent is prohibited from making such payment pursuant to the terms
of this Indenture, interest and Liquidated Damages on Securities called for
redemption ceases to accrue on and after the redemption date; and

         (g) the paragraph of the Securities pursuant to which the Securities
called for redemption are being redeemed.

         Such notice shall also state the current Conversion Price and the date
on which the right to convert such Securities or portions thereof into Common
Stock of the Company will expire.

         At the Company's request, the Trustee shall give notice of redemption
in the Company's name and at its expense.

                                      -23-
<PAGE>   24
         SECTION 3.4 Effect of Notice of Redemption. Once notice of redemption
is mailed, Securities called for redemption become due and payable on the
redemption date at the price set forth in the Security.

         SECTION 3.5 Deposit of Redemption Price. On or before the redemption
date, the Company shall deposit with the Trustee or with the Paying Agent money
sufficient to pay the redemption price of and accrued interest and Liquidated
Damages, if any, up to but not including the redemption date on all Securities
to be redeemed on that date (subject to the right of holders of record on the
relevant record date to receive interest and Liquidated Damages, if any, due on
an interest payment date) unless theretofore converted into Common Stock
pursuant to the provisions hereof. The Trustee or the Paying Agent shall return
to the Company any money not required for that purpose.

         SECTION 3.6 Securities Redeemed in Part. Upon cancellation of a
Security that is redeemed in part, the Company shall issue and the Trustee shall
authenticate for the holder at the expense of the Company a new Security equal
in principal amount to the unredeemed portion of the Security surrendered.

         SECTION 3.7 Optional Redemption. The Company may redeem all or any
portion of the Securities, upon the terms and at the redemption prices set forth
in each of the Securities. Any redemption pursuant to this Section 3.7 shall be
made pursuant to the provisions of Section 3.1 through 3.6 hereof.

         SECTION 3.8 Designated Event Offer.

         (a) In the event that, pursuant to Section 4.7 hereof, the Company
shall commence a Designated Event Offer, the Company shall follow the procedures
in this Section 3.8.

         (b) The Designated Event Offer shall remain open for a period specified
by the Company which shall be no less than 30 calendar days and no more than 40
calendar days following its commencement on the date of the mailing of notice in
accordance with Section 4.7(b) hereof (the "Commencement Date"), except to the
extent that a longer period is required by applicable law (the "Tender Period").
Upon the expiration of the Tender Period (the "Designated Event Payment Date"),
the Company shall purchase the principal amount of Securities required to be
purchased pursuant to Section 4.7 hereof (the "Offer Amount").

         (c) If the Designated Event Payment Date is on or after an interest
payment record date and on or before the related interest payment date, any
accrued interest or Liquidated Damages will be paid to the person in whose name
a Security is registered at the close of business on such record date, and no
additional interest or Liquidated Damages will be payable to Noteholders who
tender Securities pursuant to the Designated Event Offer.

         (d) The Company shall provide the Trustee with notice of the Designated
Event Offer at least 10 Business Days before the Commencement Date.

                                      -24-
<PAGE>   25
         (e) On or before the Commencement Date, the Company or the Trustee
(upon the request and at the expense of the Company) shall send, by first class
mail, a notice to each of the Noteholders, which shall govern the terms of the
Designated Event Offer and shall state:

                  (i) that the Designated Event Offer is being made pursuant to
         this Section 3.8 and Section 4.7 hereof and that all Securities
         tendered will be accepted for payment;

                  (ii) the purchase price (as determined in accordance with
         Section 4.7 hereof), the length of time the Designated Event Offer will
         remain open and the Designated Event Payment Date;

                  (iii) that any Security or portion thereof not tendered or
         accepted for payment will continue to accrue interest and, if
         applicable, Liquidated Damages;

                  (iv) that, unless the Company defaults in the payment of the
         Designated Event Payment, any Security or portion thereof accepted for
         payment pursuant to the Designated Event Offer shall cease to accrue
         interest and, if applicable, Liquidated Damage, after the Designated
         Event Payment Date;

                  (v) that Noteholders electing to have a Security or portion
         thereof purchased pursuant to any Designated Event Offer will be
         required to surrender the Security, with the form entitled "Option of
         Noteholder To Elect Purchase" on the reverse of the Security completed,
         to the Paying Agent at the address specified in the notice prior to the
         close of business on the third Business Day preceding the Designated
         Event Payment Date;

                  (vi) that Noteholders will be entitled to withdraw their
         election if the Paying Agent receives, not later than the close of
         business on the second Business Day preceding the Designated Event
         Payment Date, or such longer period as may be required by law, a letter
         or a telegram, telex or facsimile transmission (receipt of which is
         confirmed and promptly followed by a letter) setting forth the name of
         the Noteholder, the principal amount of the Security or portion thereof
         the Noteholder delivered for purchase and a statement that such
         Noteholder is withdrawing his election to have the Security or portion
         thereof purchased; and

                  (vii) that Noteholders whose Securities are being purchased
         only in part will be issued new Securities equal in principal amount to
         the unpurchased portion of the Securities surrendered, which
         unpurchased portion must be equal to $1,000 in principal amount or an
         integral multiple thereof.

         In addition, the notice shall contain all instructions and materials
that the Company shall reasonably deem necessary to enable such Noteholders to
tender Securities pursuant to the Designated Event Offer.

         (f) On or prior to the Designated Event Payment Date, the Company shall
irrevocably deposit with the Trustee or a Paying Agent in immediately available
funds an amount equal to the 

                                      -25-
<PAGE>   26
Offer Amount to be held for payment in accordance with the terms of this Section
3.8. On the Designated Event Payment Date, the Company shall, to the extent
lawful, (i) accept for payment the Securities or portions thereof tendered
pursuant to the Designated Event Offer, (ii) deliver or cause to be delivered to
the Trustee Securities so accepted and (iii) deliver to the Trustee an Officers'
Certificate stating such Securities or portions thereof have been accepted for
payment by the Company in accordance with the terms of this Section 3.8. The
Paying Agent shall promptly (but in any case not later than ten (10) calendar
days after the Designated Event Payment Date) mail or deliver to each tendering
Noteholder an amount equal to the purchase price of the Securities tendered by
such Noteholder, and the Trustee shall promptly authenticate and mail or deliver
to such Noteholders a new Security equal in principal amount to any unpurchased
portion of the Security surrendered, if any; provided, that each new Security
shall be in a principal amount of $1,000 or an integral multiple thereof. Any
Securities not so accepted shall be promptly mailed or delivered by or on behalf
of the Company to the holder thereof. The Company will publicly announce the
results of the Designated Event Offer on, or as soon as practicable after, the
Designated Event Payment Date.

         (g) The Designated Event Offer shall be made by the Company in
compliance with all applicable provisions of the Exchange Act, and all
applicable tender offer rules promulgated thereunder, and shall include all
instructions and materials that the Company shall reasonably deem necessary to
enable such Noteholders to tender their Securities.


                                   ARTICLE IV

                                    COVENANTS

         SECTION 4.1 Payment of Securities. The Company shall pay the principal
of, premium, if any, Liquidated Damages, if any and interest on the Securities
on the dates and in the manner provided in the Securities. Principal and
interest shall be considered paid on the date due if the Paying Agent (other
than the Company or an Affiliate of the Company) holds on that date money
designated for and sufficient to pay all principal, premium, if any, Liquidated
Damages, if any and interest then due and such Paying Agent is not prohibited
from paying such money to the Noteholders on that date pursuant to the terms of
this Indenture. To the extent lawful, the Company shall pay interest and
Liquidated Damages (including post petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest (without regard to any
applicable grace period) at the rate borne by the Securities, compounded
semiannually. The Company shall also pay all Liquidated Damages, if any, in the
manner, on the dates and in the amounts set forth in the Registration Agreement.

         SECTION 4.2 SEC Reports. Whether or not required by the rules and
regulations of the SEC, so long as any Securities are outstanding, the Company
will file with the SEC and, if requested, furnish to the Trustee and to the
holders of Securities all quarterly and annual financial information required to
be contained in a filing with the SEC on Forms 10-Q and 10-K, including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and, with 

                                      -26-
<PAGE>   27
respect to annual information only, a report thereon by the Company's certified
independent accountants.

         SECTION 4.3 Compliance Certificate. The Company shall deliver to the
Trustee, within 120 days after the end of each fiscal year of the Company, an
Officers' Certificate stating that a review of the activities of the Company and
its Subsidiaries during the preceding fiscal year has been made under the
supervision of the signing Officers with a view to determining whether the
Company has kept, observed, performed and fulfilled its obligations under, and
complied with the covenants and conditions contained in, this Indenture, and
further stating, as to each such Officer signing such certificate, that to the
best of his or her knowledge, the Company has kept, observed, performed and
fulfilled each and every covenant, and complied with the covenants and
conditions contained in this Indenture and is not in default in the performance
or observance of any of the terms, provisions and conditions hereof (or, if a
Default or Event of Default shall have occurred, describing all such Defaults or
Events of Default of which he or she may have knowledge) and that to the best of
his or her knowledge no event has occurred and remains in existence by reason of
which payments on account of the principal or of interest, if any, on the
Securities are prohibited.

         One of the Officers signing such Officers' Certificate shall be either
the Company's principal executive officer, principal financial officer or
principal accounting officer.

         The Company will, so long as any of the Securities are outstanding,
deliver to the Trustee, forthwith upon becoming aware of:

         (a) any Default, Event of Default or default in the performance of any
covenant, agreement or condition contained in this Indenture; or

         (b) any event of default under any other mortgage, indenture or
instrument described in Section 8.1(e), an Officers' Certificate specifying such
Default, Event of Default or default.

         Immediately upon the occurrence of any event giving rise to Liquidated
Damages in respect of any of the Securities in accordance with Section 11 of the
form thereof or the termination of any such Liquidated Damages, the Company
shall give the Trustee notice of such Liquidated Damages or termination thereof,
of the interest rate borne by the Securities after giving effect to such
Liquidated Damages or termination thereof and of the event giving rise to such
Liquidated Damages or termination thereof (such notice to be contained in an
Officers' Certificate), and prior to receipt of such Officers' Certificate the
Trustee shall be entitled to assume that no such Liquidated Damages or
termination thereof has occurred, as the case may be.

         SECTION 4.4 Stay, Extension and Usury Laws. The Company covenants (to
the extent that it may lawfully do so) that it will not at any time insist upon,
plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay, extension or usury law wherever enacted, now or at any time hereafter
in force, which may affect the covenants or the performance of this Indenture;
and the Company (to the extent it may lawfully do so) hereby expressly waives
all benefit or advantage of any such law, and covenants that it will not, by
resort to any such law, hinder, delay or 

                                      -27-
<PAGE>   28
impede the execution of any power herein granted to the Trustee, but will suffer
and permit the execution of every such power as though no such law has been
enacted.

         SECTION 4.5 Corporate Existence. Subject to Article VII hereof, the
Company will do or cause to be done all things necessary to preserve and keep in
full force and effect its corporate existence and the corporate, partnership or
other existence of each Subsidiary of the Company in accordance with the
respective organizational documents of each Subsidiary and the rights (charter
and statutory), licenses and franchises of the Company and its Subsidiaries;
provided, however, that the Company shall not be required to preserve any such
right, license or franchise, or the corporate, partnership or other existence of
any Subsidiary, if the Board of Directors shall determine that the preservation
thereof is no longer desirable in the conduct of the business of the Company and
its Subsidiaries taken as a whole and that the loss thereof is not adverse in
any material respect to the Noteholders. Notwithstanding the foregoing, the
corporate existence of any Subsidiary may also be terminated in connection with
any Board approved corporate restructuring or reorganization.

         SECTION 4.6 Taxes. The Company shall, and shall cause each of its
Subsidiaries to, pay prior to delinquency all taxes, assessments and
governmental levies, except as contested in good faith and by appropriate
proceedings.

         SECTION 4.7 Designated Event.

         (a) Upon the occurrence of a Designated Event, each holder of
Securities shall have the right, in accordance with this Section 4.7 and Section
3.8 hereof, to require the Company to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of such holder's Securities pursuant to
the terms of Section 3.8 (the "Designated Event Offer") at a purchase price
equal to 101% of the principal amount thereof, together with accrued and unpaid
interest thereon and Liquidated Damages, if any, to the Designated Event Payment
Date (the "Designated Event Payment").

         (b) Within 30 days following any Designated Event, the Company shall
mail to each holder the notice provided by Section 3.8(e).

         (c) Payment by the Company of the Designated Event Payment upon the
occurrence of a Designated Event is subject to the subordination provisions of
Article VI.

         SECTION 4.8 Shareholder Rights Plan. In the event that the Company
implements a stockholder rights plan, such rights plan shall provide that upon
conversion of the Securities the holders will receive, in addition to the Common
Stock issuable upon such conversion, the rights issued under such rights plan
(whether or not such rights have separated from the Common Stock at the time of
such conversion), provided that a holder of Securities shall be subject to all
of the terms and conditions of any such rights plan.

                                      -28-
<PAGE>   29
                                    ARTICLE V

                                   CONVERSION

         SECTION 5.1 Conversion Privilege. A holder of a Security may convert
the principal amount thereof (or any portion thereof that is an integral
multiple of $1,000) into fully paid and nonassessable shares of Common Stock of
the Company at any time after 90 days following the date of original issuance
thereof and prior to the close of business (New York time) on the date of the
Security's maturity at the Conversion Price then in effect, except that, with
respect to any Security called for redemption, such conversion right shall
terminate at the close of business on the Business Day immediately preceding the
redemption date (unless the Company shall default in making the redemption
payment when it becomes due, in which case the conversion right shall terminate
on the date such default is cured). A Security in respect of which a holder has
delivered an "Option of Noteholder to Elect Purchase" form appearing in Exhibit
A attached hereto exercising the option of such holder to require the Company to
purchase such Security may be converted only if the notice of exercise is
withdrawn as provided in Section 3.8. The number of shares of Common Stock
issuable upon conversion of a Security is determined by dividing the principal
amount of the Security converted by the conversion price in effect on the
Conversion Date (the "Conversion Price").

         The initial Conversion Price is stated in paragraph 10 of the
Securities and is subject to adjustment as provided in this Article V.

         Provisions of this Indenture that apply to conversion of all of a
Security also apply to conversion of a portion of it. A holder of Securities is
not entitled to any rights of a holder of Common Stock (other than as provided
in Section 4.8 hereof) until such holder of Securities has converted such
Securities into Common Stock, and only to the extent that such Securities are
deemed to have been converted into Common Stock under this Article V.

         SECTION 5.2 Conversion Procedure. To convert a Security, a holder must
satisfy the requirements in paragraph 10 of the Securities. The date on which
the holder satisfies all of those requirements is the conversion date (the
"Conversion Date"). As soon as practicable after the Conversion Date, the
Company shall deliver to the holder through the Conversion Agent a certificate
for the number of whole shares of Common Stock issuable upon the conversion and
a check for any fractional share determined pursuant to Section 5.3. Such
certificate shall bear any legends set forth on the converted Security, unless
and to the extent the restrictions contained in such legends no longer apply to
such Common Stock. The person in whose name the certificate is registered shall
become the stockholder of record on the Conversion Date and, as of such date,
such person's rights as a Noteholder shall cease; provided, however, that no
surrender of a Security on any date when the stock transfer books of the Company
shall be closed shall be effective to constitute the person entitled to receive
the shares of Common Stock upon such conversion as the stockholder of record of
such shares of Common Stock on such date, but such surrender shall be effective
to constitute the person entitled to receive such shares of Common Stock as the
stockholder of record thereof for all purposes at the close of business on the
next succeeding day on which such stock transfer books are open; provided
further, however, that such conversion shall be at the Conversion Price in
effect on the date 

                                      -29-
<PAGE>   30
that such Security shall have been surrendered for conversion, as if the stock
transfer books of the Company had not been closed.

         No payment or adjustment will be made for accrued and unpaid interest
and Liquidated Damages on a converted Security or for dividends or distributions
on shares of Common Stock issued upon conversion of a Security, but if any
holder surrenders a Security for conversion after the close of business on the
record date for the payment of an installment of interest and Liquidated Damages
and prior to the opening of business on the next interest payment date, then,
notwithstanding such conversion, the interest and Liquidated Damages payable on
such interest payment date shall be paid to the holder of such Security on such
record date. In such event, such Security, when surrendered for conversion,
must be accompanied by payment in funds acceptable to the Company of an amount
equal to the interest and Liquidated Damages payable on such interest payment
date on the portion so converted.

         If a holder converts more than one Security at the same time, the
number of whole shares of Common Stock issuable upon the conversion shall be
based on the total principal amount of Securities converted.

         Upon surrender of a Security that is converted in part, the Trustee
shall authenticate for the holder a new Security equal in principal amount to
the unconverted portion of the Security surrendered.

         SECTION 5.3 Fractional Shares. The Company will not issue fractional
shares of Common Stock upon conversion of a Security. In lieu thereof, the
Company will pay an amount in cash based upon the Daily Market Price of the
Common Stock on the trading day prior to the date of conversion.

         SECTION 5.4 Taxes on Conversion. The issuance of certificates for
shares of Common Stock upon the conversion of any Security shall be made without
charge to the converting Noteholder for such certificates or for any tax in
respect of the issuance of such certificates, and such certificates shall be
issued in the respective names of, or in such names as may be directed by, the
holder or holders of the converted Security; provided, however, that in the
event that certificates for shares of Common Stock are to be issued in a name
other than the name of the holder of the Security converted, such Security, when
surrendered for conversion, shall be accompanied by an instrument of transfer,
in form satisfactory to the Company, duly executed by the registered holder
thereof or his duly authorized attorney; and provided further, however, that the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the issuance and delivery of any such certificates in a
name other than that of the holder of the converted Security, and the Company
shall not be required to issue or deliver such certificates unless or until the
person or persons requesting the issuance thereof shall have paid to the Company
the amount of such tax or shall have established to the satisfaction of the
Company that such tax has been paid or is not applicable.

                                      -30-
<PAGE>   31
         SECTION 5.5 Company to Provide Stock. The Company shall at all times
reserve and keep available, free from preemptive rights, out of its authorized
but unissued Common Stock, solely for the purpose of issuance upon conversion of
Securities as herein provided, a sufficient number of shares of Common Stock to
permit the conversion of all outstanding Securities for shares of Common Stock.

         All shares of Common Stock which may be issued upon conversion of the
Securities shall be duly authorized, validly issued, fully paid and
nonassessable when so issued.

         SECTION 5.6 Adjustment of Conversion Price. The Conversion Price shall
be subject to adjustment from time to time as follows:

         (a) In case the Company shall (1) pay a dividend in shares of Common
Stock to holders of Common Stock, (2) make a distribution in shares of Common
Stock to holders of Common Stock, (3) subdivide its outstanding shares of Common
Stock into a greater number of shares of Common Stock or (4) combine its
outstanding shares of Common Stock into a smaller number of shares of Common
Stock, the Conversion Price in effect immediately prior to such action shall be
adjusted so that the holder of any Security thereafter surrendered for
conversion shall be entitled to receive the number of shares of Common Stock
which he would have owned immediately following such action had such Securities
been converted immediately prior thereto. Any adjustment made pursuant to this
subsection (a) shall become effective immediately after the record date in the
case of a dividend or distribution and shall become effective immediately after
the effective date in the case of a subdivision or combination.

         (b) In case the Company shall issue rights or warrants to substantially
all holders of Common Stock entitling them (for a period commencing no earlier
than the record date for the determination of holders of Common Stock entitled
to receive such rights or warrants and expiring not more than 45 days after such
record date) to subscribe for or purchase shares of Common Stock (or securities
convertible into Common Stock) at a price per share less than the current market
price (as determined pursuant to subsection (f) below) of the Common Stock on
such record date, the Conversion Price shall be adjusted so that the same shall
equal the price determined by multiplying the Conversion Price in effect
immediately prior to such record date by a fraction of which the numerator shall
be the number of shares of Common Stock outstanding on such record date, plus
the number of shares of Common Stock which the aggregate offering price of the
offered shares of Common Stock (or the aggregate conversion price of the
convertible securities so offered) would purchase at such current market price,
and of which the denominator shall be the number of shares of Common Stock
outstanding on such record date plus the number of additional shares of Common
Stock offered (or into which the convertible securities so offered are
convertible). Such adjustments shall become effective immediately after such
record date.

         (c) In case the Company shall distribute to all holders of Common Stock
shares of any class of Capital Stock of the Company other than Common Stock,
evidences of indebtedness or other assets (other than cash dividends out of
current or retained earnings), or shall distribute to substantially all holders
of Common Stock rights or warrants to subscribe for securities (other than 

                                      -31-
<PAGE>   32
those securities referred to in subsection (b) above), then in each such case
the Conversion Price shall be adjusted so that the same shall equal the price
determined by multiplying the Conversion Price in effect immediately prior to
the date of such distribution by a fraction of which the numerator shall be the
current market price (determined as provided in subsection (f) below) of the
Common Stock on the record date mentioned below less the then fair market value
(as determined by the Board of Directors, whose determination shall be
conclusive evidence of such fair market value and described in a Board
Resolution) of the portion of the assets so distributed or of such subscription
rights or warrants applicable to one share of Common Stock, and of which the
denominator shall be such current market price of the Common Stock. Such
adjustment shall become effective immediately after the record date for the
determination of the holders of Common Stock entitled to receive such
distribution. Notwithstanding the foregoing, in the event that the Company shall
distribute rights or warrants to subscribe for additional shares of the
Company's Capital Stock (other than the Common Stock referred to in subsection
(b) above) ("Rights") pro rata to holders of Common Stock, the Company may, in
lieu of making any adjustment pursuant to this Section 5.6, make proper
provision so that each holder of a Security who converts such Security (or any
portion thereof) after the record date for such distribution and prior to the
expiration or redemption of the Rights shall be entitled to receive upon such
conversion, in addition to the shares of Common Stock issuable upon such
conversion (the "Conversion Shares"), a number of Rights to be determined as
follows: (i) if such conversion occurs on or prior to the date for the
distribution to the holders of Rights of separate certificates evidencing such
Rights (the "Distribution Date")," the same number of Rights to which a holder
of a number of shares of Common Stock equal to the number of Conversion Shares
is entitled at the time of such conversion in accordance with the terms and
provisions of and applicable to the Rights; and (ii) if such conversion occurs
after the Distribution Date, the same number of Rights to which a holder of the
number of shares of Common Stock into which the principal amount of the Security
so converted was convertible immediately prior to the Distribution Date would
have been entitled on the Distribution Date in accordance with the terms and
provisions of and applicable to the Rights.

         (d) In case the Company shall, by dividend or otherwise, at any time
distribute to all holders of its Common Stock cash (including any distributions
of cash out of current or retained earnings of the Company but excluding any
cash that is distributed as part of a distribution requiring a Conversion Price
adjustment pursuant to paragraph (c) of this Section) in an aggregate amount
that, together with the sum of (x) the aggregate amount of any other
distributions to all holders of its Common Stock made in cash plus (y) all
Excess Payments, in each case made within the 12 months preceding the date fixed
for determining the stockholders entitled to such distribution (the
"Distribution Record Date") and in respect of which no Conversion Price
adjustment pursuant to paragraphs (c) or (e) of this Section or this paragraph
(d) has been made, exceeds 15% of the product of the current market price per
share (determined as provided in paragraph (f) of this Section) of the Common
Stock on the Distribution Record Date times the number of shares of Common Stock
outstanding on the Distribution Record Date (excluding shares held in the
treasury of the Company), the Conversion Price shall be reduced so that the same
shall equal the price determined by multiplying such Conversion Price in effect
immediately prior to the effectiveness of the Conversion Price reduction
contemplated by this paragraph (d) by a fraction of which the numerator shall be
the current market price per share (determined as provided in paragraph (f) of
this Section) of the Common Stock on the Distribution Record Date less the
amount of such cash and other consideration (including any Excess Payments) so
distributed applicable to one share (based on the pro rata portion of the
aggregate amount of such cash and other consideration (including any Excess
Payments), divided by the shares of Common Stock outstanding on the Distribution
Record Date) of Common Stock and the denominator shall be such current market
price per share (determined as provided in paragraph (f) of this Section) of the
Common 

                                      -32-
<PAGE>   33
Stock on the Distribution Record Date, such reduction to become effective
immediately prior to the opening of business on the day following the
Distribution Record Date.

         (e) In case a tender offer or other negotiated transaction made by the
Company or any Subsidiary of the Company for all or any portion of the Common
Stock shall be consummated, if an Excess Payment is made in respect of such
tender offer or other negotiated transaction and the amount of such Excess
Payment, together with the sum of (x) the aggregate amount of all Excess
Payments plus (y) the aggregate amount of all distributions to all holders of
the Common Stock made in cash (specifically including distributions of cash out
of retained earnings), in each case made within the 12 months preceding the date
of payment of such current negotiated transaction consideration or expiration of
such current tender offer, as the case may be (the "Purchase Date"), and as to
which no adjustment pursuant to paragraph (c) or paragraph (d) of this Section
or this paragraph (e) has been made, exceeds 15% of the product of the current
market price per share (determined as provided in paragraph (f) of this Section)
of the Common Stock on the Purchase Date times the number of shares of Common
Stock outstanding (including any tendered shares but excluding any shares held
in the treasury of the Company) on the Purchase Date, the Conversion Price shall
be reduced so that the same shall equal the price determined by multiplying such
Conversion Price in effect immediately prior to the effectiveness of the
Conversion Price reduction contemplated by this paragraph (e) by a fraction of
which the numerator shall be the current market price per share (determined as
provided in paragraph (f) of this Section) of the Common Stock on the Purchase
Date less the amount of such Excess Payments and such cash distributions, if
any, applicable to one share (based on the pro rata portion of the aggregate
amount of such Excess Payments and such cash distributions, divided by the
shares of Common Stock outstanding on the Purchase Date) of Common Stock and the
denominator shall be such current market price per share (determined as provided
in paragraph (f) of this Section) of the Common Stock on the Purchase Date, such
reduction to become effective immediately prior to the opening of business on
the day following the Purchase Date.

         (f) The current market price per share of Common Stock on any date
shall be deemed to be the average of the Daily Market Prices for the shorter of
(i) 30 consecutive Business Days ending on the last full trading day on the
exchange or market referred to in determining such Daily Market Prices prior to
the time of determination or (ii) the period commencing on the date next
succeeding the first public announcement of the issuance of such rights or such
warrants or such other distribution or such negotiated transaction through such
last full trading day on the exchange or market referred to in determining such
Daily Market Prices prior to the time of determination.

         (g) In any case in which this Section 5.6 shall require that an
adjustment be made immediately following a record date for an event, the Company
may elect to defer, until such event, issuing to the holder of any Security
converted after such record date the shares of Common Stock 

                                      -33-
<PAGE>   34
and other Capital Stock of the Company issuable upon such conversion over and
above the shares of Common Stock and other Capital Stock of the Company issuable
upon such conversion only on the basis of the Conversion Price prior to
adjustment; and, in lieu of the shares the issuance of which is so deferred, the
Company shall issue or cause its transfer agents to issue due bills or other
appropriate evidence of the right to receive such shares.

         SECTION 5.7 No Adjustment. No adjustment in the Conversion Price shall
be required until cumulative adjustments amount to 1% or more of the Conversion
Price as last adjusted; provided, however, that any adjustments which by reason
of this Section 5.7 are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under this
Article V shall be made to the nearest cent or to the nearest one hundredth of a
share, as the case may be. No adjustment need be made for rights to purchase
Common Stock pursuant to a Company plan for reinvestment of dividends or
interest. No adjustment need be made for a change in the par value or no par
value of the Common Stock.

         SECTION 5.8 Other Adjustments.

         (a) In the event that, as a result of an adjustment made pursuant to
Section 5.6 above, the holder of any Security thereafter surrendered for
conversion shall become entitled to receive any shares of Capital Stock of the
Company other than shares of its Common Stock, thereafter the Conversion Price
of such other shares so receivable upon conversion of any Securities shall be
subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to Common Stock
contained in this Article V.

         (b) In the event that shares of Common Stock are not delivered after
the expiration of any of the rights or warrants referred to in Section 5.6(b)
and Section 5.6(c) hereof, the Conversion Price shall be readjusted to the
Conversion Price which would otherwise be in effect had the adjustment made upon
the issuance of such rights or warrants been made on the basis of delivery of
only the number of shares of Common Stock actually delivered.

         SECTION 5.9 Adjustments for Tax Purposes. The Company may, at its
option, make such reductions in the Conversion Price, in addition to those
required by Section 5.6 above, as it determines to be advisable in order that
any stock dividend, subdivision of shares, distribution of rights to purchase
stock or securities or distribution of securities convertible into or
exchangeable for stock made by the Company to its stockholders will not be
taxable to the recipients thereof.

         SECTION 5.10 Adjustments by the Company. The Company from time to time
may, to the extent permitted by law, reduce the Conversion Price by any amount
for any period of at least 20 days, in which case the Company shall give at
least 15 day's, notice of such reduction in accordance with Section 5.11, if the
Board of Directors has made a determination that such reduction would be in the
best interests of the Company, which determination shall be conclusive.

         SECTION 5.11 Notice of Adjustment. Whenever the Conversion Price is
adjusted, the Company shall promptly mail to Noteholders at the addresses
appearing on the Registrar's books a 

                                      -34-
<PAGE>   35
notice of the adjustment and file with the Trustee an Officer's Certificate
briefly stating the facts requiring the adjustment and the manner of computing
it. The certificate shall be conclusive evidence of the correctness of such
adjustment.

         SECTION 5.12 Notice of Certain Transactions. In the event that:

         (1) the Company takes any action which would require an adjustment in
the Conversion Price;

         (2) the Company takes any action that would require a supplemental
indenture pursuant to Section 5.13; or

         (3) there is a dissolution or liquidation of the Company;

a holder of a Security may wish to convert such Security into shares of Common
Stock prior to the record date for or the effective date of the transaction so
that he may receive the rights, warrants, securities or assets which a holder of
shares of Common Stock on that date may receive. Therefore, the Company shall
mail to Noteholders at the addresses appearing on the Registrar's books and the
Trustee a notice stating the proposed record or effective date, as the case may
be. The Company shall mail the notice at least 15 days before such date;
however, failure to mail such notice or any defect therein shall not affect the
validity of any transaction referred to in clause (1), (2) or (3) of this
Section 5.12.

         SECTION 5.13 Effect of Reclassifications, Consolidations, Mergers or
Sales on Conversion Privilege. If any of the following shall occur, namely: (i)
any reclassification or change of outstanding shares of Common Stock issuable
upon conversion of Securities (other than a change in par value, or from par
value to no par value, or from no par value to par value, or as a result of a
subdivision or combination), (ii) any consolidation or merger to which the
Company is a party other than a merger in which the Company is the continuing
corporation and which does not result in any reclassification of, or change
(other than a change in name, or par value, or from par value to no par value,
or from no par value to par value or as a result of a subdivision or
combination) in, outstanding shares of Common Stock or (iii) any sale or
conveyance of all or substantially all of the property or business of the
Company as an entirety, then the Company, or such successor or purchasing 
corporation, as the case may be, shall, as a condition precedent to such
reclassification, change, consolidation, merger, sale or conveyance, execute
and deliver to the Trustee a supplemental indenture in form satisfactory to the
Trustee providing that the holder of each Security then outstanding shall have
the right to convert such Security into the kind and amount of shares of stock
and other securities and property (including cash) receivable upon such
reclassification, change, consolidation, merger, sale or conveyance by a holder
of the number of shares of Common Stock deliverable upon conversion of such
Security immediately prior to such reclassification, change, consolidation,
merger, sale or con veyance. Such supplemental indenture shall provide for
adjustments of the Conversion Price which shall be as nearly equivalent as may
be practicable to the adjustments of the Conversion Price provided for in this
Article V. The foregoing, however, shall not in any way affect the right a
holder of a Security may otherwise have, pursuant to clause (ii) of the last
sentence of subsection (c) of 

                                      -35-
<PAGE>   36
Section 5.6, to receive Rights upon conversion of a Security. If, in the case of
any such consolidation, merger, sale or conveyance, the stock or other
securities and property (including cash) receivable thereupon by a holder of
Common Stock includes shares of stock or other securities and property of a
corporation other than the successor or purchasing corporation, as the case may
be, in such consolidation, merger, sale or conveyance, then such supplemental
indenture shall also be executed by such other corporation and shall contain
such additional provisions to protect the interests of the holders of the
Securities as the Board of Directors of the Company shall reasonably consider
necessary by reason of the foregoing. The provision of this Section 5.13 shall
similarly apply to successive consolidations, mergers, sales or conveyances.

         In the event the Company shall execute a supplemental indenture
pursuant to this Section 5.13, the Company shall promptly file with the Trustee
an Officer's Certificate briefly stating the reasons therefor, the kind or
amount of shares of stock or securities or property (including cash) receivable
by holders of the Securities upon the conversion of their Securities after any
such reclassification, change, consolidation, merger, sale or conveyance and
any adjustment to be made with respect thereto.

         SECTION 5.14 Trustee's Disclaimer. The Trustee has no duty to determine
when an adjustment under this Article V should be made, how it should be made or
what such adjustment should be, but may accept as conclusive evidence of the
correctness of any such adjustment, and shall be protected in relying upon the
Officer's Certificate with respect thereto which the Company is obligated to
file with the Trustee pursuant to Section 5.11. The Trustee makes no
representation as to the validity or value of any securities or assets issued
upon conversion of Securities, and the Trustee shall not be responsible for the
Company's failure to comply with any provisions of this Article V.

         The Trustee shall not be under any responsibility to determine the
correctness of any provisions contained in any supplemental indenture executed
pursuant to Section 5.13, but may accept as conclusive evidence of the
correctness thereof, and shall be protected in relying upon, the Officers'
Certificate with respect thereto which the Company is obligated to file with the
Trustee pursuant to Section 5.13.


                                   ARTICLE VI

                                  SUBORDINATION

         SECTION 6.1 Agreement to Subordinate. The Company, for itself and its
successors, and each Noteholder, by his acceptance of Securities, agree that the
payment of the principal of or interest or Liquidated Damages on or any other
amounts due on the Securities is subordinated in right of payment, to the extent
and in the manner stated in this Article VI, to the prior payment in full of all
existing and future Senior Debt.

                                      -36-
<PAGE>   37
         SECTION 6.2 No Payment on Securities if Senior Debt in Default.
Anything in this Indenture to the contrary notwithstanding, no payment on
account of principal of or redemption or repurchase of, interest or Liquidated
Damages on or other amounts due on the Securities, including any payments on a
Designated Event Offer, and no redemption, purchase, or other acquisition of the
Securities (including, without limitation, upon a Designated Event), shall be
made by or on behalf of the Company (i) unless full payment of amounts then due
for principal and interest and of all other amounts then due on all Senior Debt
has been made or duly provided for pursuant to the terms of the instrument
governing such Senior Debt, (ii) if, at the time of such payment, redemption,
purchase or other acquisition, or immediately after giving effect thereto, there
shall exist under any Senior Debt, or any agreement pursuant to which any Senior
Debt is issued, any default, which default shall not have been cured or waived
and which default shall have resulted in the full amount of such Senior Debt
being declared due and payable or (iii) if, at the time of such payment,
redemption, purchase or other acquisition, the Trustee shall have received
written notice from a Representative of the holders of Designated Senior Debt (a
"Payment Blockage Notice") that there exists under such Designated Senior Debt,
or any agreement pursuant to which such Designated Senior Debt is issued, any
default, which default shall not have been cured or waived, permitting the
holders thereof to declare any amounts of such Designated Senior Debt due and
payable, but only for the period (the "Payment Blockage Period") commencing on
the date of receipt of the Payment Blockage Notice and ending (unless earlier
terminated by notice given to the Trustee by a Representative of the holders of
such Designated Senior Debt) on the earlier of (a) the date on which such event
of default shall have been cured or waived or (b) 180 days from the receipt of
the Payment Blockage Notice. Notwithstanding the provisions described in the
immediately preceding sentence (other than in clauses (i) and (ii)), unless the
holders of such Designated Senior Debt or the Representative of such holders
shall have accelerated the maturity of such Designated Senior Debt, the Company
may resume payments on the Securities after the end of such Payment Blockage
Period. Not more than one Payment Blockage Notice may be given in any
consecutive 360-day period irrespective of the number of defaults with respect
to Senior Debt during such period.

         In the event that, notwithstanding the provisions of this Section 6.2,
payments are made by or on behalf of the Company in contravention of the
provisions of this Section 6.2, such payments shall be held by the Trustee, any
Paying Agent or the holders, as applicable, in trust for the benefit of, and
shall be paid over to and delivered to, the Representative of the holders of
Senior Debt or the trustee under the indenture or other agreement (if any),
pursuant to which any instruments evidencing any Senior Debt may have been
issued for application to the payment of all Senior Debt ratably according to
the aggregate amounts remaining unpaid to the extent necessary to pay all Senior
Debt in full in accordance with the terms of such Senior Debt, after giving
effect to any concurrent payment or distribution to or for the holders of Senior
Debt.

         The Company shall give prompt written notice to the Trustee and any
Paying Agent of any default or event of default under any Senior Debt or under
any agreement pursuant to which any Senior Debt may have been issued. The
Trustee and the Paying Agent may assume that all payments have been made with
respect to all Senior Debt unless the Trustee or the Paying Agent, as the case
may be, has received written notice that payment has not been made and three (3)
Business Days have expired.

                                      -37-
<PAGE>   38
         SECTION 6.3 Distribution on Acceleration of Securities; Dissolution and
Reorganization; Subrogation of Securities.

         (a) If the Securities are declared due and payable because of the
occurrence of an Event of Default, the Company shall give prompt written notice
to the holders of all Senior Debt or to the trustee(s) for such Senior Debt of
such acceleration. The Company may not pay the principal of, premium, if any, or
interest or Liquidated Damages on or any other amounts due on the Securities
until five days after such holders or trustee(s) of Senior Debt receive such
notice and, thereafter, the Company may pay the principal of or interest or
Liquidated Damages on or any other amounts due on the Securities only if the
provisions of this Article VI, permit such payment.

         (b) Upon (i) any acceleration of the principal amount due on the
Securities because of an Event of Default or (ii) any distribution of assets of
the Company upon any dissolution, winding up, liquidation or reorganization of
the Company (whether in bankruptcy, insolvency or receivership proceedings or
upon an assignment for the benefit of creditors or any other. dissolution,
winding up, liquidation or reorganization of the Company):

                  (1) the holders of all Senior Debt shall first be entitled to
receive payment in full of the principal thereof, the interest thereon and any
other amounts due thereon before the holders are entitled to receive payment on
account of the principal of or interest on or any other amounts due on the
Securities;

                  (2) any payment or distribution of assets of the Company of
any kind or character, whether in cash, property or securities (other than
securities of the Company as reorganized or readjusted or securities of the
Company or any other corporation provided for by a plan of reorganization or
readjustment the payment of which is subordinate, at least to the extent
provided in this Article with respect to the Securities, to the payment in full)
without diminution or modification by such plan of all Senior Debt), to which
the holders or the Trustee would be entitled except for the provisions of this
Article, shall be paid by the liquidating trustee or agent or other person
making such a payment or distribution, directly to the holders of Senior Debt
(or their representatives(s) or trustee(s) acting on their behalf), ratably
according to the aggregate amounts remaining unpaid on account of the principal
of or interest on and other amounts due on the Senior Debt held or represented
by each, to the extent necessary to make payment in full of all Senior Debt
remaining unpaid, after giving effect to any concurrent payment or distribution
to the holders of such Senior Debt; and

                  (3) in the event that, notwithstanding the foregoing, any
payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities (other than securities of the Company as
reorganized or readjusted, or securities of the Company or any other corporation
provided for by a plan of reorganization or readjustment the payment of which is
subordinate, at least to the extent provided in this Article with respect to
the Securities, to the payment in full without diminution or modification by
such plan of Senior Debt), shall be received by the Trustee or the holders
before all Senior Debt is paid in full, such payment or distribution shall be
held in trust for the benefit of, and be paid over to upon request by a holder
of the Senior Debt, the holders of the Senior Debt remaining unpaid (or their
representatives) or trustee(s) acting on their behalf, ratably as 

                                      -38-
<PAGE>   39
aforesaid, for application to the payment of such Senior Debt until all such
Senior Debt shall have been paid in full, after giving effect to any concurrent
payment or distribution to the holders of such Senior Debt.

         Subject to the payment in full of all Senior Debt, the holders shall be
subrogated to the rights of the holders of Senior Debt to receive payments or
distributions of cash, property or securities of the Company applicable to the
Senior Debt until the principal of, premium, if any, and interest and Liquidated
Damages, if any, on the Securities shall be paid in full and, for purposes of
such subrogation, no such payments or distributions to the holders of Senior
Debt of cash, property or securities which otherwise would have been payable or
distributable to holders shall, as between the Company, its creditors other than
the holders of Senior Debt, and the holders, be deemed to be a payment by the
Company to or on account of the Senior Debt, it being understood that the
provisions of this Article are and are intended solely for the purpose of
defining the relative rights of the holders, on the one hand, and the holders of
Senior Debt, on the other hand.

         Nothing contained in this Article or elsewhere in this Indenture or in
the Securities is intended to or shall (i) impair, as between the Company and
its creditors other than the holders of Senior Debt, the obligation of the
Company, which is absolute and unconditional, to pay to the holders the
principal of, premium, if any, and interest and Liquidated Damages, if any, on
the Securities as and when the same shall become due and payable in accordance
with the terms of the Securities, (ii) affect the relative rights of the holders
and creditors of the Company other than holders of Senior Debt or, as between
the Company and the Trustee, the obligations of the Company to the Trustee, or
(iii) prevent the Trustee or the holders from exercising all remedies otherwise
permitted by applicable law upon default under this Indenture, subject to the
rights, if any, under this Article of the holders of Senior Debt in respect of
cash, property and securities of the Company received upon the exercise of any
such remedy.

         Upon distribution of assets of the Company referred to in this Article,
the Trustee, subject to the provisions of Section 9.1 hereof, and the holders
shall be entitled to rely upon a certificate of the liquidating trustee or agent
or other person making any distribution to the Trustee or to the holders for the
purpose of ascertaining the persons entitled to participate in such
distribution, the holders of the Senior Debt and other indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article.
The Trustee, however, shall not be deemed to owe any fiduciary duty to the
holders of Senior Debt. Nothing contained in this Article or elsewhere in this
Indenture, or in any of the Securities, shall prevent the good faith application
by the Trustee of any moneys which shall have been deposited with it hereunder,
prior to its receipt of written notice of facts which would prohibit such
application, for the purpose of the payment of or on account of the principal
of, premium, if any, or interest or Liquidated Damages on, the Securities
unless, prior to the date on which such application is made by the Trustee, the
Trustee shall be charged with actual notice under Section 6.3(d) hereof of the
facts which would prohibit the making of such application.

         (c) The provisions of this Article shall not be applicable to any cash,
properties or securities received by the Trustee or by any holder that are
received as a holder of Senior Debt and 

                                      -39-
<PAGE>   40
nothing in Section 9.11 hereof or elsewhere in this indenture shall deprive the
Trustee or such holder of any of its rights as such holder.

         (d) The Company shall give prompt written notice to the Trustee of any
fact known to the Company which would prohibit the making of any payment of
money to or by the Trustee in respect of the Securities pursuant to the
provisions of this Article. The Trustee, subject to the provisions of Section
9.1 hereof, shall be entitled to assume that no such fact exists unless the
Company or any holder of Senior Debt or any trustee therefor has given written
notice thereof to the Trustee. Notwithstanding the provisions of this Article or
any other provisions of this indenture, the Trustee shall not be charged with
knowledge of the existence of any fact which would prohibit the making of any
payment of moneys to or by the Trustee in respect of the Securities pursuant to
the provisions in this Article, unless and until three Business Days after the
Trustee shall have received written notice thereof from the Company or any
holder or holders of Senior Debt or from any trustee therefor; and, prior to the
receipt of any such written notice, the Trustee, subject to the provisions of
Section 9.1 hereof, shall be entitled in all respects conclusively to assume
that no such facts exist; provided that if on a date not less than three
Business Days immediately preceding the date upon which, by the terms hereof,
any such moneys may become payable for any purpose (including, without
limitation, the principal of or interest on any Security), the Trustee shall not
have received with respect to such moneys the notice provided for in this
Section 6.3(d), then anything herein contained to the contrary notwithstanding,
the Trustee shall have full power and authority to receive such moneys and to
apply the same to the purpose for which they were received, and shall not be
affected by any notice to the contrary which may be received by it on or after
such prior date.

         The Trustee shall be entitled to conclusively rely on the delivery to
it of a written notice by a person representing himself to be a holder of Senior
Debt (or a trustee on behalf of such holder) to establish that such notice has
been given by a holder of Senior Debt (or a trustee on behalf of any such holder
or holders). In the event that the Trustee determines in good faith that further
evidence is required with respect to the right of any person as a holder of
Senior Debt to participate in any payment or distribution pursuant to this
Article, the Trustee may request such person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Debt held by
such person, the extent to which such person is entitled to participate in such
payment or distribution and any other facts pertinent to the rights of such
person under this Article, and, if such evidence is not furnished, the Trustee
may defer any payment to such person pending judicial determination as to the
right of such person to receive such payment; nor shall the Trustee be charged
with knowledge of the curing or waiving of any default of the character
specified in Section 6.2 hereof or that any event or any condition preventing
any payment in respect of the Securities shall have ceased to exist, unless and
until the Trustee shall have received written notice to such effect.

         (e) The provisions of this Section 6.3 applicable to the Trustee shall
(unless the context requires otherwise) also apply to any Paying Agent for the
Company.

         SECTION 6.4 Reliance by Senior Debt on Subordination Provisions. Each
holder of any Security by his acceptance thereof acknowledges and agrees that
the foregoing subordination provisions are, and are intended to be, an
inducement and a consideration for each holder of any Senior 

                                      -40-
<PAGE>   41
Debt, whether such Senior Debt was created or acquired before or after the
issuance of the Securities, to acquire and continue to hold, or to continue to
hold, such Senior Debt, and such holder of Senior Debt shall be deemed
conclusively to have relied on such subordination provisions in acquiring and
continuing to hold, or in continuing to hold, such Senior Debt. Notice of any
default in the payment of any Senior Debt, except as expressly stated in this
Article, and notice of acceptance of the provisions hereof are hereby expressly
waived. Except as otherwise expressly provided herein, no waiver, forbearance or
release by any holder of Senior Debt under such Senior Debt or under this
Article shall constitute a release of any of the obligations or liabilities of
the Trustee or holders of the Securities provided in this Article.

         SECTION 6.5 No Waiver of Subordination Provisions. Except as otherwise
expressly provided herein, no right of any present or future holder of any
Senior Debt to enforce subordination as herein provided shall at any time in any
way be prejudiced or impaired by any act or failure to act on the part of the
Company or by any act or failure to act, in good faith, by any such holder, or
by any noncompliance by the Company with the terms, provisions and covenants of
this Indenture, regardless of any knowledge thereof any such holder may have or
be otherwise charged with.

         Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Debt may, at any time and from time to time, without the
consent of, or notice to, the Trustee or the holders of the Securities, without
incurring responsibility to the holders of the Securities and without impairing
or releasing the subordination provided in this Article VI or the obligations
hereunder of the holders of the Securities to the holders of Senior Debt, do any
one or more of the following: (i) change the manner, place or terms of payment
of, or renew or alter, Senior Debt, or otherwise amend or supplement in any
manner Senior Debt or any instrument evidencing the same or any agreement under
which Senior Debt, is outstanding; (ii) sell, exchange, release or otherwise
dispose of any property pledged, mortgaged or otherwise securing Senior Debt;
(iii) release any person liable in any manner for the collection of Senior Debt;
and (iv) exercise or refrain from exercising any rights against the Company or
any other person.

         SECTION 6.6 Trustee's Relation to Senior Debt. The Trustee in its
individual capacity shall be entitled to all the rights set forth in this
Article in respect of any Senior Debt at any time held by it, to the same extent
as any holder of Senior Debt, and nothing in Section 9.11 hereof or elsewhere in
this Indenture shall deprive the Trustee of any of its rights as such holder.

         With respect to the holders of Senior Debt, the Trustee undertakes to
perform or to observe only such of its covenants and obligations, as are
specifically set forth in this Article, and no implied covenants or obligations
with respect to the holders of Senior Debt shall be read into this Indenture
against the Trustee. The Trustee shall not owe any fiduciary duty to the holders
of Senior Debt but shall have only such obligations to such holders as are
expressly set forth in this Article.

         Each holder of a Security by his acceptance thereof authorizes and
directs the Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article and
appoints the Trustee his attorney-in-fact for any and all such purposes,
including, in the event of any dissolution, winding up or liquidation or
reorganization under any applicable bankruptcy

                                      -41-
<PAGE>   42
law of the Company (whether in bankruptcy, insolvency or receivership
proceedings or otherwise), the timely filing of a claim for the unpaid balance
of such holder's Securities in the form required in such proceedings and the
causing of such claim to be approved. If the Trustee does not file a claim or
proof of debt in the form required in such proceedings prior to 30 days before
the expiration of the time to file such claims or proofs, then any holder or
holders of Senior Debt or their representative or representatives shall have the
right to demand, sue for, collect, receive and receipt for the payments and
distributions in respect of the Securities which are required to be paid or
delivered to the holders of Senior Debt as provided in this Article and to file
and prove all claims therefor and to take all such other action in the name of
the holders or otherwise, as such holders of Senior Debt or representative
thereof may determine to be necessary or appropriate for the enforcement of the
provisions of this Article.

         SECTION 6.7 Other Provisions Subject Hereto. Except as expressly stated
in this Article, notwithstanding anything contained in this Indenture to the
contrary, all the provisions of this Indenture and the Securities are subject to
the provisions of this Article. However, nothing in this Article shall apply to
or adversely affect the claims of, or payment to, the Trustee pursuant to
Section 9.7. Notwithstanding the foregoing, the failure to make a payment on
account of principal of or interest on the Securities by reason of any provision
of this Article VI shall not be construed as preventing the occurrence of an
Event of Default under Section 8.1.


                                   ARTICLE VII

                                   SUCCESSORS

         SECTION 7.1 Merger, Consolidation or Sale of Assets. The Company may
not consolidate or merge with or into any person (whether or not the Company is
the surviving corporation), or sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of its properties or assets
unless:

         (a) the Company is the surviving corporation or the entity or the
person formed by or surviving any such consolidation or merger (if other than
the Company) or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made is a corporation organized or existing
under the laws of the United States, any state thereof or the District of
Columbia;

         (b) the entity or person formed by or surviving any such consolidation
or merger (if other than the Company) assumes all the Obligations of the
Company, pursuant to a supplemental indenture in a form reasonably satisfactory
to the Trustee, under the Securities and the Indenture;

         (c) such sale, assignment, transfer, lease, conveyance or other
disposition of all or substantially all of the Company's properties or assets
shall be as an entirety or virtually as an entirety to one person and such
person shall have assumed all the Obligations of the Company, pursuant to a

                                      -42-
<PAGE>   43
supplemental indenture in a form reasonably satisfactory to the Trustee, under
the Securities and the Indenture;

         (d) immediately after such transaction no Default or Event of Default
exists; and

         (e) the Company or such person shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that such
transaction and the supplemental indenture comply with the Indenture and that
all conditions precedent in the Indenture relating to such transaction have been
satisfied.

         SECTION 7.2 Successor Corporation Substituted. Upon any consolidation
or merger, or any sale, assignment, transfer, lease, conveyance or other
disposition of all or substantially all of the assets of the Company in
accordance with Section 7.1 hereof, the successor corporation formed by such
consolidation or into or with which the Company is merged or to which such sale,
assignment, transfer, lease, conveyance or other disposition is made shall
succeed to, and be substituted for and may exercise every right and power of,
the Company under this indenture with the same effect as if such successor
person has been named as the Company herein; provided, however, that the
predecessor Company in the case of a sale, assignment, transfer, lease,
conveyance or other disposition shall not be released from the obligation to pay
the principal of and interest on the Securities.


                                  ARTICLE VIII

                              DEFAULTS AND REMEDIES

         SECTION 8.1 Events of Default. An "Event of Default" occurs if:

         (a) the Company defaults in the payment of interest on any Security
when the same becomes due and payable, whether or not such payments shall be
prohibited by Article VI, and the Default continues for a period of 30 days
after the date due and payable;

         (b) the Company defaults in the payment of the principal of any
Security when the same becomes due and payable at maturity, upon redemption or
otherwise, whether or not such payment shall be prohibited by Article VI;

         (c) the Company defaults in the payment of the Designated Event Payment
when the same becomes due and payable, whether or not such payment may be
prohibited by Article VI;

         (d) the Company fails to provide notice of any Designated Event in
accordance with Section 4.7;

         (e) the Company fails to observe or perform any other covenant or
agreement contained in this Indenture or the Securities, required by it to be
performed and the Default continues for a 

                                      -43-
<PAGE>   44
period of 60 days after the receipt of written notice from the Trustee to the
Company or from the holders of 25% in aggregate principal amount of the then
outstanding Securities to the Company and the Trustee stating that such notice
is a "Notice of Default";

         (f) there is a default under any mortgage, indenture or instrument
under which there may be issued or by which there may be secured or evidenced
any Indebtedness for money borrowed by the Company or any Subsidiary of the
Company (or the payment of which is guaranteed by the Company or any Subsidiary
of the Company), whether such Indebtedness or guarantee now exists or is created
after the Issuance Date, which default (i) is caused by a failure to pay when
due principal of or interest on such Indebtedness within the grace period
provided for in such Indebtedness (which failure continues beyond the longer of
any applicable grace period and 30 days) (a "Payment Default") or (ii) results
in the acceleration of such Indebtedness prior to its express maturity and, in
each case, the principal amount of any such Indebtedness, together with the
principal amount of any other such Indebtedness under which there is a Payment
Default or the maturity of which has been so accelerated, aggregates $10 million
or more;

         (g) a final, non-appealable judgment or final, non-appealable judgments
(other than any judgment as to which a reputable insurance company has accepted
full liability) for the payment of money are entered by a court or courts of
competent jurisdiction against the Company or any Subsidiary of the Company and
remain undischarged for a period (during which execution shall not be
effectively stayed) of 60 days, provided that the aggregate of all such
judgments exceeds $10 million;

         (h) the Company or any Material Subsidiary pursuant to or within the
meaning of any Bankruptcy Law: (i) commences a voluntary case, (ii) consents to
the entry of an order for relief against it in an involuntary case in which it
is the debtor, (iii) consents to the appointment of a Bankruptcy Custodian of it
or for all or substantially all of its property, (iv) makes a general assignment
for the benefit of its creditors, or (v) makes the admission in writing that it
generally is unable to pay its debts as the same become due; or

         (i) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that: (i) is for relief against the Company or any Material
Subsidiary of the Company in an involuntary case, (ii) appoints a Bankruptcy
Custodian of the Company or any Material Subsidiary of the Company or for all or
substantially all of its property, and the order or decree remains unstayed and
in effect for 60 days, or (iii) orders the liquidation of the Company or any
Material Subsidiary of the Company, and the order or decree remains unstayed and
in effect for 60 days.

         The term "Bankruptcy Law" means Title 11, U.S. Code or any similar
Federal or state law for the relief of debtors. The term "Bankruptcy Custodian"
means any receiver, trustee, assignee, liquidator or similar official under any
Bankruptcy Law.

         SECTION 8.2 Acceleration. If an Event of Default (other than an Event
of Default specified in clauses (h) and (i) of Section 8.1 hereof) occurs and is
continuing, the Trustee by notice to the Company, or the Noteholders of at least
25% in principal amount of the then outstanding Securities by notice to the
Company and the Trustee, may declare all the Securities to be due and

                                      -44-
<PAGE>   45
payable. Upon such declaration, the principal of, premium, if any, and accrued
and unpaid interest on the Securities shall be due and payable immediately. If
an Event of Default specified in clause (h) or (i) of Section 8.1 hereof occurs,
such an amount shall ipso facto become and be immediately due and payable
without any declaration or other act on the part of the Trustee or any
Noteholder. The Noteholders of a majority in aggregate principal amount of the
then outstanding Securities by notice to the Trustee may rescind an acceleration
and its consequences if the rescission would not conflict with any judgment or
decree and if all existing Events of Default have been cured or waived except
nonpayment of principal or interest that has become due solely because of the
acceleration.

         SECTION 8.3 Other Remedies. If an Event of Default occurs and is
continuing, the Trustee may pursue any available remedy to collect the payment
of principal or interest then due and payable on the Securities or to enforce
the performance of any provision of the Securities or this Indenture.

         The Trustee may maintain a proceeding even if it does not possess any
of the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Noteholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies are
cumulative to the extent permitted by law.

         SECTION 8.4 Waiver of Past Defaults. The Noteholders of a majority in
aggregate principal amount of the then outstanding Securities by notice to the
Trustee may waive an existing Default or Event of Default and its consequences
except a continuing Default or Event of Default in the payment of the Designated
Event Payment or the principal of, or interest on, any Security. When a Default
or Event of Default is waived, it is cured and ceases; but no such waiver shall
extend to any subsequent or other Default or impair any right consequent
thereon.

         SECTION 8.5 Control by Majority. The Noteholders of a majority in
principal amount of the then outstanding Securities may direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
or exercising any trust or power conferred on it. However, the Trustee may
refuse to follow any direction that conflicts with law or this Indenture, is
unduly prejudicial to the rights of other Noteholders, or would involve the
Trustee in personal liability.

         SECTION 8.6 Limitation on Suits. A Noteholder may pursue a remedy with
respect to this Indenture or the Securities only if:

         (a) the Noteholder gives to the Trustee notice of a continuing Event of
Default;

         (b) the Noteholders of at least 25% in principal amount of the then
outstanding Securities make a request to the Trustee to pursue the remedy;

         (c) such Noteholder or Noteholders offer to the Trustee indemnity
satisfactory to the Trustee against any loss, liability or expense;

                                      -45-
<PAGE>   46
         (d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer of indemnity; and

         (e) during such 60-day period the Noteholders of a majority in
principal amount of the then outstanding Securities do not give the Trustee a
direction inconsistent with the request.

         A Noteholder may not use this Indenture to prejudice the rights of
another Noteholder or to obtain a preference or priority over another
Noteholder.

         SECTION 8.7 Rights of Noteholders to Receive Payment. Notwithstanding
any other provision of this Indenture, the right of any Noteholder of a Security
to receive payment of principal and interest on the Security, on or after the
respective due dates expressed in the Security, or to bring suit for the
enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of the Noteholder made pursuant to this
Section.

         SECTION 8.8 Collection Suit by Trustee. If an Event of Default
specified in Section 8.1(a) or (b) occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Company for the whole amount of principal and interest remaining unpaid on the
Securities and interest on overdue principal and interest and such further
amount as shall be sufficient to cover the costs and, to the extent lawful,
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.

         SECTION 8.9 Trustee May File Proofs of Claim. The Trustee may file such
proofs of claim and other papers or documents as may be necessary or advisable
in order to have the claims of the Trustee and the Noteholders allowed in any
judicial proceedings relative to the Company, its creditors or its property.
Nothing contained herein shall be deemed to authorize the Trustee to authorize
or consent to or accept or adopt on behalf of any Noteholder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Noteholder thereof, or to authorize the Trustee to vote in
respect of the claim of any Noteholder in any such proceeding.

         SECTION 8.10 Priorities. If the Trustee collects any money pursuant to
this Article, it shall pay out the money in the following order:

         First: to the Trustee for amounts due under Section 9.7 hereof;

         Second: to the holders of Senior Debt to the extent required by Article
VI;

         Third: to Noteholders for amounts due and unpaid on the Securities for
principal and interest, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Securities for principal and
interest, respectively; and

         Fourth: to the Company.

                                      -46-
<PAGE>   47
         Except as otherwise provided in Section 2.12 hereof, the Trustee may
fix a record date and payment date for any payment to Noteholders made pursuant
to this Section.

         SECTION 8.11 Undertaking for Costs. In any suit for the enforcement of
any right or remedy under this Indenture or in any suit against the Trustee for
any action taken or omitted by it as a Trustee, a court in its discretion may
require the filing by any party litigant in the suit of an undertaking to pay
the costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorneys' fees, against any party litigant in the
suit, having due regard to the merits and good faith of the claims or defenses
made by the party litigant. This Section does not apply to a suit by the
Trustee, a suit by a holder pursuant to Section 8.7 hereof, or a suit by
Noteholders of more than 10% in principal amount of the then outstanding
Securities.

                                   ARTICLE IX

                                     TRUSTEE

         SECTION 9.1 Duties of Trustee.

         (a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in their exercise, as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.

         (b) Except during the continuance of an Event of Default: (i) the
Trustee need perform only those duties that are specifically set forth in this
Indenture and no others and (ii) in the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed. therein, upon certificates or opinions
furnished to the Trustee and conforming to the requirements of this Indenture.
However, the Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture.

         (c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own wilful
misconduct, except that (i) this paragraph does not limit the effect of
paragraph (b) of this Section 9.1; (ii) the Trustee shall not be liable for any
error of judgment made in good faith by a Trust Officer, unless it is proved
that the Trustee was negligent in ascertaining the pertinent facts and (iii) the
Trustee shall not be liable with respect to any action it takes or omits to take
in good faith in accordance with a direction received by it pursuant to Section
8.5 hereof.

         (d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section 9.1. No
provision of this Indenture shall require the Trustee to expend or risk its own
funds or otherwise incur any financial liability in the performance of any of
its duties hereunder, or in the exercise of any of its rights or powers, if it
shall have reasonable 

                                      -47-
<PAGE>   48
grounds for believing that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured to it.

         (e) The Trustee may refuse to perform any duty or exercise any right or
power unless it receives indemnity satisfactory to it against any loss,
liability or expense.

         (f) The Trustee shall not be liable for interest on any money received
by it except as the Trustee may agree in writing with the Company. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law.

         SECTION 9.2 Rights of Trustee.

         (a) The Trustee may rely on any document reasonably believed by it to
be genuine and to have been signed or presented by the proper person. The
Trustee need not investigate any fact or matter stated in the document.

         (b) Before the Trustee acts or refrains from acting, it (unless other
evidence be herein specifically prescribed) may require an Officer's Certificate
or an Opinion of Counsel, or both. The Trustee shall not be liable for any
action it takes or omits to take in good faith in reliance on such Officers'
Certificate or Opinion of Counsel.

         (c) The Trustee may act through agents and nominees and shall not be
responsible for the misconduct or negligence of any agent appointed with due
care.

         (d) The Trustee shall not be liable for any action that it takes or
omits to take in good faith, without negligence or wilful misconduct, and that
it reasonably believes to be authorized or within its rights or powers.

         (e) The Trustee shall not be charged with knowledge of any Event of
Default under subsection (c), (d), (e), (f), (g), (h) or (i) of Section 8.1 or
of the identity of any material Subsidiary unless either (1) a Trust Officer
assigned to its Institutional Trust Administration shall have actual knowledge
thereof, or (2) the Trustee shall have received notice thereof in accordance
with Section 12.2 hereof from the Company or any holder.

         SECTION 9.3 Individual Rights of Trustee. The Trustee in its individual
or any other capacity may become the owner or pledgee of Securities and may
otherwise deal with the Company or an Affiliate with the same rights it would
have if it were not Trustee. Any Agent may do the same with like rights.
However, the Trustee is subject to Sections 9.10 and 9.11 hereof.

         SECTION 9.4 Trustee's Disclaimer. The Trustee makes no representation
as to the validity or adequacy of this Indenture or the Securities, it shall not
be accountable for the Company's use of the proceeds from any Securities
authenticated and delivered by the Trustee in conformity with the provisions of
this Indenture, and it shall not be responsible for any statement of the Company
in the Indenture or any statement in the Securities other than its
authentication.

                                      -48-
<PAGE>   49
         SECTION 9.5 Notice of Defaults. If a Default or Event of Default occurs
and is continuing and if it is actually known to the Trustee, the Trustee shall
mail to Noteholders a notice of the Default or Event of Default within 90 days
after it occurs. Except in the case of a Default or Event of Default in payment
on any Security, the Trustee may withhold the notice if and so long as a
committee of its Trust Officers in good faith determines that withholding the
notice is in the interests of Noteholders.

         SECTION 9.6 Reports by Trustee to Noteholders. Within 60 days after the
reporting date stated in Section 12.10, the Trustee shall mail to Noteholders a
brief report dated as of such reporting date that complies with TIA Section
313(a) if and to the extent required by such Section 313(a). The Trustee also
shall comply with TIA Section 313(b)(2). The Trustee shall also transmit by mail
all reports as required by TIA Section 313(c).

         A copy of each report at the time of its mailing to Noteholders shall
be filed with the SEC and each stock exchange on which the Securities are
listed. The Company shall notify the Trustee when the Securities are listed on
any stock exchange.

         SECTION 9.7 Compensation and Indemnity. The Company shall pay to the
Trustee from time to time reasonable compensation for its services hereunder.
The Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee upon
request for all reasonable and duly documented disbursements, expenses and
advances incurred or made by it. Such disbursements and expenses may include the
reasonable and duly documented disbursements, compensation and expenses of the
Trustee's agents and counsel.

         The Company shall indemnify the Trustee and its officers, directors,
employees and all other agents against any loss or liability incurred by it
except as set forth in the next paragraph. The Trustee shall notify the Company
promptly of any claim for which it may seek indemnity. The Company shall defend
the claim and the Trustee shall cooperate in the defense. The Trustee may have
separate counsel and the Company shall pay the reasonable and duly documented
fees, disbursements and expenses of such counsel. The Company need not pay for
any settlement made without its consent, which consent shall not be unreasonably
withheld.

         The Company need not reimburse any expense or indemnify against any
loss or liability incurred by the Trustee through negligence, bad faith or
wilful misconduct.

         To secure the Company's payment obligations in this Section, the
Trustee shall have a lien prior to the Securities on all money or property held
or collected by the Trustee, except money or property held in trust to pay
principal and interest on particular Securities.

         When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 8.1(h) or (i) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.

                                      -49-
<PAGE>   50
         The provisions of this Section 9.7 shall survive the termination of
this Indenture, as provided by Section 10.1 hereof.

         SECTION 9.8 Replacement of Trustee. A resignation or removal of the
Trustee and appointment of a successor Trustee shall become effective only upon
the successor Trustee's acceptance of appointment as provided in this Section.

         The Trustee may resign by so notifying the Company. The Noteholders of
a majority in principal amount of the then outstanding Securities may remove the
Trustee by so notifying the Trustee and the Company. The Company may remove the
Trustee if:

         (a) the Trustee fails to comply with Section 9.10 hereof, unless the
Trustee's duty to resign is stayed as provided in TIA Section 310(b);

         (b) the Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law;

         (c) a Bankruptcy Custodian or public officer takes charge of the
Trustee or its property; or

         (d) the Trustee becomes incapable of acting.

         If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the
Noteholders of a majority in principal amount of the then outstanding Securities
may appoint a successor Trustee to replace the successor Trustee appointed by
the Company.

         If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Noteholders of at least 10% in principal amount of the then outstanding
Securities may petition any court of competent jurisdiction for the appointment
of a successor Trustee.

         If the Trustee fails to comply with Section 9.10 hereof, unless the
Trustee's duty to resign is stayed as provided in TIA Section 310(b), any
Noteholder who has been a bona fide holder of a Security for at least six months
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.

         A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, the
Company shall promptly pay all amounts due and payable to the retiring Trustee
pursuant to Section 9.7 hereof and the successor Trustee shall have all the
rights, powers and duties of the Trustee under this Indenture. The successor
Trustee shall mail a notice of its succession to Noteholders. The retiring
Trustee shall promptly transfer all property held by it as Trustee to the

                                      -50-
<PAGE>   51
successor Trustee, subject to the lien provided for in Section 9.7 hereof.
Notwithstanding replace ment of the Trustee pursuant to this Section 9.8, the
Company's obligations under Section 9.7 hereof shall continue for the benefit of
the retiring Trustee with respect to expenses and liabilities incurred by it
prior to such replacement.

         SECTION 9.9 Successor Trustee by Merger, Etc. If the Trustee
consolidates, merges or converts into, or transfers all or substantially all of
its corporate trust business to, another corporation, the successor corporation
without any further act shall be the successor Trustee.

         SECTION 9.10 Eligibility; Disqualification.

         This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1) and (5). The Trustee, or if the Trustee is
a member of a bank holding company system, its bank holding company shall always
have a combined capital and surplus as stated in Section 12.10 hereof.
The Trustee is subject to TIA Section 310(b).

         SECTION 9.11 Preferential Collection of Claims Against Company. The
Trustee is subject to TIA Section 311(a), excluding any creditor relationship
listed in TIA Section 311(b). A Trustee who has resigned or been removed shall
be subject to TIA Section 311(a) to the extent indicated therein.

         SECTION 9.12 Sections Applicable to Registrar, Paying Agent and
Conversion Agent. The term "Trustee" as used in Sections 6.3, 9.1, 9.2, 9.3, 9.4
and 9.7 hereof shall (unless the context requires otherwise) be construed as
extending to and including the Trustee acting in its capacity, if any, as
Registrar, Paying Agent and Conversion Agent.


                                    ARTICLE X

                             DISCHARGE OF INDENTURE

         SECTION 10.1 Termination of Company's Obligations. This Indenture shall
cease to be of further effect (except that the Company's obligations under
Sections 9.7 and 10.2 hereof shall survive) when all outstanding Securities
theretofore authenticated and issued have been delivered to the Trustee for
cancellation and the Company has paid all sums payable hereunder.

         Thereupon, the Trustee upon request of the Company, shall acknowledge
in writing the discharge of the Company's obligations under this Indenture,
except for those surviving obligations specified above.

         SECTION 10.2 Repayment to Company. The Trustee and the Paying Agent
shall promptly pay to the Company upon request any excess money or securities
held by them at any time.

         The Trustee and the Paying Agent shall pay to the Company upon request
any money held by them for the payment of principal, premium, if any, or
interest or Liquidated Damages, if any, that 

                                      -51-
<PAGE>   52
remains unclaimed for the period ending on the earlier of 10 Business Days prior
to the date such funds would escheat to the State or two years after the date
upon which such payment shall have become due; provided, however, that the
Company, or the Trustee at the request of the Company, shall have first caused
notice of such payment to the Company to be mailed to each Noteholder entitled
thereto no less than 30 days prior to such payment. After payment to the
Company, the Trustee and the Paying Agent shall have no further liability with
respect to such money and Noteholders entitled to the money must look to the
Company for payment as general creditors unless any applicable abandoned
property law designates another person.

                                   ARTICLE XI

                       AMENDMENTS, SUPPLEMENTS AND WAIVERS

         SECTION 11.1 Without Consent of Noteholders. The Company and the
Trustee may amend or supplement this Indenture or the Securities without the
consent of any Noteholder:

         (a) to cure any ambiguity, defect or inconsistency;

         (b) to comply with Sections 5.13 and 7.1 hereof;

         (c) to provide for uncertificated Securities in addition to
certificated Securities;

         (d) to make any change that does not adversely affect the legal rights
hereunder of any Noteholder;

         (e) to qualify this Indenture under the TIA or to comply with the
requirements of the SEC in order to maintain the qualification of the Indenture
under the TIA; or

         (f) to make any change that provides any additional rights or benefits
to the holders of Securities.

         An amendment under this Section may not make any change that adversely
affects the rights under Article VI of any holder of Senior Debt then
outstanding unless the holders of such Senior Debt (or any group or
representative thereof authorized to give a consent) consent to such change.

         SECTION 11.2 With Consent of Noteholders. Subject to Section 8.7
hereof, the Company and the Trustee may amend or supplement this Indenture or
the Securities with the written consent (including consents obtained in
connection with any tender offer or exchange offer for Securities) of the
Noteholders of at least a majority in principal amount of the then outstanding
Securities. Subject to Sections 8.4 and 8.7 hereof, the Noteholders of a
majority in principal amount of the Securities then outstanding may also by
their written consent (including consents obtained in connection with any tender
offer or exchange offer for Securities) waive any existing Default as provided
in Section 8.4 or waive compliance in a particular instance by the Company with
any provision of this 

                                      -52-
<PAGE>   53
Indenture or the Securities. However, without the consent of each Noteholder
affected, an amendment, supplement or waiver under this Section may not (with
respect to any Securities held by a nonconsenting Noteholder):

         (a) reduce the amount of Securities whose Noteholders must consent to
an amendment, supplement or waiver;

         (b) reduce the rate of or change the time for payment of interest on
any Security;

         (c) reduce the principal of or change the fixed maturity of any
Security or alter the redemption provisions with respect thereto;

         (d) make any Security payable in money other than that stated in the
Security;

         (e) make any change in Section 8.4, 8.7 or 11.2 hereof (this sentence);

         (f) waive a default in the payment of the Designated Event Payment or
the principal of, or interest on, any Security (other than as provided in
Section 8.4);

         (g) waive a redemption payment payable on any Security;

         (h) make any change that adversely affects the right of Noteholders to
convert Securities into Common Stock of the Company; or

         (i) make any change in Articles V or VI hereof that adversely affects
the interests of the Noteholders.

         To secure a consent of the Noteholders under this Section 11.2, it
shall not be necessary for the Noteholders to approve the particular form of any
proposed amendment supplement or waiver, but it shall be sufficient if such
consent approves the substance thereof.

         An amendment under this Section may not make any change that adversely
affects the rights under Article VI of any holder of Senior Debt then
outstanding unless the holders of such Senior Debt (or any group or
representative thereof authorized to give a consent) consent to such change.

         Neither the Company nor any of its Subsidiaries shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any holder of Securities or as an inducement to
any consent, waiver or amendment of any of the terms or provisions of this
Indenture or the Securities unless such consideration is offered to be paid or
agreed to be paid to all holders of the Securities that consent, waive or agree
to amend in the time frame set forth in the solicitation documents relating to
such consent, waiver or agreement.

         After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to Noteholders a notice briefly describing the
amendment or waiver.

                                      -53-
<PAGE>   54
         SECTION 11.3 Compliance with Trust Indenture Act. Every amendment to
this Indenture or the Securities shall be set forth in a supplemental indenture
that complies with the TIA as then in effect.

         SECTION 11.4 Revocation and Effect of Consents. Until an amendment,
supplement or waiver becomes effective, a consent to it by a Noteholder of a
Security is a continuing consent by the Noteholder and every subsequent
Noteholder of a Security or portion of a Security that evidences the same debt
as the consenting Noteholder's Security, even if notation of the consent is not
made on any Security. However, any such Noteholder or subsequent Noteholder may
revoke the consent as to such Noteholder's Security or portion of a Security if
the Trustee receives the notice of revocation before the date on which the
Trustee receives an Officers' Certificate certifying that the Noteholders of the
requisite principal amount of Securities have consented to the amendment,
supplement or waiver.

         The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Noteholders entitled to consent to any amendment,
supplement or waiver. If a record date is fixed, then notwithstanding the
provisions of the immediately preceding paragraph, those persons who were
Noteholders at such record date (or their duly designated proxies), and only
those persons, shall be entitled to consent to such amendment, supplement or
waiver or to revoke any consent previously given, whether or not such persons
continue to be Noteholders after such record date. No consent shall be valid or
effective for more than 90 days after such record date unless consents from
Noteholders of the principal amount of Securities required hereunder or such
amendment or waiver to be effective shall have also been given and not revoked
within such 90-day period.

         After an amendment, supplement or waiver becomes effective it shall
bind every Noteholder, unless it is of the type described in any of clauses (a)
through (i) of Section 11.2 hereof. In such case, the amendment or waiver shall
bind each Noteholder who has consented to it and every subsequent Noteholder of
a Security or portion of a Security that evidences the same debt as the
consenting Noteholder's Security.

         SECTION 11.5 Notation on or Exchange of Securities. The Trustee may
place an appropriate notation about an amendment or waiver on any Security
thereafter authenticated. The Company in exchange for all Securities may issue
and the Trustee shall authenticate new Securities that reflect the amendment or
waiver.

         SECTION 11.6 Trustee Protected. The Trustee shall sign all supplemental
indentures, except that the Trustee may, but need not, sign any supplemental
indenture that adversely affects its rights.


                                   ARTICLE XII

                                  MISCELLANEOUS

                                      -54-
<PAGE>   55
         SECTION 12.1 Trust Indenture Act Controls. If any provision of this
Indenture limits, qualifies, or conflicts with another provision which is
automatically deemed to be incorporated in this Indenture by the TIA, the
incorporated provision shall control.

         SECTION 12.2 Notices. Any notice or communication by the Company or the
Trustee to the other is duly given if in writing and delivered in person or
mailed by first class mail or nationally recognized courier to the other's
address stated in Section 12.10 hereof. The Company or the Trustee by notice to
the other may designate additional or different addresses for subsequent notices
or communications.

         Any notice or communication to a Noteholder shall be mailed by first
class mail to his address shown on the register kept by the Registrar. Failure
to mail a notice or communication to a Noteholder or any defect in it shall not
affect its sufficiency with respect to other Noteholders.

         If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.

         If the Company mails a notice or communication to Noteholders, it shall
mail a copy to the Trustee and each Agent at the same time.

         All notices or communications shall be in writing.

         In case by reason of the suspension of regular mail service, or by
reason of any other cause, it shall be impossible to mail any notice as required
by the Indenture, then such method of notification as shall be made with the
approval of the Trustee shall constitute a sufficient mailing of such notice.

         SECTION 12.3 Communication by Noteholders with Other Noteholders.
Noteholders may communicate pursuant to TIA Section 312(b) with other
Noteholders with respect to their rights under this Indenture or the Securities.
The Company, the Trustee, the Registrar and anyone else shall have the
protection of TIA Section 312(c).

         SECTION 12.4 Certificate and Opinion as to Conditions Precedent. Upon
any request or application by the Company to the Trustee to take any action
under this Indenture, the Company shall furnish to the Trustee:

         (a) an Officers' Certificate stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with; and

         (b) an Opinion of Counsel stating that, in the opinion of such counsel,
all such conditions precedent have been complied with.

                                      -55-
<PAGE>   56
         SECTION 12.5 Statements Required in Certificate or Opinion. Each
certificate or opinion with respect to compliance with a condition or covenant
provided for in this Indenture (other than pursuant to Section 4.3) shall
include:

         (a) a statement that the person signing such certificate or rendering
such opinion has read such covenant or condition;

         (b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;

         (c) a statement that, in the opinion of such person, such person has
made such examination or investigation as is necessary to enable such person to
express an informed opinion as to whether or not such covenant or condition has
been complied with; and

         (d) a statement as to whether or not, in the opinion of such person,
such condition or covenant has been complied with.

         SECTION 12.6 Rules by Trustee and Agents. The Trustee may make
reasonable rules for action by, or a meeting of, Noteholders. The Registrar or
Paying Agent may make reasonable rules and set reasonable requirements for its
functions.

         SECTION 12.7 Legal Holidays. A "Legal Holiday" is a Saturday, a Sunday
or a day on which banking institutions either in the State of New York or the
State of California are not required to be open. If a payment date is a Legal
Holiday at a place of payment, payment may be made at that place on the next
succeeding day that is not a Legal Holiday, and no interest shall accrue for the
intervening period. If any other operative date for purposes of this Indenture
shall occur on a Legal Holiday then for all purposes the next succeeding day
that is not a Legal Holiday shall be such operative date.

         SECTION 12.8 No Recourse Against Others. A director, officer, employee
or stockholder, as such of the Company shall not have any liability for any
obligations of the Company under the Securities or the Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creation. Each Noteholder by accepting a Security waives and releases all such
liability. The waiver and release are part of the consideration for the issue of
the Securities.

         SECTION 12.9 Counterparts. This Indenture may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.

         SECTION 12.10 Variable Provisions. "Officer" means the Chairman of the
Board, the President, any Vice-President, the Treasurer, the Secretary, any
Assistant Treasurer or any Assistant Secretary of the Company.

                                      -56-
<PAGE>   57
         The first certificate pursuant to Section 4.3 hereof shall be for the
fiscal year ending on March 31, 1997.

         The reporting date for Section 9.6 hereof is May 15 of each year. The
first reporting date is May 15, 1997.

         The Trustee, or if the Trustee is a member of a bank holding company
system, its bank holding company, shall always have a combined capital and
surplus of at least $50,000,000 as set forth in its most recent published annual
report of condition.

The Company's address is:  HMT Technology Corporation
                           1055 Page Avenue
                           Fremont, California 94538
                           Attention:  Chief Financial Officer
                           Telephone number:          (510) 490-3100
                           Telefax number:            (510) 490-5538

with a copy to:            James C. Kitch
                           Cooley Godward LLP
                           Five Palo Alto Square
                           3000 El Camino Real
                           Palo Alto, California 94306
                           Telephone number:          (415) 843-5000
                           Telefax number:            (415) 857-0663

The Trustee's address is:  State Street Bank and Trust Company
                             of California, N.A.
                           725 South Figueroa Street
                           Suite 3100
                           Los Angles, California 90017
                           Attention:  Corporate Trust Department
                           Telephone Number:          (213) 362-7338
                           Telefax Number:            (213) 362-7357

         SECTION 12.11 Governing Law. THE INTERNAL LAWS OF THE STATE OF NEW YORK
SHALL GOVERN THIS INDENTURE AND THE SECURITIES, WITHOUT REGARD TO THE CONFLICT
OF LAWS PROVISIONS THEREOF.

         SECTION 12.12 No Adverse Interpretation of Other Agreements. This
Indenture may not be used to interpret another indenture, loan or debt agreement
of the Company or an Affiliate. Any such indenture, loan or debt agreement may
not be used to interpret this Indenture.


                                      -57-
<PAGE>   58
         SECTION 12.13 Successors. All agreements of the Company in this
Indenture and the Securities shall bind its successor. All agreements of the
Trustee in this Indenture shall bind its successor.

         SECTION 12.14 Severability. In case any provision in this Indenture or
in the Securities shall be, invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.

         SECTION 12.15 Table of Contents Headings, Etc. The Table of Contents,
Cross Reference Table, and headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not to be
considered a part hereof, and shall in no way modify or restrict any of the
terms or provisions hereof.

         IN WITNESS WHEREOF the parties hereto have caused this Indenture to be
duly executed, all as of the date first written above.



                         HMT Technology Corporation,
                         as Company,


                              /s/ Peter S. Norris       
                         By:___________________________________________________
                            Name: Peter S. Norris
                            Title: Chief Financial Officer


                         State Street Bank and Trust Company of California, N.A.
                         as Trustee


                              /s/ Jeanie Mar
                         By:___________________________________________________
                            Name:
                            Title:

                                      -58-
<PAGE>   59
                           HMT TECHNOLOGY CORPORATION
                                   as Company









                 5 3/4% Convertible Subordinated Notes Due 2004









                                    INDENTURE

                          Dated as of January 15, 1997








             STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A.
                                   as Trustee
<PAGE>   60
                                TABLE OF CONTENTS
                                   (CONTINUED)



                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                                   PAGE
                                                                                                                   ----
<S>      <C>                                                                                                         <C>
ARTICLE I - DEFINITIONS AND INCORPORATION BY REFERENCE ...............................................................1

         SECTION 1.1           Definitions............................................................................1
         SECTION 1.2           Other Definitions......................................................................7
         SECTION 1.3           Incorporation by Reference of Trust Indenture Act......................................8
         SECTION 1.4           Rules of Construction..................................................................8

ARTICLE II - THE SECURITIES...........................................................................................9

         SECTION 2.1           Form and Dating........................................................................9
         SECTION 2.2           Execution and Authentication..........................................................11
         SECTION 2.3           Registrar, Paying Agent and Conversion Agent..........................................12
         SECTION 2.4           Paying Agent to Hold Money in Trust...................................................12
         SECTION 2.5           Noteholder Lists......................................................................12
         SECTION 2.6           Transfer and Exchange.................................................................13
         SECTION 2.7           Replacement Securities................................................................20
         SECTION 2.8           Outstanding Securities................................................................20
         SECTION 2.9           Treasury Securities...................................................................20
         SECTION 2.10          Temporary Securities..................................................................21
         SECTION 2.11          Cancellation..........................................................................21
         SECTION 2.12          Transfer of Interests in Global Securities............................................21
         SECTION 2.13          Defaulted Interest or Liquidated Damages..............................................21

ARTICLE III - REDEMPTION AND REPURCHASE..............................................................................22

         SECTION 3.1           Notices to Trustee....................................................................22
         SECTION 3.2           Selection of Securities to be Redeemed................................................22
         SECTION 3.3           Notice of Redemption..................................................................22
         SECTION 3.4           Effect of Notice of Redemption........................................................23
         SECTION 3.5           Deposit of Redemption Price...........................................................23
         SECTION 3.6           Securities Redeemed in Part...........................................................23
         SECTION 3.7           Optional Redemption...................................................................24
         SECTION 3.8           Designated Event Offer................................................................24

ARTICLE IV - COVENANTS...............................................................................................26

         SECTION 4.1           Payment of Securities.................................................................26
         SECTION 4.2           SEC Reports...........................................................................26
         SECTION 4.3           Compliance Certificate................................................................26
         SECTION 4.4           Stay, Extension and Usury Laws........................................................27
</TABLE>

                                       -i-
<PAGE>   61
                                TABLE OF CONTENTS
                                   (CONTINUED)

<TABLE>
<CAPTION>
<S>      <C>                                                                                                         <C>
         SECTION 4.5           Corporate Existence...................................................................27
         SECTION 4.6           Taxes.................................................................................28
         SECTION 4.7           Designated Event......................................................................28
         SECTION 4.8           Shareholder Rights Plan...............................................................28

ARTICLE V - CONVERSION...............................................................................................28

         SECTION 5.1           Conversion Privilege..................................................................28
         SECTION 5.2           Conversion Procedure..................................................................29
         SECTION 5.3           Fractional Shares.....................................................................30
         SECTION 5.4           Taxes on Conversion...................................................................30
         SECTION 5.5           Company to Provide Stock..............................................................30
         SECTION 5.6           Adjustment of Conversion Price........................................................30
         SECTION 5.7           No Adjustment.........................................................................33
         SECTION 5.8           Other Adjustments.....................................................................34
         SECTION 5.9           Adjustments for Tax Purposes..........................................................34
         SECTION 5.10          Adjustments by the Company............................................................34
         SECTION 5.11          Notice of Adjustment..................................................................34
         SECTION 5.12          Notice of Certain Transactions........................................................34
         SECTION 5.13          Effect of Reclassifications, Consolidations, Mergers or Sales on
                               Conversion Privilege..................................................................35
         SECTION 5.14          Trustee's Disclaimer..................................................................36

ARTICLE VI - SUBORDINATION...........................................................................................36

         SECTION 6.1           Agreement to Subordinate..............................................................36
         SECTION 6.2           No Payment on Securities if Senior Debt in Default....................................36
         SECTION 6.3           Distribution on Acceleration of Securities; Dissolution and Reorganization;
                               Subrogation of Securities.............................................................37
         SECTION 6.4           Reliance by Senior Debt on Subordination Provisions...................................40
         SECTION 6.5           No Waiver of Subordination Provisions.................................................40
         SECTION 6.6           Trustee's Relation to Senior Debt.....................................................41
         SECTION 6.7           Other Provisions Subject Hereto.......................................................41

ARTICLE VII - SUCCESSORS.............................................................................................42

         SECTION 7.1           Merger, Consolidation or Sale of Assets...............................................42
         SECTION 7.2           Successor Corporation Substituted.....................................................42
</TABLE>

                                      -ii-
<PAGE>   62
                                TABLE OF CONTENTS
                                   (CONTINUED)

<TABLE>
<CAPTION>
<S>      <C>                                                                                                         <C>
ARTICLE VIII - DEFAULTS AND REMEDIES.................................................................................43

         SECTION 8.1           Events of Default.....................................................................43
         SECTION 8.2           Acceleration..........................................................................44
         SECTION 8.3           Other Remedies........................................................................44
         SECTION 8.4           Waiver of Past Defaults...............................................................45
         SECTION 8.5           Control by Majority...................................................................45
         SECTION 8.6           Limitation on Suits...................................................................45
         SECTION 8.7           Rights of Noteholders to Receive Payment..............................................45
         SECTION 8.8           Collection Suit by Trustee............................................................46
         SECTION 8.9           Trustee May File Proofs of Claim......................................................46
         SECTION 8.10          Priorities............................................................................46
         SECTION 8.11          Undertaking for Costs.................................................................46

ARTICLE IX - TRUSTEE.................................................................................................47

         SECTION 9.1           Duties of Trustee.....................................................................47
         SECTION 9.2           Rights of Trustee.....................................................................48
         SECTION 9.3           Individual Rights of Trustee..........................................................48
         SECTION 9.4           Trustee's Disclaimer..................................................................48
         SECTION 9.5           Notice of Defaults....................................................................48
         SECTION 9.6           Reports by Trustee to Noteholders.....................................................48
         SECTION 9.7           Compensation and Indemnity............................................................49
         SECTION 9.8           Replacement of Trustee................................................................49
         SECTION 9.9           Successor Trustee by Merger, Etc......................................................50
         SECTION 9.10          Eligibility; Disqualification.........................................................51
         SECTION 9.11          Preferential Collection of Claims Against Company.....................................51
         SECTION 9.12          Sections Applicable to Registrar, Paying Agent and Conversion Agent ..................51

ARTICLE X - DISCHARGE OF INDENTURE...................................................................................51

         SECTION 10.1          Termination of Company's Obligations..................................................51
         SECTION 10.2          Repayment to Company..................................................................51

ARTICLE XI - AMENDMENTS, SUPPLEMENTS AND WAIVERS.....................................................................52

         SECTION 11.1          Without Consent of Noteholders........................................................52
         SECTION 11.2          With Consent of Noteholders...........................................................52
         SECTION 11.3          Compliance with Trust Indenture Act...................................................53
</TABLE>

                                      -iii-
<PAGE>   63
                                TABLE OF CONTENTS
                                   (CONTINUED)
<TABLE>
<CAPTION>
<S>      <C>                                                                                                         <C>
         SECTION 11.4          Revocation and Effect of Consents.....................................................53
         SECTION 11.5          Notation on or Exchange of Securities.................................................54
         SECTION 11.6          Trustee Protected.....................................................................54

ARTICLE XII - MISCELLANEOUS..........................................................................................54

         SECTION 12.1          Trust Indenture Act Controls..........................................................54
         SECTION 12.2          Notices...............................................................................54
         SECTION 12.3          Communication by Noteholders with Other Noteholders...................................55
         SECTION 12.4          Certificate and Opinion as to Conditions Precedent....................................55
         SECTION 12.5          Statements Required in Certificate or Opinion.........................................55
         SECTION 12.6          Rules by Trustee and Agents...........................................................56
         SECTION 12.7          Legal Holidays........................................................................56
         SECTION 12.8          No Recourse Against Others............................................................56
         SECTION 12.9          Counterparts..........................................................................56
         SECTION 12.10         Variable Provisions...................................................................56
         SECTION 12.11         Governing Law.........................................................................57
         SECTION 12.12         No Adverse Interpretation of Other Agreements.........................................57
         SECTION 12.13         Successors............................................................................57
         SECTION 12.14         Severability..........................................................................57
         SECTION 12.15         Table of Contents Headings, Etc.......................................................57

EXHIBIT A                  FORM OF CONVERTIBLE SUBORDINATED NOTE
EXHIBIT B-1                FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF
                           TRANSFER FROM RESTRICTED GLOBAL NOTE TO UNRESTRICTED
                           GLOBAL NOTE
EXHIBIT B-2                FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF
                           TRANSFER FROM UNRESTRICTED GLOBAL NOTE TO RESTRICTED
                           GLOBAL NOTE
EXHIBIT B-3                FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF
                           TRANSFER OF CERTIFICATED NOTES  AND FOR CERTAIN OTHER
                           PURPOSES
EXHIBIT B-4                FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF
                           TRANSFER FROM RESTRICTED GLOBAL NOTE OR UNRESTRICTED
                           GLOBAL NOTE TO CERTIFICATED CONVERTIBLE NOTE
</TABLE>

                                      -iv-

<PAGE>   1
                                                                     Exhibit 4.9


                           HMT TECHNOLOGY CORPORATION
                 5-3/4% CONVERTIBLE SUBORDINATED NOTES DUE 2004
                             REGISTRATION AGREEMENT
                                                              NEW YORK, NEW YORK

                             As of January 15, 1997


SALOMON BROTHERS INC
ALEX. BROWN & SONS INCORPORATED
HAMBRECHT & QUIST LLC
ROBERTSON, STEPHENS & COMPANY LLC
 c/o Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048


Ladies and Gentlemen:

         HMT Technology Corporation., a Delaware corporation (the "Company"),
proposes to issue and sell (such issuance and sale, the "Initial Placement") to
you (the "Initial Purchasers"), upon the terms set forth in a purchase agreement
dated January 15, 1997 (the "Purchase Agreement"), $200,000,000 principal amount
(plus an additional $30,000,000 principal amount to cover over-allotments, if
any) of its 5-3/4% Convertible Subordinated Notes due 2004 (the "Securities").
The Securities will be convertible into shares of Common Stock, par value $0.001
per share (the "Common Stock"), of the Company at the conversion price set forth
in the Final Memorandum. As an inducement to you to enter into the Purchase
Agreement and in satisfaction of a condition to your obligations thereunder, the
Company agrees with you, (i) for your benefit and (ii) for the benefit of the
holders from time to time of the Securities or the Common Stock issuable upon
conversion of the Securities (including you) (each of the foregoing, a "Holder"
and together, the "Holders"), as follows:

         1. Definitions. Capitalized terms used herein without definition shall
have the respective meanings set forth in the Purchase Agreement. As used in
this Agreement, the following capitalized terms shall have the following
meanings:

                  "Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder.

                  "Affiliate" of any specified person means any other person
that, directly or indirectly, is in control of, is controlled by, or is under
common control with, such specified person. For purposes of this definition,
control of a person means the power, direct or indirect, to direct or cause the
direction of the management and policies of such person whether by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
<PAGE>   2
                  "Business Day" means any day that is neither a Saturday or a
Sunday nor a day on which banking institutions in The City of New York are
authorized or obligated by law or executive order to close.

                  "Closing Date" has the meaning set forth in the Purchase
Agreement.

                  "Commission" means the Securities and Exchange Commission.

                  "Damages Accrual Period" has the meaning set forth in Section
2(c) hereof.

                  "Damages Payment Date" has the meaning set forth in Section
2(c) hereof.

                  "Event" has the meaning set forth in Section 2(c) hereof.

                  "Event Date" has the meaning set forth in Section 2(c) hereof.

                  "Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated thereunder.

                  "Final Memorandum" has the meaning set forth in the Purchase
Agreement.

                  "Holder" has the meaning set forth in the preamble hereto.

                  "Indenture" means the Indenture relating to the Securities
dated as of January 15, 1997, between the Company and State Street Bank and
Trust Company, of California, N. A., as trustee, as the same may be amended from
time to time in accordance with the terms thereof.

                  "Initial Placement" has the meaning set forth in the preamble
hereto.

                  "Liquidated Damages" has the meaning set forth in Section 2(c)
hereof.

                  "Majority Holders" means the Holders of a majority of the then
outstanding aggregate principal amount of Securities registered under a Shelf
Registration Statement; provided, that Holders of Common Stock issued upon
conversion of Securities shall be deemed to be Holders of the aggregate
principal amount of Securities from which such Common Stock was converted.

                  "Managing Underwriters" means the Underwriter or Underwriters
that shall administer an Underwritten Offering.

                  "Notice Holder" has the meaning set forth in Section 2(b)
hereof.

                  "Prospectus" means the prospectus included in any Shelf
Registration Statement (including, without limitation, a prospectus that
discloses information previously omitted from a prospectus filed as part of an
effective registration statement in reliance upon Rule 430A under the Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the


                                       -2-
<PAGE>   3
offering of any portion of the Securities or Common Stock issuable upon
conversion thereof, covered by such Shelf Registration Statement, and all
amendments and supplements to such prospectus, including post-effective
amendments.

                  "Record Date" has the meaning set forth in Section 2(c)
hereof.

                  "Record Holder" has the meaning set forth in Section
2(c)hereof.

                  "Registrable Securities" shall mean the Securities and shares
of Common Stock issued upon conversion thereof, excluding any such securities
that, and any such securities the predecessors of which, were previously sold
pursuant to a registration statement of the Company filed under the Act or
pursuant to Rule 144 promulgated under the Act.

                  "Securities" has the meaning set forth in the preamble hereto.

                  "Selling Confirmation" means, with respect to a Notice Holder
and a Selling Notice given by such Notice Holder, a written notice given by the
Company to such Notice Holder instructing and notifying such Notice Holder that
the Shelf Registration Statement and Prospectus may be used during the
applicable Selling Period to effect the transactions described in such Selling
Notice, that the Company is then-currently in compliance with Section 3(b) and
that the Company reaffirms the consent granted pursuant to Section 3(f).

                  "Selling Notice" has the meaning set forth in Section 2(b)
hereof.

                  "Selling Period" means, with respect to a Notice Holder and a
Selling Notice given by such Notice Holder, a period of forty-five calendar days
commencing on the date such Notice Holder receives a Selling Confirmation in
respect of the transactions described in such Selling Notice; provided, that the
Company may defer existing Selling Periods in accordance with Section 3(c)(2).

                  "Shelf Registration" means a registration effected pursuant to
Section 2 hereof.

                  "Shelf Registration Period" has the meaning set forth in
Section 2(a) hereof.

                  "Shelf Registration Statement" means a "shelf" registration
statement of the Company pursuant to the provisions of Section 2 hereof
(including additional registration statements filed pursuant to Section 3(d))
which covers some or all of the Securities and the Common Stock issuable upon
conversion thereof, as applicable, on an appropriate form under Rule 415
promulgated under the Act, or any similar rule that may be adopted by the
Commission, and all amendments and supplements to such registration statement,
including post-effective amendments, in each case including the Prospectus
contained therein, all exhibits thereto and all material incorporated by
reference therein.

                  "Trustee" means the trustee with respect to the Securities
under the Indenture.


                                       -3-
<PAGE>   4
                  "Underwriter" means any underwriter of Securities or Common
Stock issuable upon conversion thereof in connection with an offering thereof
under a Shelf Registration Statement.

                  "Underwritten Offering" means an offering in which the
Securities or Common Stock are sold to an Underwriter or with the assistance of
an Underwriter for reoffering to the public.

         2. Shelf Registration; Suspension of Use of Prospectus; Liquidated
Damages.

                  (a) The Company shall prepare and file with the Commission, as
soon as practicable but in any event on or prior to the date seventy-five (75)
days following the Closing Date, a Shelf Registration Statement under the Act
registering the resale from time to time by Holders thereof of all of the
Registrable Securities. The Shelf Registration Statement shall permit resales of
Registered Securities by Holders in the manner or manners designated by them
(including, without limitation, one or more Underwritten Offerings) from time to
time, which shall be set forth in such Shelf Registration Statement. The Company
shall use all reasonable efforts to cause the Shelf Registration Statement to be
declared effective under the Act as soon as practicable but in any event on or
prior to the date one hundred five (105) days following the Closing Date and to
keep the Shelf Registration Statement continuously effective under the Act until
the earlier of (i) the third anniversary of the last date of original issuance
of the Securities, (ii) the date on which the Securities or Common Stock
issuable upon conversion thereof may be sold by non-affiliates of the Company
pursuant to paragraph (k) of Rule 144 (or any successor provision) promulgated
by the Commission and (iii) such date as of which all the Securities or the
Common Stock issuable upon conversion thereof have been sold pursuant to the
Shelf Registration Statement (the period ending at such earlier date, the "Shelf
Registration Period").

                  (b) Each Holder of Registrable Securities agrees that if such
Holder wishes to sell its Registrable Securities pursuant to the Shelf
Registration Statement and the Prospectus, it will do so only in accordance with
this Section 2(b). Each Holder of Registrable Securities agrees to give written
notice to the Company at least four Business Days prior to any intended resale
of Registrable Securities under the Shelf Registration Statement, which notice
shall specify the date on which such Holder intends to begin such distribution
and such information with respect to such Holder and the intended distribution
as may be reasonably required to amend the Shelf Registration Statement or
supplement the Prospectus with respect to such intended distribution (each
Holder providing the notice described in this sentence and with respect to which
the related Selling Period is continuing or has been deferred, a "Notice
Holder"; each such notice, a "Selling Notice"). As soon as practicable after the
date a Selling Notice is received by the Company, and in any event within three
Business Days after such date, the Company shall either:

                           (i) (A) provide a Selling Confirmation to such Notice
Holder or (B) file a supplement to the Prospectus or a post-effective amendment
to the Shelf Registration Statement as required by Section 3(b), cause any such
amendment to become effective and immediately provide a Selling Confirmation to
such Notice Holder; or


                                       -4-
<PAGE>   5
                           (ii) in the event of the happening of any event of
the kind described in Section 3(c)(2)(i), 3(c)(2)(ii), 3(c)(2)(iii) (y) or
3(c)(2)(iv) hereof, the Company shall deliver to such Notice Holder the notice
required by Section 3(c)(2) and notify the holder that the consent granted
pursuant to Section 3(f) is suspended until further notice.

                           Each such Notice Holder may sell all or any
Registrable Securities pursuant to the Shelf Registration Statement and the
Prospectus only during the Selling Period commencing with the earlier of (x) the
date on which such Notice Holder receives a Selling Confirmation and (y) the
fourth Business Day after the related Selling Notice has been received by the
Company; provided that in the event the Company elects to take the actions
permitted by Section 2(b)(ii), the commencement of the Selling Period shall be
deferred until such later date as the Company delivers a Selling Confirmation. A
Notice Holder shall not sell any Registrable Securities pursuant to the Shelf
Registration Statement or the Prospectus after the expiration of the applicable
Selling Period without giving a new Selling Notice pursuant to Section 2(b)
hereof and receiving new Selling Confirmation. Notwithstanding the foregoing,
the Company shall not under any circumstances be entitled to exercise its right
under this paragraph to defer the commencement of a Selling Period or its right
under Section 3(c)(2) to defer existing Selling Periods, in the aggregate, more
than one time in any three month period or three times in any twelve month
period, and the period in which a Selling Period is deferred shall not exceed
thirty (30) days. In no event shall the Company be permitted to extend the
period during which the commencement of any such Selling Period is deferred
(whether pursuant to this paragraph or Section 3(c)(2) from and after the date a
Notice Holder provides a Selling Notice to the Company in accordance with this
Section 2(c) (a "Deferral Period") beyond such thirty (30) day period.

                  In the event the Company elects to take the actions described
in Section 2(b)(ii), the Company will, at such time as it is in compliance with
Section 3(b) and as use of the Prospectus may be resumed, immediately provide
Selling Confirmations to all Notice Holders.

                  (c) The parties hereto agree that the Holders of the
Registrable Securities will suffer damages, and that it would not be feasible to
ascertain the extent of such damages with precision, if (i) the Shelf
Registration statement has not been filed on or prior to the date seventy-five
(75) days following the Closing Date, (ii) the Shelf Registration Statement has
not been declared effective under the Securities Act on or before the date one
hundred five (105) days following the Closing Date, (iii) prior to the end of
the Shelf Registration Period, the Commission shall have issued a stop order
suspending the effectiveness of the Shelf Registration Statement or proceedings
have been initiated with respect to the Shelf Registration Statement under
Section 8(d) or 8(e) of the Act, (iv) the aggregate number of days in any one
Deferral Period exceeds the periods permitted pursuant to Section 2(b) hereof or
(v) the number of Deferral Periods exceeds the number permitted pursuant to
Section 2(b) hereof (each of the events of a type described in any of the
foregoing clauses (i) through (v) are individually referred to herein as an
"Event"; and the date seventy-five (75) days following the Closing Date in the
case of clause (i), the date one hundred five days following the Closing Date in
the case of clause (ii), the date on which the effectiveness of the Shelf
Registration Statement has been suspended or proceedings with respect to the
Shelf Registration Statement under Section 8(d) or 8(e) of the Act have been
commenced in the case of clause (iii), the date on which the


                                       -5-
<PAGE>   6
duration of a Deferral Period exceeds the periods permitted by Section 2(c)
hereof in the case of clause (iv), and the date of the commencement of a
Deferral Period that causes the limit on the number of Deferral Periods under
Section 2(b) hereof to be exceeded in the case of clause (v), are referred to
herein as an "Event Date"). Events shall be deemed to continue until the date of
the termination of such Event, which shall be the following date with respect to
the respective types of Events: the date the Registration Statement is filed in
the case of an Event of the type described in clause (i), the date the
Registration Statement is declared effective under the Act in the case of an
Event described in clause (ii), the date that all stop orders suspending
effectiveness of the Shelf Registration Statement have been removed and the
proceedings initiated with respect to the Shelf Registration Statement under
Section 8(d) or 8(e) of the Act have terminated, as the case may be, in the case
of Events of the types described in clause (iii), termination of the Deferral
Period which caused the aggregate number of days in any one Deferral Period to
exceed the number permitted by Section 2(b) to be exceeded in the case of Events
of the type described in clause (iv), and termination of the Deferral Period the
commencement of which caused the number of Deferral Periods permitted by Section
2(b)(ii) to be exceeded in the case of Events of the type described in clause
(v).

                  Accordingly, upon the occurrence of any Event and until such
time as there are no Events which have occurred and are continuing (a "Damages
Accrual Period"), commencing on the Event Date on which such Damages Accrual
Period began, the Company agrees to pay, as liquidated damages, and not as a
penalty, an additional amount (the "Liquidated Damages"): (A) to each Holder of
Registrable Securities that is a Notice Holder, accruing at a rate equal to
one-half of one percent per annum (50 basis points) on (s) where such
Registrable Securities are Securities, the aggregate principal amount of such
Securities held by such Notice Holder and (t) where such Registrable Securities
are shares of Common Stock issued upon conversion of Securities, the aggregate
principal amount of Securities that were converted into such shares and (B) if
the Damages Accrual Period continues for a period in excess of thirty days from
the Event Date, from and after the end of such thirty day period until such time
as there are no Events which have occurred and are continuing, to each Holder of
Registrable Securities (whether or not a Notice Holder), accruing at a rate
equal to one-half of one percent per annum (50 basis points) on (u) where such
Registrable Securities are Securities, the aggregate principal amount of such
Securities held by such Holder and (v) where such Registrable Securities are
shares of Common Stock issued upon conversion of Securities, the aggregate
principal amount of Securities that were converted into such shares.
Notwithstanding the foregoing, no Liquidated Damages shall accrue under clause
(A) of the preceding sentence during any period for which Liquidated Damages
accrue under clause (B) of the preceding sentence or as to any Securities or
shares of Common Stock from and after the earlier of (x) the date such
securities are no longer Registrable Securities, and (y) the expiration of the
Shelf Registration Period. In addition, Liquidated Damages will not accrue as to
any Securities or Common Stock issuable upon the conversion thereof represented
by the Unrestricted Global Note (as defined in the Indenture) provided that such
securities are not subject to limitations on transfer under United States
federal or state securities laws and there shall have been at least six months
during which the Shelf Registration Statement was effective and the Prospectus
included therein was available for effecting resales of the Securities and the
Common Stock issuable upon conversion thereof. The rate of accrual of the
Liquidated Damages with respect to any period shall not exceed the rate provided
for in this paragraph notwithstanding the occurrence of multiple concurrent
Events.


                                       -6-
<PAGE>   7
                  Liquidated Damages due on any Securities or Common Stock shall
be payable on each Interest Payment Date on the Securities occurring (or if
there are no Securities outstanding, which would have occurred) during the
Damages Accrual Period and on the Interest Payment Date immediately following
(or which would have followed) the termination of such Period (a "Damages
Payment Date"). The Company shall pay the Liquidated Damages due on any
Securities by depositing with the Trustee under the Indenture, in trust, for the
benefit of the Holders of Securities or Common Stock or Notice Holders, as the
case may be, entitled thereto, at least one Business Day prior to the applicable
Damages Payment Date, sums sufficient to pay the Liquidated Damages accrued or
accruing since the last preceding Damages Payment Date to such Damages Payment
Date. The Liquidated Damages shall be paid on each Damages Payment Date to the
Holders of record of the Registrable Securities (the "Record Holders") on the
15th day of January or 15th day of July (each a "Record Date") immediately
preceding such Damages Payment Date by wire transfer of immediately available
funds to the accounts specified by them or by mailing checks to their registered
addresses as they appear in the Securities register or stock transfer books of
the Company, if no such accounts have been specified on or before the
applicable Regular Record Date. The Trustee shall be entitled, on behalf of the
Holders of Securities, Common Stock and Notice Holders, to seek any available
remedy for the enforcement of this Agreement, including for the payment of such
Liquidated Damages.

                  Notwithstanding the foregoing, the parties agree that the sole
remedy payable for a violation of the terms of this Agreement with respect to
which Liquidated Damages are expressly provided shall be such Liquidated
Damages. Nothing shall preclude a Notice Holder or Holder of Registrable
Securities from pursuing or obtaining specific performance or other equitable
relief with respect to any violation of this Agreement for which liquidated
damages are not expressly provided by this Agreement.

                  All of the Company's obligations set forth in this Section
2(c) which are outstanding with respect to any Registrable Securities at the
time such security ceases to be a Registrable Security shall survive until such
time as all such obligations with respect to such security have been satisfied
in full (notwithstanding termination of the Agreement).

                  The parties hereto agree that the Liquidated Damages provided
for in this Section 2(c) constitute a reasonable estimate of the damages that
may be incurred by Holders of Registrable Securities (other than the Initial
Purchasers) by reason of the failure of the Shelf Registration Statement to be
filed or declared effective or unavailable (absolutely or as a practical matter)
for effecting resales of Registrable Securities, as the case may be, in
accordance with the provisions hereof.

         3. Registration Procedures. In connection with any Shelf Registration
Statement, the following provisions shall apply:

                  (a) The Company shall furnish to you, prior to the filing
thereof with the Commission, a copy of any Shelf Registration Statement, and
each amendment thereof and each amendment or supplement, if any, to the
Prospectus included therein and shall use its best efforts to


                                       -7-
<PAGE>   8
reflect in each such document, when so filed with the Commission, such comments
as Salomon Brothers Inc reasonably may propose.

                  (b) The Company shall ensure that (i) any Shelf Registration
Statement and any amendment thereto and any Prospectus forming part thereof and
any amendment or supplement thereto comply in all material respects with the Act
and the rules and regulations thereunder, (ii) any Shelf Registration Statement
and any amendment thereto does not, when it becomes effective, contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading and
(iii) any Prospectus forming part of any Shelf Registration Statement, and any
amendment or supplement to such Prospectus, does not include an untrue statement
of a material fact or omit to state a material fact necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading; provided that no representation or agreement is made
hereby with respect to information with respect to you or any Holder required to
be included in any Shelf Registration or Prospectus pursuant to the Act or the
rules and regulations thereunder or provided by you, any Holder, or any Managing
Underwriter specifically for inclusion in any Shelf Registration Statement or
Prospectus.

                  (c) (1) The Company shall advise you and the Holders and, if
requested by you or any such Holder, confirm such advice in writing:

                  (i) when a Shelf Registration Statement and any amendment
         thereto has been filed with the Commission and when the Shelf
         Registration Statement or any post-effective amendment thereto has
         become effective; and

                  (ii) of any request by the Commission for amendments or
         supplements to the Shelf Registration Statement or the Prospectus
         included therein or for additional information.

                  (2) During any Selling Period, during the deferral of any
Selling Period and within three Business Days of receipt by the Company of any
Selling Notice, the Company shall notify you and the Notice Holders and, if
requested by you or any such Notice Holder, confirm such notification in
writing:

                  (i) of the issuance by the Commission of any stop order
         suspending the effectiveness of the Shelf Registration Statement or the
         initiation of any proceedings for that purpose;

                  (ii) of the receipt by the Company of any notification with
         respect to the suspension of the qualification of the Securities
         included in any Shelf Registration Statement for sale in any
         jurisdiction or the initiation or threat of any proceeding for such
         purpose;

                  (iii) of (x) the suspension of the use of the Prospectus
         pursuant to Section 2(b) hereof or (y) of the happening of any event
         that requires the making of any changes in the Shelf Registration
         Statement or the Prospectus so that, as of such date, the statements
         therein are not misleading and do not omit to state a material fact
         required to be stated therein or


                                       -8-
<PAGE>   9
         necessary to make the statements therein (in the case of the
         Prospectus, in light of the circumstances under which they were made)
         not misleading; and

                  (iv) of the determination by the Company, in its judgment,
         that it is advisable to suspend use of the Prospectus for valid
         business reasons (not including avoidance of the Company's obligations
         hereunder) including, among other things, the acquisition or
         divestiture of assets, public filings with the Commission, pending
         corporate developments and similar events;

which notice shall be accompanied by an instruction to defer the use of the
Prospectus until the Company delivers a Selling Confirmation whereupon any
existing Selling Period shall be deferred and shall recommence upon delivery of
the aforementioned Selling Confirmation; provided, that such Selling Period
shall be extended by the number of days elapsed in such period prior to such
deferral.

                  (d) The Company shall use its best efforts to obtain the
withdrawal of any order suspending the effectiveness of any Shelf Registration
Statement at the earliest possible time, and in any event shall within thirty
(30) days of any such order amend the Shelf Registration Statement in a manner
reasonably expected to obtain the withdrawal of such order, or file an
additional Shelf Registration Statement covering all of the Registrable
Securities (whereupon references herein to the Shelf Registration Statement
shall be deemed to include reference to such additional filing).

                  (e) The Company shall furnish to each Holder of Securities or
the Common Stock issued upon conversion thereof included within the coverage of
any Shelf Registration Statement, without charge, at least one copy of such
Shelf Registration Statement and any post-effective amendment thereto, including
financial statements and schedules, and, if the Holder so requests in writing,
all exhibits (including those incorporated by reference).

                  (f) The Company shall, during the Shelf Registration Period,
deliver to each Holder of Securities or the Common Stock issued upon conversion
thereof included within the coverage of any Shelf Registration Statement,
without charge, as many copies of the Prospectus (including each preliminary
Prospectus) included in such Shelf Registration Statement and any amendment or
supplement thereto as such Holder may reasonably request; and, except during
such periods as the Company shall have suspended the use of the Prospectus
pursuant to Section 2(b) or 3(c)(2), the Company consents to the use of the
Prospectus or any amendment or supplement thereto by each of the selling Holders
in connection with the offering and sale of the Securities or the Common Stock
issued upon conversion thereof covered by the Prospectus or any amendment or
supplement thereto.

                  (g) Prior to any offering of Securities or the Common Stock
issued upon conversion thereof pursuant to any Shelf Registration Statement, the
Company shall register or qualify or cooperate with the Holders of Securities or
the Common Stock issued upon conversion thereof included therein and their
respective counsel in connection with the registration or qualification of such
Securities or Common Stock for offer and sale under the securities or blue sky
laws of such jurisdictions as any such Holders reasonably request in writing and
do any and all other


                                       -9-
<PAGE>   10
acts or things necessary or advisable to enable the offer and sale in such
jurisdictions of the Securities and the Common Stock issued upon conversion
thereof covered by such Shelf Registration Statement; provided, however, that
the Company will not be required to qualify generally to do business in any
jurisdiction where it is not then so qualified or to take any action which would
subject it to general service of process or to taxation in any such jurisdiction
where it is not then so subject.

                  (h) The Company shall cooperate with the Holders to facilitate
the timely preparation and delivery of certificates representing Securities or
the Common Stock issued upon conversion thereof to be sold pursuant to any Shelf
Registration Statement free of any restrictive legends and in such denominations
and registered in such names as Holders may request prior to sales of Securities
or the Common Stock issued upon conversion thereof pursuant to such Shelf
Registration Statement.

                  (i) Upon the occurrence of any event contemplated by paragraph
(c)(2)(iii) above, the Company shall promptly prepare a post-effective amendment
to any Shelf Registration Statement or an amendment or supplement to the related
Prospectus or file any other required document so that, as thereafter delivered
(when and as permitted pursuant to Section 2(c)) to purchasers of the Securities
or the Common Stock issued upon conversion thereof included therein, the
Prospectus will not include an untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading.

                  (j) The Company shall use its best efforts to cause The
Depository Trust Company ("DTC") on the first Business Day following the
effective date of any Shelf Registration Statement hereunder or as soon as
possible thereafter to remove (i) from any existing CUSIP number assigned to the
Securities any designation indicating that the Securities are "restricted
securities", which efforts shall include delivery to DTC of a letter executed by
the Company substantially in the form of Exhibit A hereto and (ii) any other
stop or restriction on DTC's system with respect to the Securities. In the event
the Company is unable to cause DTC to take the actions described in the
immediately preceding sentence, the Company shall take such actions as Salomon
Brothers Inc may reasonably request to provide, as soon as practicable, a CUSIP
number for the Securities registered under such Shelf Registration Statement and
to cause such CUSIP number to be assigned to the Securities (or to the maximum
aggregate principal amount of the Securities to which such number may be
assigned). Upon compliance with the foregoing requirements of this Section 3(j),
the Company shall provide the Trustee with printed certificates for such
Securities, in a form eligible for deposit with DTC.

                  (k) The Company shall use its best efforts to comply with all
applicable rules and regulations of the Commission and shall make generally
available to its security holders as soon as practicable after the effective
date of the applicable Shelf Registration Statement an earnings statement
satisfying the provisions of Section 11(a) of the Act and Rule 158 promulgated
by the Commission thereunder.

                  (l) The Company shall cause the Indenture to be qualified
under the Trust Indenture Act in a timely manner.


                                      -10-
<PAGE>   11
                  (m) The Company may require each Holder of Securities or the
Common Stock issued upon conversion thereof to be sold pursuant to any Shelf
Registration Statement to furnish to the Company such information regarding the
Holder and the distribution of such Securities or Common Stock as may, from time
to time, be required by the Act and the rules and regulations promulgated
thereunder, and the obligations of the Company to any Holder hereunder shall be
expressly conditioned on the compliance of such Holder with such request.

                  (n) The Company shall, if requested, use its best efforts to
promptly incorporate in a Prospectus supplement or post-effective amendment to a
Shelf Registration Statement (i) such information as the Majority Holders or, if
the Securities or Common Stock are being sold in an Underwritten Offering, as
the Managing Underwriters and the Majority Holders reasonably agree should be
included therein and provide to the Company in writing for inclusion in the
Shelf Registration Statement or Prospectus, and (ii) such information as a
Holder may provide from time to time to the Company in writing for inclusion in
a Prospectus or any Shelf Registration Statement concerning such Holder and the
distribution of such Holder's Securities and Common Stock and, in either case,
shall make all required filings of such Prospectus supplement or post-effective
amendment as soon as notified of the matters to be incorporated in such
Prospectus supplement or post-effective amendment.

                  (o) The Company shall enter into such agreements (including
underwriting agreements) and take all other appropriate actions in order to
expedite or facilitate the registration or the disposition of the Securities or
the Common Stock issuable upon conversion thereof, and in connection therewith,
if an underwriting agreement is entered into, cause the same to contain
indemnification provisions and procedures no less favorable to the Holders than
those set forth in Section 5 (or such other provisions and procedures acceptable
to the Majority Holders and the Managing Underwriters, if any, with respect to
all parties to be indemnified pursuant to Section 5 from Holders of Securities
or the Common Stock issuable upon conversion thereof to the Company).

                  (p) The Company shall (i) make reasonably available for
inspection by the Holders of Securities or the Common Stock issued upon
conversion thereof to be registered under a Shelf Registration Statement, any
Underwriter participating in any disposition pursuant to such Shelf Registration
Statement, and any attorney, accountant or other agent retained by the Holders
or any such Underwriter all relevant financial and other records, pertinent
corporate documents and properties of the Company and its subsidiaries; (ii)
cause the Company's officers, directors and employees to supply all relevant
information reasonably requested by the Holders or any such Underwriter,
attorney, accountant or agent in connection with any such Shelf Registration
Statement as is customary for similar due diligence examinations; provided,
however, that any information that is designated in writing by the Company, in
its sole discretion, as confidential at the time of delivery of such information
shall be kept confidential by the Holders or any such Underwriter, attorney,
accountant or agent, unless disclosure thereof is made in connection with a
court proceeding or required by law, or such information has become available to
the public generally or through a third party without an accompanying obligation
of confidentiality; (iii) make such representations and warranties to the
Holders of Securities or the Common Stock issued upon conversion thereof
registered thereunder and the Underwriters, if any, in form, substance and scope
as are customarily


                                      -11-
<PAGE>   12
made by issuers to Underwriters and covering matters including, but not limited
to, those set forth in the Purchase Agreement; (iv) obtain opinions of counsel
to the Company and updates thereof (which counsel and opinions, in form, scope
and substance, shall be reasonably satisfactory to the Managing Underwriters, if
any) addressed to each selling Holder and the Underwriters, if any, covering
such matters as are customarily covered in opinions requested in underwritten
offerings and such other matters as may be reasonably requested by such Holders
and Underwriters; (v) obtain "cold comfort" letters and updates thereof from the
independent certified public accountants of the Company (and, if necessary, any
other independent certified public accountants of any subsidiary of the Company
or of any business acquired by the Company for which financial statements and
financial data are, or are required to be, included in the Shelf Registration
Statement), addressed to each selling Holder of Securities or the Common Stock
issued upon conversion thereof registered thereunder (provided such Holder
furnishes the accountants with such representations as the accountants
customarily require in similar situations) and the Underwriters, if any, in
customary form and covering matters of the type customarily covered in "cold
comfort" letters in connection with primary underwritten offerings; and (vi)
deliver such documents and certificates as may be reasonably requested by the
Majority Holders and the Managing Underwriters, if any, including those to
evidence compliance with Section 3(i) and with any customary conditions
contained in the underwriting agreement or other agreement entered into by the
Company. The foregoing actions set forth in clauses (iii), (iv), (v) and (vi) of
this Section 3(p) shall be performed at (A) the effectiveness of such Shelf
Registration Statement and each post-effective amendment thereto and (B) each
closing under any underwriting or similar agreement as and to the extent
required thereunder.

         4. Registration Expenses. The Company shall bear all expenses incurred
in connection with the performance of its obligations under Sections 2 and 3
hereof and shall reimburse the Holders for the reasonable fees and disbursements
of one firm or counsel designated by the Majority Holders to act as counsel for
the Holders in connection therewith.

         5. Indemnification and Contribution.

                  (a) (i) In connection with any Shelf Registration Statement,
the Company agrees to indemnify and hold harmless each Holder of Securities or
Common Stock issued upon conversion thereof covered thereby (including the
Initial Purchasers), the directors, officers, employees and agents of each such
Holder and each person who controls any such Holder within the meaning of either
the Act or the Exchange Act against any and all losses, claims, damages or
liabilities, joint or several, to which they or any of them may become subject
under the Act, the Exchange Act or other Federal or state statutory law or
regulation, at common law or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of a material fact contained in
the Shelf Registration Statement as originally filed or in any amendment
thereof, or in any preliminary Prospectus or Prospectus, or in any amendment
thereof or supplement thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and agrees to
reimburse each such indemnified party, as incurred, for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided,


                                      -12-
<PAGE>   13
however, that the Company will not be liable in any case to the extent that any
such loss, claim, damage or liability arises out of or is based upon (A) any
such untrue statement or alleged untrue statement or omission or alleged
omission made therein in reliance upon and in conformity with written
information furnished to the Company by or on behalf of any such Holder or any
Initial Purchaser specifically for inclusion therein, (B) use of a Shelf
Registration Statement or the related Prospectus during a period when a stop
order has been issued in respect of such Shelf Registration or any proceedings
for that purpose have been initiated or use of a Prospectus when use of such
Prospectus has been deferred pursuant to Section 2(c); provided, further, in
each case, that the Company delivered prior notice, and the Holders have
received such prior notice, in accordance with Section 6(c) hereof of such stop
order, initiation of proceedings or deferral or (C) if the Holder fails to
deliver a Prospectus or the then current Prospectus. This indemnity agreement
will be in addition to any liability which the Company may otherwise have.

                           (ii) The Company also agrees to indemnify or
contribute to Losses, as provided in Section 5(d), of any Underwriters of
Securities or the Common Stock issued upon conversion thereof registered under a
Shelf Registration Statement, their officers and directors and each person who
controls such Underwriters on substantially the same basis as that of the
indemnification of the Initial Purchasers and the selling Holders provided in
this Section 5(a) and shall, if requested by any Holder, enter into an
underwriting agreement reflecting such agreement, as provided in Section 3(o)
hereof.

                  (b) Each Holder of Securities or Common Stock issued upon
conversion thereof covered by a Shelf Registration Statement (including the
Initial Purchasers) severally agrees to indemnify and hold harmless (i) the
Company, (ii) each of its directors, (iii) each of its officers who signs such
Shelf Registration Statement and (iv) each person who controls the Company
within the meaning of either the Act or the Exchange Act to the same extent as
the foregoing indemnity from the Company to each such Holder, but only with
reference to written information relating to such Holder furnished to the
Company by or on behalf of such Holder specifically for inclusion in the
documents referred to in the foregoing indemnity. This indemnity agreement will
be in addition to any liability which any such Holder may otherwise have.

                  (c) Promptly after receipt by an indemnified party under this
Section 5 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 5, notify the indemnifying party in writing of the
commencement thereof; but the failure so to notify the indemnifying party (i)
will not relieve it from liability under paragraph (a) or (b) above unless and
to the extent it did not otherwise learn of such action and such failure results
in the forfeiture by the indemnifying party of substantial rights and defenses
and (ii) will not, in any event, relieve the indemnifying party from any
obligations to any indemnified party other than the indemnification obligation
provided in paragraph (a) or (b) above. The indemnifying party shall be entitled
to appoint counsel of the indemnifying party's choice at the indemnifying
party's expense to represent the indemnified party in any action for which
indemnification is sought (in which case the indemnifying party shall not
thereafter be responsible for the fees and expenses of any separate counsel
retained by the indemnified party or parties except as set forth below);
provided, however, that such counsel shall be satisfactory to the indemnified
party.


                                      -13-
<PAGE>   14
Notwithstanding the indemnifying party's election to appoint counsel to
represent the indemnified party in an action, the indemnified party shall have
the right to employ separate counsel (including local counsel), and the
indemnifying party shall bear the reasonable fees, costs and expenses of such
separate counsel (and local counsel) if (i) the use of counsel chosen by the
indemnifying party to represent the indemnified party would present such counsel
with a conflict of interest, (ii) the actual or potential defendants in, or
targets of, any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those available to the
indemnifying party, (iii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after notice of the institution of such action or (iv) the
indemnifying party shall authorize the indemnified party to employ separate
counsel at the expense of the indemnifying party; provided further, that the
indemnifying party shall not be responsible for the fees and expenses of more
than one separate counsel (together with appropriate local counsel) representing
all the indemnified parties under paragraph (a)(i), paragraph (a)(ii) or
paragraph (b) above. An indemnifying party will not, without the prior written
consent of the indemnified parties, settle or compromise or consent to the entry
of any judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding.

                  (d) In the event that the indemnity provided in paragraph (a)
or (b) of this Section 5 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, then each applicable indemnifying party, in
lieu of indemnifying such indemnified party, shall have a joint and several
obligation to contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in connection
with investigating or defending same) (collectively "Losses") to which such
indemnified party may be subject in such proportion as is appropriate to reflect
the relative benefits received by such indemnifying party, on the one hand, and
such indemnified party, on the other hand, from the Initial Placement and the
Shelf Registration Statement which resulted in such Losses; provided, however,
that in no case shall the Initial Purchasers be responsible, in the aggregate,
for any amount in excess of the purchase discount or commission applicable to
such Security, as set forth on the cover page of the Final Memorandum (unless
such Initial Purchaser shall also be an Underwriter, in which case, such Initial
Purchaser shall also be responsible for amounts pursuant to the remaining of
this sentence), nor shall any Underwriter be responsible for any amount in
excess of the underwriting discount or commission applicable to the Securities
and Common Stock issued upon conversion thereof purchased by such Underwriter
under the Shelf Registration Statement which resulted in such Losses. If the
allocation provided by the immediately preceding sentence is unavailable for any
reason, the indemnifying party and the indemnified party shall contribute in
such proportion as is appropriate to reflect not only such relative benefits but
also the relative fault of such indemnifying party, on the one hand, and such
indemnified party, on the other hand, in connection with the statements or
omissions which resulted in such Losses as well as any other relevant equitable
considerations. Benefits received by the Company shall be deemed to be equal to
the sum of (x) the total net proceeds from the Initial Placement (before
deducting


                                      -14-
<PAGE>   15
expenses) as set forth on the cover page of the Final Memorandum and (y) the
total amount of additional interest which the Company was not required to pay as
a result of registering the Securities and Common Stock issued upon conversion
thereof covered by the Shelf Registration Statement which resulted in such
Losses. Benefits received by the Initial Purchasers shall be deemed to be equal
to the total purchase discounts and commissions as set forth on the cover page
of the Final Memorandum, and benefits received by any other Holders shall be
deemed to be equal to the value of receiving Securities or the Common Stock
issuable upon conversion thereof registered under the Act. Benefits received by
any Underwriter shall be deemed to be equal to the total underwriting discounts
and commissions, as set forth on the cover page of the Prospectus forming a part
of the Shelf Registration Statement which resulted in such Losses. Relative
fault shall be determined by reference to whether any alleged untrue statement
or omission relates to information provided by the indemnifying party, on the
one hand, or by the indemnified party, on the other hand. The parties agree that
it would not be just and equitable if contribution were determined by pro rata
allocation or any other method of allocation which does not take account of the
equitable considerations referred to above. Notwithstanding the provisions of
this paragraph (d), no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. For purposes of
this Section 5, each person who controls a Holder within the meaning of either
the Act or the Exchange Act and each director, officer, employee and agent of
such Holder shall have the same rights to contribution as such Holder, and each
person who controls the Company within the meaning of either the Act or the
Exchange Act, each officer of the Company who shall have signed the Shelf
Registration Statement and each director of the Company shall have the same
rights to contribution as the Company, subject in each case to the applicable
terms and conditions of this paragraph (d).

                  (e) The provisions of this Section 5 will remain in full force
and effect, regardless of any investigation made by or on behalf of any Holder
or the Company or any of the officers, directors or controlling persons referred
to in Section 5 hereof, and will survive the sale by a Holder of Securities
covered by a Shelf Registration Statement.

         6.       Miscellaneous.

                  (a) No Inconsistent Agreements. The Company has not, as of the
date hereof, entered into nor shall it, on or after the date hereof, enter into,
any agreement with respect to its Securities that is inconsistent with the
rights granted to the Holders herein or otherwise conflicts with the provisions
hereof.

                  (b) Amendments and waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, qualified,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, unless the Company has obtained the written
consent of the Majority Holders; provided that, with respect to any matter that
directly or indirectly affects the rights of the Initial Purchasers hereunder,
the Company shall obtain the written consent of the Initial Purchasers against
which such amendment, qualification, supplement, waiver or consent is to be
effective. Notwithstanding the foregoing (except the foregoing proviso), a
waiver or consent to departure from the provisions hereof with respect to a
matter that relates exclusively to the


                                      -15-
<PAGE>   16
rights of Holders whose Securities are being sold pursuant to a Shelf
Registration Statement and that does not directly or indirectly affect the
rights of other Holders may be given by the Majority Holders, determined on the
basis of Securities being sold rather than registered under such Shelf
Registration Statement.

                  (c) Notices. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand-delivery, first-class
mail, telex, telecopier, or air courier guaranteeing overnight delivery:

                           (i) if to you, initially at the address set forth in
         the Purchase Agreement;

                           (ii) if to any other Holder, at the most current
         address given by such Holder to the Company in accordance with the
         provisions of this Section 6(c), which address initially is, with
         respect to each Holder, the address of such Holder maintained by the
         Registrar under the Indenture, with a copy in like manner to Salomon
         Brothers Inc; and

                           (iii) if to the Company, initially at its address set
         forth in the Purchase Agreement.

                  All such notices and communications shall be deemed to have
been duly given when received, if delivered by hand or air courier, and when
sent, if sent by first-class mail, telex or telecopier.

                  The Initial Purchasers or the Company by notice to the other
may designate additional or different addresses for subsequent notices or
communications.

                  (d) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including, without the need for an express assignment or any consent by
the Company thereto, subsequent Holders. The Company hereby agrees to extend the
benefits of this Agreement to any Holder and any such Holder may specifically
enforce the provisions of this Agreement as if an original party hereto.

                  (e) Counterparts. This agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.

                  (f) Headings. The headings in this agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.

                  (g) Governing Law. This agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
agreements made and to be performed in said State, without regard to the
conflicts of law rules thereof.


                                      -16-
<PAGE>   17
                  (h) Severability. In the event that any one of more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way impaired
or affected thereby, it being intended that all of the rights and privileges of
the parties shall be enforceable to the fullest extent permitted by law.

                  (i) Securities Held by the Company, etc. Whenever the consent
or approval of Holders of a specified percentage of principal amount of
Securities or the Common Stock issuable upon conversion thereof is required
hereunder, Securities or the Common Stock issued upon conversion thereof held by
the Company or its Affiliates (other than subsequent Holders of Securities or
the Common Stock issued upon conversion thereof if such subsequent Holders are
deemed to be Affiliates solely by reason of their holdings of such Securities)
shall not be counted in determining whether such consent or approval was given
by the Holders of such required percentage.

         Please confirm that the foregoing correctly sets forth the agreement
between the Company and you.


                                      Very truly yours,

                                      HMT TECHNOLOGY CORPORATION

                                       /s/ Peter S. Norris
                                      --------------------------------------
                                      Name: Peter S. Norris     
                                      Title: Chief Financial Officer

The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.


SALOMON BROTHERS INC
ALEX. BROWN & SONS INCORPORATED
HAMBRECHT & QUIST LLC
ROBERTSON, STEPHENS & COMPANY LLC
By: Salomon Brothers Inc

 /s/ Richard J. Gallivan
- ------------------------------------
Name: Richard J. Gallivan
Title: Vice President


                                      -17-
<PAGE>   18
                                                                       EXHIBIT A

                   FORM OF LETTER TO BE PROVIDED BY ISSUER TO
                          THE DEPOSITORY TRUST COMPANY



The Depository Trust Company
7 Hanover Square, 23rd Floor
New York, NY  10004

       Re: 5-3/4% Convertible Subordinated Notes due 2004 (the "Securities") of
           HMT Technology Corporation (the "Issuer")

Ladies and Gentlemen:

         Please be advised that the Securities and Exchange Commission has
declared effective a Registration Statement on Form S-3 under the Securities Act
of 1933, as amended, with regard to all of the Securities referenced above.
Accordingly, there is no longer any restriction as to whom such Securities may
be sold and any restrictions on the CUSIP designation are no longer appropriate
and may be removed. I understand that upon receipt of this letter, DTC will
remove any stop or restriction on its system with respect to this issue.

         As always, please do not hesitate to call if we can be of further
assistance.


                                        Very truly yours,



                                        Authorized Officer


                                       A-1





<PAGE>   1
                                                                    EXHIBIT 4.10

                           HMT TECHNOLOGY CORPORATION

                                  $200,000,000
                 5-3/4% CONVERTIBLE SUBORDINATED NOTES DUE 2004

                               PURCHASE AGREEMENT


                                                                January 15, 1997

SALOMON BROTHERS INC
ALEX. BROWN & SONS INCORPORATED
HAMBRECHT & QUIST LLC
ROBERTSON, STEPHENS & COMPANY LLC
c/o Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048


Dear Sirs:

      HMT Technology Corporation, a Delaware corporation (the "Company"),
proposes to issue and sell to the persons listed on Annex I hereto, as initial
purchasers (the "Initial Purchasers"), $200,000,000 principal amount of its
5-3/4% Convertible Subordinated Notes due 2004 (the "Firm Securities"). The
Company also proposes to grant to you an option to purchase up to $30,000,000
additional principal amount of such Notes to cover over-allotments, if any (the
"Option Securities" and, together with the Firm Securities, the "Securities").
The Securities will be convertible into shares of Common Stock, par value $0.001
per share (the "Common Stock"), of the Company at the conversion price set forth
herein. The Securities are to be issued under an indenture (the "Indenture") to
be dated as of January 15, 1997, between the Company and State Street Bank and
Trust Company of California, N.A., as trustee (the "Trustee").

      The sale of the Securities to you will be made without registration of the
Securities or the Common Stock issuable upon conversion thereof under the
Securities Act of 1933, as amended (the "Act"), in reliance upon the exemption
from the registration requirements of the Act provided by Section 4(2) thereof.
You have advised the Company that you will make an offering of the Securities
purchased by you hereunder in accordance with Section 4 hereof on the terms set
forth in the Final Memorandum (as defined below), as soon as you deem advisable
after this Agreement has been executed and delivered.

      In connection with the sale of the Securities, the Company has prepared a
preliminary offering memorandum, dated January 3, 1997 (the "Preliminary
Memorandum"), and a final offering memorandum, dated January 15, 1997 (the
"Final Memorandum"). Each of the Preliminary Memorandum and the Final Memorandum
sets forth certain information concerning the Company, the Securities and the
Common Stock issuable upon conversion thereof. The Company hereby confirms that
it has authorized the use of the Preliminary Memorandum and the Final Memorandum
in connection
<PAGE>   2
with the offering and resale by the Initial Purchasers of the Securities.
Any references herein to the Preliminary Memorandum or the Final Memorandum
shall be deemed to include all exhibits thereto and all documents incorporated
by reference therein that were filed under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), on or before the date and time that this
Agreement is executed and delivered by the parties hereto (the "Execution
Time"); and any reference herein to the terms "amend", "amendment" or
"supplement" with respect to the Final Memorandum shall be deemed to refer to
and include the filing of any document under the Exchange Act after the
Execution Time that is incorporated by reference therein.

      The holders of the Securities or the Common Stock issuable upon conversion
thereof will be entitled to the benefits of the Registration Agreement (the
"Registration Agreement") to be dated as of January 15, 1997, between the
Company and the Initial Purchasers.

      1. Representations and Warranties. The Company represents and warrants to,
and agrees with, the Initial Purchasers as set forth below in this Section 1.

            (a) Each of the Preliminary Memorandum and the Final Memorandum as
of its respective date did not, and the Final Memorandum (as the same may have
been amended or supplemented) as of the Closing Date (as defined in Section 3
below) will not, contain any untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading; provided,
however, that the Company makes no representations or warranties as to the
information contained in or omitted from the Preliminary Memorandum or the Final
Memorandum in reliance upon and in conformity with information furnished in
writing to the Company by or on behalf of the Initial Purchasers specifically
for inclusion in the Preliminary Memorandum or the Final Memorandum (or any
amendment or supplement thereof or thereto). All documents incorporated by
reference in the Preliminary Memorandum or the Final Memorandum that were filed
under the Exchange Act on or before the Execution Time complied, and all such
documents that are filed under the Exchange Act after the Execution Time and on
or before the Closing Date will comply, in all material respects with the
applicable requirements of the Exchange Act and the rules thereunder. No stop
order or other similar order or decree preventing the use of the Preliminary
Memorandum or the Final Memorandum, or any order or decree asserting that the
transactions contemplated by this Agreement are subject to the registration
requirements of the Act has been issued and remains in effect and, to the best
of the Company's knowledge, no proceedings for that purpose have been commenced
or are contemplated.

            (b) The information provided by the Company pursuant to Section 5(h)
hereof will not, at the date thereof, contain any untrue statement of a material
fact or omit to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.

            (c) Each of the Company and its subsidiary, HMT FSC Ltd., a Barbados
West Indies Company (the "Subsidiary"), has been duly incorporated and is
validly existing as a corporation in good standing under the laws of the
jurisdiction in which it is chartered or organized, with full corporate power
and authority to own its properties and conduct its business as described in the
Final


                                       -2-
<PAGE>   3
Memorandum, and is duly qualified to do business as a foreign corporation and is
in good standing under the laws of each jurisdiction which requires such
qualification wherein it owns or leases material properties or conducts material
business, except where failure to be so qualified or to be in good standing
would not have a material adverse effect on the condition (financial or
otherwise), earnings, operations, business or business prospects of the Company
and the Subsidiary, taken as a whole; to the best of the Company's knowledge, no
proceeding has been instituted in any such jurisdiction, revoking, limiting or
curtailing, or seeking to revoke, limit or curtail, such power and authority or
qualification; each of the Company and the Subsidiary is in possession of and
operating in compliance with all authorizations, licenses, certificates,
consents, orders and permits from state, federal and other regulatory
authorities which are material to its business, all of which are valid and in
full force and effect; neither the Company nor the Subsidiary is in violation of
its respective charter or bylaws or in default in the performance or observance
of any obligation, agreement, covenant or condition contained in any material
bond, debenture, note or other evidence of indebtedness, or in any material
lease, contract, indenture, mortgage, deed of trust, loan agreement, joint
venture or other agreement or instrument to which the Company or the Subsidiary
is a party or by which either of them or any of their properties may be bound;
and neither the Company nor the Subsidiary is in violation of any law, order,
rule, regulation, writ, injunction, judgment or decree of any court, government
or governmental agency or body, domestic or foreign, having jurisdiction over
the Company or any of its properties. The Company does not own or control,
directly or indirectly, any corporation, association or other entities other
than the Subsidiary, which is not a "Significant Subsidiary" (as such term is
defined in Regulation S-X of the Act).

            (d) All the outstanding shares of capital stock of the Subsidiary
have been duly and validly authorized and issued and are fully paid and
nonassessable, and all outstanding shares of capital stock of the Subsidiary are
owned of record by the Company directly free and clear of any security
interests, claims, liens or encumbrances.

            (e) The Company's authorized equity capitalization is as set forth
in the Final Memorandum; the Securities and the Common Stock conform as to legal
matters in all material respects to the descriptions thereof contained in the
Final Memorandum; the holders of the outstanding shares of capital stock of the
Company are not entitled to any preemptive right, right of first refusal or
other similar rights to subscribe for the Securities or the shares of Common
Stock issuable upon conversion thereof; and the shares of Common Stock initially
issuable upon conversion of the Securities have been duly and validly authorized
and reserved for issuance upon such conversion and, when issued upon conversion,
will be validly issued, fully paid and nonassessable, and not subject to any
preemptive right, right of first refusal or other similar rights. No further
approval or authorization of any stockholder, the Board of Directors of the
Company or others is required for the issuance and sale or transfer of the
Securities except as may be required under the Act. Except as disclosed in the
Memorandum, the Company does not have outstanding any options to purchase, or
any preemptive rights or other rights to subscribe for or to purchase, any
securities or obligations convertible into, or any contracts or commitments to
issue or sell, shares of its capital stock or any such options, rights,
convertible securities or obligations. The description of the Company's stock
option, stock bonus and other stock plans or arrangements, and the options or
other rights granted


                                       -3-
<PAGE>   4
and exercised thereunder, set forth in the Final Memorandum, accurately and
fairly presents the information required to be shown with respect to such plans,
arrangements, options and rights.

            (f) The Company has the corporate power and authority to enter into
this Agreement, the Indenture and the Registration Agreement and to issue, sell
and deliver the Securities. This Agreement has been duly authorized, executed
and delivered by the Company, and each of the Indenture and the Registration
Agreement has been duly authorized by the Company, and from and after the
Closing Date will be duly authorized and executed by the Company, and, assuming
due authorization, execution and delivery by the Initial Purchasers or the
Trustee, as the case may be, constitutes, or, in the case of the Indenture and
the Registration Agreement, from and after the Closing Date will constitute, a
legal, valid and binding instrument enforceable against the Company in
accordance with its terms (subject, as to enforcement of remedies, to applicable
bankruptcy, reorganization, insolvency, moratorium or other similar laws
affecting creditors' rights generally from time to time in effect and general
principles of equity, whether enforcement is considered in a proceeding in
equity or at law and the discretion of the court before which any proceeding
therefor may be brought); and the Securities have been duly authorized by the
Company and, when executed and authenticated in accordance with the provisions
of the Indenture and delivered to and paid for by the Initial Purchasers
pursuant to this Agreement, will constitute legal, valid and binding obligations
of the Company, entitled to the benefits of the Indenture (subject, as to
enforcement of remedies, to applicable bankruptcy, reorganization, insolvency,
moratorium or other similar laws affecting creditors' rights generally from time
to time in effect and general principles of equity, whether enforcement is
considered in a proceeding in equity or at law and the discretion of the court
before which any proceeding therefor may be brought).

            (g) Neither the issue and sale of the Securities, the execution and
delivery of this Agreement, the Indenture or the Registration Agreement, the
performance by the Company of its obligations under this Agreement, the
Indenture, the Registration Agreement or the Securities, nor the fulfillment of
the terms hereof will (i) conflict with, result in a breach or violation of, or
constitute a default under any law or the charter or by-laws of the Company or
the Subsidiary, (ii) result in a breach or violation of any of the terms of any
material agreement, mortgage, deed of trust, lease, franchise, license,
indenture or other agreement or instrument to which either the Company or the
Subsidiary is a party or by which either of them is bound (including without
limitation the Revolving Credit Agreement (as defined below)), or (iii) result
in a breach or violation of any applicable statute, rule or regulation
applicable to the Company or the Subsidiary or any judgment, order or decree
applicable to the Company or the Subsidiary of any court, regulatory body,
administrative agency, governmental body or arbitrator having jurisdiction over
the Company or the Subsidiary, as the case may be.

            (h) No consent, approval, authorization or order of or qualification
with any court, government or governmental agency or body having jurisdiction
over the Company, or over any of its properties or operations, is necessary in
connection with the consummation by the Company of the transactions herein
contemplated and the performance by the Company of its obligations under this
Agreement, the Indenture, the Registration Agreement or the Securities.


                                       -4-
<PAGE>   5
            (i) The Common Stock is registered pursuant to Section 12(g) of the
Exchange Act and is quoted on the Nasdaq National Market, and the Company has
taken no action designed to, or likely to have the effect of, terminating the
registration of the Common Stock under the Exchange Act or delisting the Common
Stock from the Nasdaq National Market, nor has the Company received any
notification that the Commission or the National Association of Securities
Dealers, Inc. is contemplating terminating such registration or listing.

            (j) The Company is not an "investment company" within the meaning of
the Investment Company Act of 1940, as amended (the "Investment Company Act"),
without taking account of any exemption arising out of the number of holders of
the Company's securities.

            (k) The Firm Securities and the Option Securities, as the case may
be, satisfy the requirements set forth in Rule 144A(d)(3) under the Act for
securities to be eligible for trading pursuant to Rule 144A.

            (l) It is not necessary in connection with the offer, sale and
delivery of the Securities to the Initial Purchasers under this Agreement or in
connection with the initial resale of such Securities by the Initial Purchasers
in accordance with this Agreement to register the Securities under the Act or to
qualify the Indenture under the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act").

            (m) Neither the Company nor any affiliate (as defined in Rule 501(b)
of Regulation D under the Act ("Regulation D")) of the Company has directly, or
through any agent, (i) sold, offered for sale, solicited offers to buy or
otherwise negotiated in respect of, any security (as defined in the Act) that is
currently or will be integrated with the sale of the Securities in a manner that
would require the registration of the Securities or the Common Stock issuable
upon conversion thereof under the Act or (ii) engaged in any form of general
solicitation or general advertising (within the meaning of Regulation D) in
connection with the offering of the Securities.

            (n) None of the Company, its affiliates or any person acting on
behalf of the Company or its affiliates has engaged in any directed selling
efforts (as that term is defined in Regulation S under the Act ("Regulation S"))
with respect to the Securities, and the Company and its affiliates and any
person acting on its or their behalf have complied with the offering
restrictions requirement of Regulation S.

            (o) The Company is subject to the reporting requirements of Section
13 or Section 15(d) of the Exchange Act.

            (p) The Company has agreed to permit the Securities to be designated
PORTAL eligible securities, will pay the requisite fees related thereto and has
provided all necessary information to the National Association of Securities
Dealers, Inc. in order to ensure that the Securities are designated PORTAL
eligible securities.


                                       -5-
<PAGE>   6
            (q) The Company has not paid or agreed to pay to any person any
compensation for soliciting another to purchase any securities of the Company
(except as contemplated by this Agreement).

      2. Purchase and Sale. (a) Subject to the terms and conditions and in
reliance upon the representations and warranties herein set forth, the Company
agrees to sell to the Initial Purchasers, and each of the Initial Purchasers
agrees, severally and not jointly, to purchase from the Company, the Firm
Securities at a purchase price of 97.0% of the principal amount thereof, plus
accrued interest, if any, from January 21, 1997, to the Closing Date. Each
Security will be convertible at the option of the holder into shares of Common
Stock of the Company at a conversion price of $23.75 per share, subject to
adjustment as specified in the Final Memorandum. Delivery of the certificates
for the Securities, and payment therefor, shall be made as provided in Section 3
hereof.

            (b) Subject to the terms and conditions and in reliance upon the
representations and warranties herein set forth, the Company hereby grants an
option (the "Option") to the Initial Purchasers to purchase the Option
Securities at a purchase price of 97.0% of the principal amount thereof, plus
accrued interest, if any, from January 21, 1997, to the settlement date for the
Option Securities. The Option may be exercised only to cover over-allotments in
the sale of the Firm Securities by the Initial Purchasers. The Option may be
exercised in whole or in part at any time (but not more than once) on or before
the 30th day after the date of the Final Memorandum upon written or telegraphic
notice to the Company setting forth the principal amount of Option Securities as
to which the Initial Purchasers are exercising the Option and the settlement
date therefor. Delivery of certificates for the Option Securities, and payment
therefor, shall be made as provided in Section 3 hereof.

            (c) The Initial Purchasers shall notify the Company of the
completion of the sale of the Securities by the Initial Purchasers.

      3. Delivery and Payment. Delivery of and payment for the Firm Securities
and Option Securities (if the Option provided for in Section 2(b) hereof shall
have been exercised on or before the second business day prior to the Closing
Date) shall be made at 7:00 A.M., San Francisco time, on January 21, 1997, or
such later date as the Initial Purchasers and the Company shall agree (such date
and time of delivery and payment for the Securities being herein called the
"Closing Date"). Delivery of the Securities shall be made to the Initial
Purchasers against payment by the Initial Purchasers of the purchase price
thereof to or upon the order of the Company by certified or official bank check
or wire transfer and payable in same day funds. Delivery of the Securities shall
be made at such location as the Initial Purchasers shall reasonably designate at
least one business day in advance of the Closing Date and payment for the
Securities shall be made at the offices of Wilson Sonsini Goodrich & Rosati,
Professional Corporation, 650 Page Mill Road, Palo Alto 94304. Certificates for
the Securities shall be registered in such names and in such denominations as
the Initial Purchasers may request not less than two full business days in
advance of the Closing Date.


                                       -6-
<PAGE>   7
            The Company agrees to have the Securities available for inspection,
checking and packaging by the Initial Purchasers in New York, New York, not
later than 1:00 P.M., San Francisco time, on the business day prior to the
Closing Date.

            If the Option is exercised after the second business day prior to
the Closing Date, the Company will deliver (at the expense of the Company) to
the Initial Purchasers, at the offices of Wilson Sonsini Goodrich & Rosati,
Professional Corporation, 650 Page Mill Road, Palo Alto 94304, on the date
specified by the Initial Purchasers (which shall be within two business days
after exercise of the Option), certificates for the Option Securities in such
names and denominations as the Initial Purchasers shall have requested against
payment of the purchase price thereof to or upon the order of the Company by
certified or official bank check or wire transfer and payable in same day funds.
If settlement for the Option Securities occurs after the Closing Date, the
Company will deliver to the Initial Purchasers on the settlement date for the
Option Securities, and the obligation of the Initial Purchasers to purchase the
Option Securities shall be conditioned upon receipt of, supplemental opinions,
certificates and letters confirming as of such date the opinions, certificates
and letters delivered on the Closing Date pursuant to Section 6 hereof.

      4. Offering of Securities; Restrictions on Transfer. (a) Each Initial
Purchaser severally represents and warrants to and agrees with the Company that
(i) such Initial Purchaser has not solicited and will not solicit any offer to
buy or offer to sell the Securities by means of any form of general solicitation
or general advertising (within the meaning of Regulation D) or in any manner
involving a public offering within the meaning of Section 4(2) of the Act or,
with respect to Securities sold in reliance on Regulation S, by means of any
directed selling efforts and (ii) it has solicited and will solicit offers to
buy the Securities only from, and has offered and will offer, sell or deliver
the Securities only to, (A) persons who it reasonably believes to be qualified
institutional buyers (as defined in Rule 144A under the Act) or, if any such
person is buying for one or more institutional accounts for which such person is
acting as fiduciary or agent, only when such person has represented to it that
each such account is a qualified institutional buyer, to whom notice has been
given that such sale or delivery is being made in reliance on Rule 144A, and, in
each case, in transactions under Rule 144A, (B) persons who it reasonably
believes to be institutional "accredited investors" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D), and who provide to it a letter
substantially in the form of Exhibit A hereto or (C) persons to whom, and under
circumstances which, it reasonably believes offers and sales of Securities may
be made without registration of the Securities under the Act in reliance upon
Regulation S thereunder. Each Initial Purchaser also severally represents and
warrants and agrees that such Initial Purchaser has offered and will offer to
sell the Securities only to, and has solicited and will solicit offers to buy
the Securities only from, persons that in purchasing such Securities will be
deemed to have represented and agreed as provided under "Investor
Representations and Restrictions on Resale" in Exhibit B hereto.

            (b) Each Initial Purchaser severally represents and warrants to and
agrees with the Company that (i) it has not offered or sold, and will not offer
or sell any Securities to persons in the United Kingdom, except to persons whose
ordinary activities involve them in acquiring, holding, managing or disposing of
investments (as principal or as agent) for the purposes of their businesses or
otherwise in circumstances which have not resulted and will not result in an
offer to the public in the


                                       -7-
<PAGE>   8
United Kingdom, within the meaning of the Public Offers of Securities
Regulations 1995 (the "Regulations"), (ii) it has complied and will comply with
all applicable provisions of the Financial Services Act 1986 and the Regulations
with respect to anything done by it in relation to the Securities in, from or
otherwise involving the United Kingdom, and (iii) it has only issued or passed
on and will only issue or pass on to any person in the United Kingdom any
document received by it in connection with the issue of the Securities if that
person is of a kind described in Article 11(3) of the Financial Services Act
1986 (Investment Advertisements) (Exemptions) Order 1995 or is a person to whom
such document may otherwise lawfully be issued or passed on.

      5. Agreements. The Company agrees with the Initial Purchasers that:

            (a) The Company will furnish to the Initial Purchasers, without
charge, during the period mentioned in paragraph (c) below, as many copies of
the Final Memorandum and any supplements and amendments thereof or thereto as
the Initial Purchasers may reasonably request. The Company will pay the expenses
of printing or other production of all documents relating to the offering.

            (b) The Company will not amend or supplement the Final Memorandum,
other than by filing documents under the Exchange Act that are incorporated by
reference therein, without prior consent of the Initial Purchasers. Prior to the
completion of the sale of the Securities by the Initial Purchasers, the Company
will not file any document under the Exchange Act that is incorporated by
reference in the Final Memorandum unless the Company has furnished you a copy
for your review prior to filing and will not file any such document to which you
reasonably and timely object.

            (c) The Company will promptly advise the Initial Purchasers when,
prior to the completion of the sale of the Securities by the Initial Purchasers,
any document filed under the Exchange Act which is incorporated by reference in
the Final Memorandum shall have been filed with the Securities and Exchange
Commission (the "Commission").

            (d) If at any time prior to the completion of the sale of the
Securities by the Initial Purchasers, any event occurs as a result of which the
Final Memorandum as then amended or supplemented would include any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein in the light of the circumstances under which they
were made not misleading, or if it shall be necessary to amend or supplement the
Final Memorandum (including any document incorporated by reference therein which
was filed under the Exchange Act) to comply with the Exchange Act or the rules
thereunder or other applicable law, the Company promptly will notify the Initial
Purchasers of the same and, subject to paragraph (b) of this Section 5, will
prepare and provide to the Initial Purchasers pursuant to paragraph (a) of this
Section 5 an amendment or supplement which will correct such statement or
omission or effect such compliance and, in the case of such an amendment or
supplement which is to be filed under the Exchange Act and which is incorporated
by reference in the Final Memorandum, will file such amendment or supplement
with the Commission.


                                       -8-
<PAGE>   9
            (e) The Company will cooperate with you and your counsel in
endeavoring to obtain the qualification of the Securities for sale under the
laws of such jurisdictions as the Initial Purchasers may reasonably designate,
will maintain such qualifications in effect so long as reasonably required for
the sale of the Securities and will arrange for the determination of the
legality of the Securities for purchase by institutional investors; provided,
however, that the Company shall not be required to file any general consent to
service of process or to qualify as a foreign corporation or as a dealer in
securities in any jurisdiction in which it is not so qualified or to subject
itself to taxation in respect of doing business in any jurisdiction in which it
is not otherwise so subject. The Company will promptly advise the Initial
Purchasers of the receipt by the Company of any notification with respect to (i)
the suspension of the qualification of the Securities for sale in any
jurisdiction or (ii) the initiation or threatening of any proceeding for such
purpose.

            (f) Neither the Company nor any affiliate (as defined in Rule 501(b)
of Regulation D) of the Company will solicit any offer to buy or offer or sell
the Securities by means of any form of general solicitation or general
advertising (within the meaning of Regulation D).

            (g) None of the Company, its affiliates nor any person acting on
behalf of the Company or its affiliates will engage in any directed selling
efforts with respect to the Securities within the meaning of Regulation S, and
the Company, its affiliates and each such person acting on its or their behalf
will comply with the offering restrictions requirement of' Regulation S.

            (h) The Company shall, during any period in the three years after
the Closing Date in which the Company is not subject to Section 13 or 15(d) of
the Exchange Act, make available, upon request, to any holder of the Securities
or Common Stock issued upon conversion thereof in connection with any sale
thereof and any prospective purchaser of Securities or Common Stock issued upon
conversion thereof from such holder the information specified in Rule 144A(d)(4)
under the Act.

            (i) The Company will not, and will not permit any of its affiliates
(as defined in Rule 501(b) of Regulation D) to, resell any Securities or Common
Stock issued upon conversion thereof which constitute "restricted securities"
under Rule 144 that have been reacquired by any of them.

            (j) Neither the Company nor any affiliate (as defined in Rule 501(b)
of Regulation D) will sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in the Act) the offering of
which security will be integrated with the sale of the Securities in a manner
that would require the registration of the Securities or Common Stock issuable
upon conversion thereof under the Act.

            (k) The Company shall include information substantially in the form
set forth in Exhibit B in each Final Memorandum.


                                       -9-
<PAGE>   10
            (l) The Company shall use its best efforts in cooperation with the
Initial Purchasers to permit the Securities to be eligible for clearance and
settlement through The Depository Trust Company.

            (m) The Company will not, for a period of 90 days following the
Execution Time without prior written consent of Salomon Brothers, Inc (which
consent shall not be unreasonably withheld), offer, sell or contract to sell, or
otherwise dispose of, directly or indirectly, or announce the offering of, any
debt securities issued or guaranteed by the Company, any preferred stock or
Common Stock of the Company or any security convertible into or exchangeable for
preferred stock or Common Stock (other than the Securities); provided, however,
that the Company may issue securities upon the exercise of outstanding warrants
and may grant options and performance shares and issue and sell Common Stock
pursuant to any employee stock option, stock incentive or purchase plan, stock
ownership plan or dividend reinvestment plan of the Company in effect at the
Execution Time.

            (n) The Company will apply the net proceeds from the issuance of
Notes substantially as set forth in the Final Memorandum.

      6. Conditions to the Obligations of the Initial Purchasers. The
obligations of the Initial Purchasers to purchase the Firm Securities and the
Option Securities, as the case may be, shall be subject to the accuracy of the
representations and warranties on the part of the Company contained herein as of
the Execution Time and the Closing Date, to the accuracy of the statements of
the Company made in any certificates pursuant to the provisions hereof, to the
performance by the Company of its obligations hereunder and to the following
additional conditions:

            (a) The Company shall have furnished to the Initial Purchasers the
opinion of Cooley Godward LLP, counsel for the Company, dated the Closing Date,
to the effect that:

                  (i) the Company has been duly incorporated and is validly
      existing as a corporation in good standing under the laws of the State of
      Delaware, with full corporate power and authority to own its properties
      and conduct its business as described in the Final Memorandum, and, to the
      best of such counsel's knowledge, is duly qualified as a foreign
      corporation and is in good standing under the laws of each jurisdiction
      which requires such qualification wherein it owns or leases material
      properties or conducts material business, except where failure to be so
      qualified or to be in good standing would not have a material adverse
      effect on the financial condition, earnings, operations or business of the
      Company. To the best of such counsel's knowledge, the Company does not own
      or control, directly or indirectly, any corporation, association or other
      entity other than the HMT FSC Ltd.;

                  (ii) the Company's authorized equity capitalization is as set
      forth in the Final Memorandum; the holders of the outstanding shares of
      capital stock of the Company are not entitled to any preemptive right or,
      to the best of such counsel's knowledge, any right of first refusal or
      other similar rights to subscribe for the Securities or the shares of
      Common Stock issuable upon conversion thereof; and the shares of Common
      Stock initially issuable upon conversion of the Securities have been duly
      and validly authorized and reserved for


                                      -10-
<PAGE>   11
      issuance upon such conversion and, when issued upon conversion, would be
      validly issued, fully paid and nonassessable, and not subject to any
      preemptive right, or, to the best of such counsel's knowledge any
      registration right, right of first refusal or other similar rights;

                  (iii) the Company has the corporate power and authority to
      enter into this Agreement, the Indenture and the Registration Agreement
      and to issue, sell and deliver the Securities;

                  (iv) each of this Agreement, the Indenture and the
      Registration Agreement has been duly authorized, executed and delivered by
      the Company, and, assuming due authorization, execution and delivery by
      the Initial Purchasers or the Trustee, as the case may be, constitutes a
      legal, valid and binding instrument enforceable against the Company in
      accordance with its terms (subject, as to enforcement of remedies, to
      applicable bankruptcy, reorganization, insolvency, moratorium or other
      similar laws affecting creditors' rights generally from time to time in
      effect and general principles of equity, whether enforcement is considered
      in a proceeding in equity or at law and the discretion of the court before
      which any proceeding therefor may be brought); and the Securities have
      been duly authorized by the Company and, when executed and authenticated
      in accordance with the provisions of the Indenture and delivered to and
      paid for by the Initial Purchasers pursuant to this Agreement, will
      constitute legal, valid and binding obligations of the Company, entitled
      to the benefits of the Indenture (subject, as to enforcement of remedies,
      to applicable bankruptcy, reorganization, insolvency, moratorium or other
      similar laws affecting creditors' rights generally from time to time in
      effect and general principles of equity, whether enforcement is considered
      in a proceeding in equity or at law and the discretion of the court before
      which any proceeding therefor may be brought);

                  (v) no consent, approval, authorization or order of or
      qualification with any court, government or governmental agency or body
      having jurisdiction over the Company, or over any of its properties or
      operations, is necessary in connection with the issuance of the Securities
      by the Company and the performance by the Company at the Closing of its
      obligations under the Indenture, the Registration Agreement or the
      Securities, except such as may be required under the blue sky laws of any
      jurisdiction in connection with the purchase and distribution of the
      Securities by the Initial Purchasers (as to which such counsel need
      express no opinion);

                  (vi) neither the issue and sale of the Securities by the
      Company, the execution and delivery by the Company of the Indenture or the
      Registration Agreement, the performance by the Company of its obligations
      under this Agreement, the Indenture, the Registration Agreement or the
      Securities, nor the fulfillment of the terms hereof (a) conflict with,
      result in a breach or violation of, or constitute a default under the
      certificate of incorporation or bylaws of the Company, (b) constitute a
      default or breach of any agreement, mortgage, deed of trust, lease,
      franchise, license, indenture or other agreement or instrument that would
      be required to be filed with the Commission in connection with a
      registration statement of the Company on Form S-1 if filed as of the date
      of such opinion, or (c) result in a


                                      -11-
<PAGE>   12
      breach or violation of any (i) applicable statute, rule or regulation, or
      (ii) any judgment, order or decree known to such counsel to be applicable
      to the Company of any court, regulatory body, administrative agency,
      governmental body or arbitrator having jurisdiction over the Company;

                  (vii) it is not necessary in connection with the offer, sale
      and delivery of the Securities in the manner contemplated by this
      Agreement to register the Securities under the Act or to qualify the
      Indenture under the Trust Indenture Act;

                  (viii) to the best of such counsel's knowledge, except as set
      forth in the Final Memorandum, there are no legal or governmental
      proceedings pending or threatened against the Company or the Subsidiary
      which are of a type that would be required to be described in the Final
      Memorandum if the Final Memorandum were a prospectus included in a
      registration statement of the Company on Form S-1 under the Act;

                  (ix) the Firm Securities and the Option Securities, as the
      case may be, satisfy the requirements set forth in Rule 144A(d)(3) under
      the Act for securities to be eligible for trading pursuant to Rule 144A;

                  (x) each document incorporated by reference into the Final
      Memorandum (except for financial statements, supporting schedules and
      other financial and statistical data derived therefrom as to which such
      counsel need not express any opinion), complied as to form when filed with
      the Commission in all material respects with the Exchange Act and the
      rules and regulations of the Commission thereunder;

                  (xi) the terms and provisions of the capital stock of the
      Company and the terms and provisions of the Securities and Indenture are
      accurate and consistent in all material respects when compared with the
      description thereof contained in the Final Memorandum;

                  (xii) the statements in the Final Memorandum under the
      captions "Description of Convertible Notes," "Description of Capital
      Stock" and "Certain Federal Income Tax Considerations" insofar as such
      statements constitute a summary of the legal matters, documents or
      proceedings referred to therein, have been reviewed by such counsel and
      fairly present the information that would be called for with respect to,
      and are fair summaries of, such legal matters, documents and proceedings
      if the Final Memorandum were a prospectus included in a registration
      statement of the Company on Form S-1 under the Act; and

                  (xiii)to such counsel's knowledge, except as set forth in the
      Final Memorandum, no holders of Common Stock or other securities of the
      Company have registration rights with respect to securities of the Company
      and all such rights, because of the filing of the registration statement
      required to be filed pursuant to the Registration Agreement have, with
      respect thereto, been waived.


                                      -12-
<PAGE>   13
                  Such counsel shall also state that, in the course of
preparation by the Company of the Final Memorandum, such counsel has
participated in conferences with officers and other representatives of the
Company, representatives of the Initial Purchasers and representatives of
counsel for the Initial Purchasers, at which conferences the contents of the
Final Memorandum and related matters were reviewed and discussed and, although
such counsel has not independently verified, the accuracy, completeness or
fairness of the statements contained in the Final Memorandum (other than as set
forth in clauses (xi) and (xii) above), no facts have come to the attention of
such counsel that would lead such counsel to believe that the Final Memorandum
(other than the financial statements including supporting schedules and other
financial and statistical information contained therein, as to which such
counsel need not express any comment), as of its date or on the Closing Date,
contained or contains an untrue statement of a material fact or omitted or omits
to state a material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading.

                  In rendering such opinion, such counsel may rely (A) as to
matters involving the application of laws of any jurisdiction other than the
State of California or the United States or the Delaware General Corporation Law
to the extent they deem proper and specified in such opinion, upon the opinion
of other counsel of good standing whom they believe to be reliable and who are
satisfactory to counsel for the Initial Purchasers and (B) as to matters of
fact, to the extent they deem proper, on certificates of responsible officers of
the Company and public officials.

            (b) The Initial Purchasers shall have received from Wilson Sonsini
Goodrich & Rosati, Professional Corporation, counsel for the Initial Purchasers,
such opinion or opinions, dated the Closing Date, with respect to the issuance
and sale of the Securities, the Indenture, the Final Memorandum (together with
any amendment or supplement thereof or thereto) and other related matters as the
Initial Purchasers may reasonably require, and the Company shall have furnished
to such counsel such documents as they request for the purpose of enabling them
to pass upon such matters.

            (c) The Company shall have furnished to the Initial Purchasers a
certificate of the Company, signed by the Chairman of the Board or the President
and the principal financial or accounting officer of the Company, dated the
Closing Date, to the effect that the signers of such certificate have carefully
examined the Final Memorandum, any amendment or supplement to the Final
Memorandum and this Agreement and that:

                        (i) the representations and warranties of the Company in
      this Agreement are true and correct on and as of the Closing Date with the
      same effect as if made on the Closing Date and the Company has complied
      with all the agreements and satisfied all the conditions on its part to be
      performed or satisfied pursuant to this agreement at or prior to the
      Closing Date; and

                        (ii) since the date of the most recent financial
      statements incorporated by reference in the Final Memorandum (exclusive of
      any amendment or supplement thereof or thereto), there has been no
      material adverse change in the condition


                                      -13-
<PAGE>   14
      (financial or other), earnings, business or properties of the Company,
      whether or not arising from transactions in the ordinary course of
      business, except as set forth in or contemplated in the Final Memorandum
      (exclusive of any amendment or supplement thereof or thereto).

            (d) At the Closing Date, Coopers & Lybrand L.L.P. shall have
furnished to the Initial Purchasers a letter or letters, dated as of the Closing
Date, in form and substance satisfactory to the Initial Purchasers, confirming
that they are independent accountants within the meaning of the Exchange Act and
the applicable published rules and regulations thereunder and stating in effect
that: Coopers & Lybrand L.L.P. addressed to the Initial Purchasers, dated the
Closing Date, confirming that they are independent certified public accountants
with respect to the Company, within the meaning of the Act and the Rules and
Regulations and based upon the procedures described in their letter delivered to
you concurrently with the execution of this Agreement (herein called the
"Original Letter"), but carried out to a date not more than five business days
prior to the Closing Date, (i) confirming, to the extent true, that the
statements and conclusions set forth in the Original Letter are accurate as of
the Closing Date; and (ii) setting forth any revisions and additions to the
statements and conclusions set forth in the Original Letter which are necessary
to reflect any changes in the facts described in the Original Letter since the
date of such letter, or to reflect the availability of more recent financial
statements, data or information. The letter shall not disclose any change or any
development involving a prospective change, in or affecting the business or
properties of the Company which, in your sole judgment, makes it impracticable
or inadvisable to proceed with the sale of the Securities as contemplated by the
Final Memorandum. The Original Letter from Coopers & Lybrand L.L.P. shall be
addressed to or for the use of the Initial Purchasers in form and substance
satisfactory to the Initial Purchasers and shall (i) represent, to the extent
true, that they are independent certified public accountants with respect to
the Company within the meaning of the Act and the applicable published Rules and
Regulations, (ii) set forth their opinion with respect to their examination of
the consolidated balance sheet of the Company as of March 31, 1996 and related
consolidated statements of operations, shareholders' equity, and cash flows for
the twelve (12) months ended March 31, 1996, (iii) state that Coopers & Lybrand
L.L.P. has performed the procedures set out in the Statement on Auditing
Standards No. 71 ("SAS 71") for a review of interim financial information and
providing the report of Coopers & Lybrand L.L.P. as described in SAS 71 on the
financial statements for each of the quarters in the two quarter period ended
September 30, 1996 (the "Quarterly Financial Statements"), (iv) state that in
the course of such review, nothing came to their attention that leads them to
believe that any material modifications need to be made to any of the Quarterly
Financial Statements in order for them to be in compliance with generally
accepted accounting principles consistently applied across the periods
presented, (v) state that nothing came to their attention that caused them to
believe that the pro forma financial statements contained in the Final
Memorandum do not comply as to form in all material respects with the applicable
accounting requirements of Rule 11-02 of Regulation S-X, or that the pro forma
adjustments thereto have not been properly applied to the historical amounts in
the completion of such statements, and (vi) address other matters agreed upon by
Coopers & Lybrand L.L.P. and you. In addition, you shall have received from
Coopers & Lybrand L.L.P. a letter addressed to the Company and made available to
you for the use of the Initial Purchasers stating that their review of the
Company's system of internal accounting controls to the extent they deemed
necessary in establishing the scope of their examination


                                      -14-
<PAGE>   15
of the Company's consolidated financial statements as of March 31, 1996, did not
disclose any weaknesses in internal controls that they considered to be material
weaknesses.

            (e) Subsequent to the Execution Time or, if earlier, the dates as of
which information is given in the Final Memorandum (exclusive of any amendment
or supplement thereof or thereto), there shall not have been (i) any change or
decrease specified in the letter or letters referred to in paragraph (d) of this
Section 6 or (ii) any change, or any development involving a prospective change,
in or affecting the business or properties of the Company the effect of which,
in any case referred to in clause (i) or (ii) above, is, in the reasonable
judgment of the Initial Purchasers, to make it impractical or inadvisable to
market the Securities as contemplated by the Final Memorandum (exclusive of any
amendment or supplement thereof or thereto).

            (f) Subsequent to the Execution Time, there shall not have been any
decrease in the rating of any of the Company's debt securities by any
"nationally recognized statistical rating organization" (as defined for purposes
of Rule 436(g) under the Securities Act) or any notice given of any intended or
potential decrease in any such rating or of a possible change in any such rating
that does not indicate the direction of the possible change.

            (g) The Company shall have furnished to the Initial Purchasers a
certificate of the Company, signed on behalf of the Company by the Chairman of
the Board and Chief Financial Officer of the Company, to the effect that the
signers of such certificate have carefully examined the Final Memorandum, any
amendment or supplement to the Final Memorandum and this Agreement and that, and
the Initial Purchasers shall be satisfied that:

                        (i) The representations and warranties of the Company in
this Agreement are true and correct, as if made on and as of the Execution Time
and the Company has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied at or prior to the Execution
Time;

                        (ii) As of the date of this Agreement and at all times
subsequent thereto up to the delivery of such certificate, the Final Memorandum
did not and does not include an untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in light of the
circumstances in which made, not misleading, and, since the date of this
Agreement, there has occurred no event necessary to be set forth in an amended
or supplemented Final Memorandum in order to make any statements in such Final
Memorandum, in light of the circumstances under which made, not misleading,
which has not been so set forth; and

                        (iii) Subsequent to the respective dates as of which
information is given in each Memorandum, there has not been (A) any material
adverse change in the business, properties or assets described or referred to in
the Final Memorandum or in the condition (financial or otherwise), earnings,
operations or business of the Company or any change which would adversely affect
the power or ability of the Company to perform its obligations under this
Agreement, the Indenture, the Registration Agreement or the Securities, (B) any
change in the capital stock or outstanding indebtedness of the Company which is
material to the Company, except for the issuance


                                      -15-
<PAGE>   16
of the Securities pursuant hereto, or (C) any loss or damage (whether or not
insured) to the property of the Company which has been sustained or will have
been sustained which has a material adverse effect on the condition (financial
or otherwise), earnings, operations, business or business prospects of the
Company.

            (h) The Company shall have furnished to the Initial Purchasers
satisfactory evidence that the execution, delivery and performance by the
Company of this Agreement, the Indenture and the Registration Agreement, and the
issuance of the Securities, will not result in breach of or default under that
certain Amended and Restated Revolving Credit Agreement dated as of August 28,
1996 among the Company, the lenders party thereto and The First National Bank of
Boston, as administrative agent, as amended through the Closing Date (the
"Revolving Credit Agreement").

            (i) At the Execution Time, the Company shall have furnished to the
Initial Purchasers letters substantially in the form of Exhibit C hereto from
the executive officers and directors of the Company, and from Summit Partners,
L.P. and Hitachi Metals, Ltd., in which each such person agrees, for a period of
ninety (90) days after the last date of original issuance of the Securities to
the Initial Purchasers, not to offer to sell, contract to sell or otherwise
sell, dispose of, loan, pledge or grant any rights with respect to any shares of
Common Stock, any options or warrants to purchase any shares of Common Stock or
any securities convertible into or exchangeable for shares of Common Stock, now
owned or hereafter acquired directly by such person or with respect to which
such person has or hereafter acquires the power of disposition, otherwise than
(i) as to any individual, during his or her lifetime or upon death, by gift,
will or intestacy, to his or her immediate family or to a trust the
beneficiaries of which are exclusively such person and/or a member or members
of such person's immediate family; provided any donee or transferee thereof
agrees in writing to be bound by such agreement, (ii) as a distribution to
partners or stockholders of such person, provided that the distributees thereof
agree in writing to be bound by the terms of such agreement or (iii) with the
prior written consent of Salomon Brothers Inc.

            (j) Prior to the Closing Date, the Company shall have furnished to
the Initial Purchasers such further information, certificates and documents as
the Initial Purchasers may reasonably request.

                  If any of the conditions specified in this Section 6 shall not
have been fulfilled in all material respects when and as provided in this
Agreement, or if any of the opinions and certificates mentioned above or
elsewhere in this Agreement shall not be in all material respects reasonably
satisfactory in form and substance to the Initial Purchasers and counsel for the
Initial Purchasers, this Agreement and all obligations of the Initial Purchasers
hereunder may be canceled at, or at any time prior to, the Closing Date by the
Initial Purchasers. Notice of such cancellation shall be given to the Company in
writing or by telephone or telefax confirmed in writing.


                                      -16-
<PAGE>   17
                  The documents required to be delivered by this Section 6 shall
be delivered at the offices of Wilson Sonsini Goodrich & Rosati, Professional
Corporation, counsel for the Initial Purchasers, at 650 Page Mill Road, Palo
Alto, California 94304 on the Closing Date.

      7. Reimbursement of Initial Purchasers' Expenses. If the sale of the
Securities provided for herein is not consummated because any condition to the
obligations of the Initial Purchasers set forth in Section 6 hereof (other than
paragraph (b) of Section 6) is not satisfied or because of any refusal,
inability or failure on the part of the Company to perform any agreement herein
or comply with any provision hereof other than by reason of a default by the
Initial Purchasers, the Company will reimburse the Initial Purchasers upon
demand for all reasonable and duly documented out-of-pocket expenses (including
reasonable fees and disbursements of counsel) that shall have been incurred by
it in connection with the proposed purchase and sale of the Securities.

      8. Indemnification and Contribution. (a) The Company agrees to indemnify
and hold harmless each of the Initial Purchasers, the directors, officers,
employees and agents of each of the Initial Purchasers and each person who
controls any of the Initial Purchasers within the meaning of either the Act or
the Exchange Act against any and all losses, claims, damages or liabilities,
joint or several, to which they or any of them may become subject under the Act,
the Exchange Act or other Federal or state statutory law or regulation, at
common law or otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in or
incorporated by reference into the Preliminary Memorandum, the Final Memorandum
or any information provided by the Company to any holder or prospective
purchaser of Securities pursuant to Section 5(h), or in any amendment thereof or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and agrees to reimburse
each such indemnified party, as incurred, for any reasonable legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the Company will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon any such untrue
statement or alleged untrue statement or omission or alleged omission made in
the Preliminary Memorandum or the Final Memorandum, or in any amendment thereof
or supplement thereto, in reliance upon and in conformity with written
information furnished to the Company by or on behalf of the Initial Purchasers
specifically for inclusion therein. This indemnity agreement will be in addition
to any liability which the Company may otherwise have.

            (b) Each Initial Purchaser, severally and not jointly, agrees to
indemnify and hold harmless the Company, its directors, its officers, and each
person who controls the Company within the meaning of either the Act or the
Exchange Act, to the same extent as the foregoing indemnity from the Company to
such Initial Purchaser, but only with reference to written information furnished
to the Company by or on behalf of such Initial Purchaser specifically for
inclusion in the Preliminary Memorandum or the Final Memorandum, or in any
amendment thereof or supplement thereto. This indemnity agreement will be in
addition to any liability which each Initial Purchaser may otherwise have. The
Company acknowledges that the statements set forth in the last paragraph of the
cover page and under the heading "Plan of Distribution" in the Preliminary
Memorandum and the Final Memorandum constitute the only information furnished in
writing by or on behalf of the Initial Purchasers for inclusion in the
Preliminary Memorandum or the Final Memorandum.


                                      -17-
<PAGE>   18
            (c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 8, notify the indemnifying party in writing of the
commencement thereof; but the failure so to notify the indemnifying party (i)
will not relieve it from liability under paragraph (a) or (b) above unless and
to the extent it did not otherwise learn of such action and such failure results
in the forfeiture by the indemnifying party of substantial rights and defenses
and (ii) will not, in any event, relieve the indemnifying party from any
obligations to any indemnified party other than the indemnification obligation
provided in paragraph (a) or (b) above. The indemnifying party shall be entitled
to appoint counsel of the indemnifying party's choice at the indemnifying
party's expense to represent the indemnified party in any action for which
indemnification is sought (in which case the indemnifying party shall not
thereafter be responsible for the fees and expenses of any separate counsel
retained by the indemnified party or parties except as set forth below);
provided, however, that such counsel shall be reasonably satisfactory to the
indemnified party. Notwithstanding the indemnifying party's election to appoint
counsel to represent the indemnified party in an action, the indemnified party
shall have the right to employ separate counsel (including local counsel), and
the indemnifying party shall bear the reasonable fees, costs and expenses of
such separate counsel if (i) the use of counsel chosen by the indemnifying party
to represent the indemnified party would present such counsel with a conflict of
interest, (ii) the actual or potential defendants in, or targets of, any such
action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there are legal defenses
available to it and/or other indemnified parties which are different from or
additional to those available to the indemnifying party, (iii) the indemnifying
party shall not have employed counsel reasonably satisfactory to the indemnified
party to represent the indemnified party within a reasonable time after notice
of the institution of such action or (iv) the indemnifying party shall authorize
the indemnified party to employ separate counsel at the expense of the
indemnifying party. An indemnifying party will not, without the prior written
consent of the indemnified parties, settle or compromise or consent to the entry
of any judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding.

            (d) In the event that the indemnity provided in paragraph (a) or (b)
of this Section 8 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, the Company and each Initial Purchaser,
severally and not jointly, agrees to contribute to the aggregate losses, claims,
damages and liabilities (including legal or other expenses reasonably incurred
in connection with investigating or defending same) (collectively "Losses") to
which the Company and such Initial Purchaser may be subject in such proportion
as is appropriate to reflect the relative benefits received by the Company and
by such Initial Purchaser from the offering of the Securities; provided,
however, that in no case shall such Initial Purchaser be responsible for any
amount in excess of the purchase discount or commission applicable to the
Securities purchased by such Initial

                                      -18-
<PAGE>   19
 Purchaser hereunder. If the allocation provided by the immediately
preceding sentence is unavailable for any reason, the Company and the Initial
Purchasers, severally and not jointly, shall contribute in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company and of each of the Initial Purchasers in connection with
the statements or omissions that resulted in such Losses as well as any other
relevant equitable considerations. Benefits received by the Company shall be
deemed to be equal to the total net proceeds from the offering (before deducting
expenses), and benefits received by each such Initial Purchaser shall be deemed
to be equal to the total purchase discounts and commissions, in each case as set
forth on the cover page of the Final Memorandum. Relative fault shall be
determined by reference to whether any alleged untrue statement or omission
relates to information provided by the Company or such Initial Purchaser. The
Company and each Initial Purchaser, severally and not jointly, agree that it
would not be just and equitable if contribution were determined by pro rata
allocation or any other method of allocation that does not take account of the
equitable considerations referred to above. Notwithstanding the provisions of
this paragraph (d), no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. For purposes of
this Section 8, each person who controls an Initial Purchaser within the meaning
of either the Act or the Exchange Act and each director, officer, employee and
agent of such Initial Purchasers shall have the same rights to contribution as
such Initial Purchaser, and each person who controls the Company within the
meaning of either the Act or the Exchange Act and each officer and director of
the Company shall have the same rights to contribution as the Company, subject
in each case to the applicable terms and conditions of this paragraph (d).

      9. Substitution of Initial Purchasers. If any Initial Purchaser or Initial
Purchasers shall fail to take up and pay for the number of Firm Securities
agreed by such Initial Purchaser or Initial Purchasers to be purchased hereunder
upon tender of such Firm Securities in accordance with the terms hereof, and if
the aggregate number of Firm Securities that such defaulting Initial Purchaser
or Initial Purchasers so agreed but failed to purchase does not exceed 5% of the
aggregate principal amount of the Firm Securities, the remaining Initial
Purchasers shall be obligated, severally in proportion to their respective
commitments hereunder, to take up and pay for the Firm Securities that such
defaulting Initial Purchaser or Initial Purchasers agreed but failed to
purchase.

      If any Initial Purchaser or Initial Purchasers so defaults and the
aggregate number of Firm Securities that such defaulting Initial Purchaser or
Initial Purchasers agreed but failed to take up and pay for exceeds 5% of the
aggregate principal amount of the Firm Securities, the remaining Initial
Purchasers shall have the right, but shall not be obligated, to take up and pay
for (in such proportions as may be agreed upon among them) the Firm Securities
which the defaulting Initial Purchaser or Initial Purchasers so agreed but
failed to purchase. If such remaining Initial Purchasers do not, at the Closing
Date, take up and pay for the Firm Securities which the defaulting Initial
Purchaser or Initial Purchasers so agreed but failed to purchase, the Closing
Date shall be postponed for twenty-four hours (including nonbusiness hours) to
allow the remaining Initial Purchasers the privilege of substituting within such
twenty-four hour period (including non-business hours) another purchaser or
purchasers (which may include any nondefaulting Initial Purchaser) reasonably
satisfactory to the Company. If no such purchaser or purchasers shall have been
substituted as aforesaid by such postponed Closing Date, the Closing Date may,
at the option of the Company, be postponed for a


                                      -19-
<PAGE>   20
further twenty-four hours, if necessary, to allow the Company the privilege of
finding another purchaser or purchasers, reasonably satisfactory to you, to
purchase the Firm Securities which the defaulting Initial Purchaser or Initial
Purchasers so agreed but failed to purchase. If it shall be arranged for the
remaining Initial Purchasers or substituted purchasers to take up the Firm
Securities of the defaulting Initial Purchaser or Initial Purchasers as provided
in this Section , (i) the Company shall have the right to postpone the time of
delivery for a period of not more than seven full business days, in order to
effect whatever changes may thereby be made necessary in the Memorandum, or in
any other documents or arrangements, and the Company agrees promptly to prepare
and deliver any amendments or supplements to the Memorandum or other such
documents which may thereby be made necessary, and (ii) the respective number of
Firm Securities to be purchased by the remaining Initial Purchasers and
substituted purchasers shall be taken as the basis of their obligation to
purchase hereunder. If the remaining Initial Purchasers shall not take up and
pay for all such Firm Securities so agreed to be purchased by the defaulting
Initial Purchaser or Initial Purchasers or substitute another purchaser or
purchasers as aforesaid, and the Company shall not find or shall not elect to
seek another purchaser or purchasers for such Firm Securities as aforesaid, then
this Agreement shall terminate.

      In the event of any termination of this Agreement pursuant to the
preceding paragraph of this Section , the Company shall not be liable to any
Initial Purchaser (except as provided in Sections 4(j), 5 and 8 hereof) and no
Initial Purchaser (other than an Initial Purchaser who shall have failed,
otherwise than for some reason permitted under this Agreement, to purchase the
principal amount of Firm Securities agreed by such Initial Purchaser to be
purchased hereunder, which Initial Purchaser shall remain liable to the Company
and the other Initial Purchasers for damages, if any, resulting from such
default) shall be liable to the Company (except to the extent provided in
Sections 5 and 8 hereof).

      The term "Initial Purchaser" in this Agreement shall include any person
substituted for a Initial Purchaser under this Section .

      10. Termination. This Agreement shall be subject to termination in the
absolute discretion of the Initial Purchasers, by notice given to the Company
prior to delivery of and payment for the Securities, if prior to such time (i)
trading in the Company's Common Stock shall have been suspended by the
Commission or the National Association of Securities Dealers Automated Quotation
National Market, (ii) trading in securities generally on the New York Stock
Exchange or the Nasdaq National Market shall have been suspended or limited or
minimum prices shall have been established on either of such Exchange or Market,
(iii) a banking moratorium shall have been declared either by Federal,
California or New York State authorities or (iv) there shall have occurred any
outbreak or escalation of hostilities, declaration by the United States of a
national emergency or war or other calamity or crisis the effect of which on
financial markets is such as to make it, in the reasonable judgment of the
Initial Purchasers, impracticable or inadvisable to proceed with the offering or
delivery of the Securities as contemplated by the Final Memorandum (exclusive of
any amendment or supplement thereof or thereto).

      11. Representations and Indemnities to Survive. The respective agreements,
representations, warranties, indemnities and other statements of the Company or
its officers and of


                                      -20-
<PAGE>   21
the Initial Purchasers set forth in or made pursuant to this Agreement will
remain in full force and effect, regardless of any investigation made by or on
behalf of the Initial Purchasers or the Company or any of the officers,
directors or controlling persons referred to in Section 8 hereof, and will
survive delivery of and payment for the Securities. The provisions of Sections 7
and 8 hereof shall survive the termination or cancellation of this Agreement.

      12. Notices. All communications hereunder will be in writing and effective
only on receipt, and, if sent to the Initial Purchaser, will be mailed,
delivered or telefaxed and confirmed to Salomon Brothers Inc in writing, at
Seven World Trade Center, New York, New York, 10048, telefax no.: (212)
783-2274, Attention of Legal Department, with a copy to Wilson Sonsini Goodrich
& Rosati, P.C., 650 Page Mill Road, Palo Alto, California 94304, telefax no.:
(415) 493-6811, Attention of John A. Fore; or, if sent to the Company, will be
mailed, delivered or telefaxed and confirmed to it in writing at 1055 Page
Avenue, Fremont, California 94538, telefax no.: (510) 490-5538, Attention of
Peter S. Norris, Chief Financial Officer, with a copy to Cooley Godward LLP,
Five Palo Alto Square, 3000 El Camino Real, Palo Alto, California 94306, telefax
no.: (415) 857-0663, Attention of James C. Kitch.

      13. Successors. This Agreement will inure to the benefit of and be binding
upon the parties hereto and their respective successors and the officers and
directors and controlling persons referred to in Section 8 hereof, and no other
person will have any right or obligation hereunder.

      14. Applicable Law. This Agreement will be governed by and construed in
accordance with the laws of the State of New York.


                                      -21-
<PAGE>   22
      If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof, whereupon
this letter and your acceptance shall represent a binding agreement between the
Company and the Initial Purchasers.


                                    Very truly yours,

                                    HMT TECHNOLOGY CORPORATION

                                        /s/ Peter S. Norris
                                    By:_________________________________________
                                       Name: Peter S. Norris
                                       Title: Chief Financial Officer

The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.

SALOMON BROTHERS INC
ALEX. BROWN & SONS INCORPORATED
HAMBRECHT & QUIST LLC
ROBERTSON, STEPHENS & COMPANY LLC
  c/o Salomon Brothers Inc

By:  SALOMON BROTHERS INC

            Robert Messih
       By:___________________________________
          Name: Robert Messih
          Title:   Director


                                      -22-
<PAGE>   23
                                     ANNEX I

                               INITIAL PURCHASERS

<TABLE>
<CAPTION>
Initial Purchaser                               Principal Amount
- -----------------                               ----------------
<S>                                             <C>
SALOMON BROTHERS INC                              $100,000,000
ALEX. BROWN & SONS INCORPORATED                     30,000,000
HAMBRECHT & QUIST LLC                               30,000,000
ROBERTSON, STEPHENS & COMPANY LLC                   40,000,000
                                                  ------------
            Total                                 $200,000,000
</TABLE>
<PAGE>   24
                                    EXHIBIT A

                          Form of Investment Letter for
                              Accredited Investors


SALOMON BROTHERS INC
ALEX. BROWN & SONS INCORPORATED
HAMBRECHT & QUIST LLC
ROBERTSON, STEPHENS & COMPANY LLC
c/o Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048


Dear Sirs:

      In connection with our proposed purchase of $__________ aggregate
principal amount of the 5-3/4% Convertible Subordinated Notes due 2004 (the
"Securities") of HMT Technology Corporation, a Delaware corporation (the
"Company"), we confirm that:

      1. We understand that the Securities and the Common Stock issuable upon
conversion thereof have not been registered under the Securities Act of 1933
(the "Securities Act"), and may not be sold except as permitted in the following
sentence. We understand and agree, on our own behalf and on behalf of any
accounts for which we are acting as hereinafter stated, (x) that such Securities
are being offered only in a transaction not involving any public offering within
the meaning of the Securities Act, (y) that if we should resell, pledge or
otherwise transfer such Securities or the Common Stock issuable upon conversion
thereof within three years after the date of the original issuance of the
Securities (or such shorter period as may then be applicable under the
Securities Act) or within three months after we cease to be an Affiliate (within
the meaning of Rule 144A under the Securities Act) of the Company, such
Securities or the Common Stock issuable upon conversion thereof may be resold,
pledged or transferred only (i) to the Company, (ii) so long as such Securities
or the Common Stock issuable upon conversion thereof are eligible for resale
pursuant to Rule 144A under the Securities Act ("Rule 144A"), to a person whom
we reasonably believe is a "qualified institutional buyer" (as defined in Rule
144A) ("QIB") that purchases for its own account or for the account of a QIB to
whom notice is given that the resale, pledge or transfer is being made in
reliance on Rule 144A (as indicated by the box checked by the transferor on the
Certificate of Transfer on the reverse of the certificate for the Security),
(iii) in an offshore transaction in accordance with Regulation S under the
Securities Act (as indicated by the box checked by the transferor on the
Certificate of Transfer on the reverse of the certificate for the Security),
(iv) to an institution that is an "accredited investor" as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act (as indicated by the box
checked by the transferor on the Certificate of Transfer on the reverse of the
certificate for the Security) that has certified to the Company and the Trustee
(or, in the case of Common Stock, the Transfer Agent) that it is such an
accredited investor and is acquiring the
<PAGE>   25
Securities or the Common Stock issuable upon conversion thereof for investment
purposes and not for distribution, (v) pursuant to an exemption from
registration under the Securities Act provided by Rule 144 (if applicable) under
the Securities Act, or (vi) pursuant to an effective registration statement
under the Securities Act, in each case in accordance with any applicable
securities laws of any state of the United States, and we will notify any
purchaser of the Securities or Common Stock issuable upon conversion thereof
from us of the above resale restrictions, if then applicable. We further
understand that in connection with any transfer of the Securities or Common
Stock issuable upon conversion thereof by us, the Company and the Trustee (or,
in the case of Common Stock, the Transfer Agent) may request, and if so
requested we will furnish, such certificates, legal opinions and other
information as they may reasonably require to confirm that any such transfer
complies with the foregoing restrictions.

      2. We are able to fend for ourselves in the transactions contemplated by
this Offering Memorandum, we have such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of our
investment in the Securities, and we and any accounts for which we are acting
are each able to bear the economic risk of our or its investment and can afford
the complete loss of such investment.

      3. We understand that the minimum principal amount of Securities that may
be purchased by an institutional accredited investor is $250,000.

      4. We understand that the Company and Salomon Brothers Inc, Alex. Brown &
Sons Incorporated, Hambrecht & Quist LLC and Robertson, Stephens & Company LLC,
as the initial purchasers of the Securities ("Initial Purchasers"), and others
will rely upon the truth and accuracy of the foregoing acknowledgments,
representations and agreements and we agree that if any of the acknowledgments,
representations and warranties deemed to have been made by us by our purchase of
Securities, for our own account or for one or more accounts as to each of which
we exercise sole investment discretion, are no longer accurate, we shall
promptly notify the Company and the Initial Purchasers.

      5. We are acquiring the Securities purchased by us for investment
purposes, and not for distribution, for our own account or for one or more
accounts as to each of which we exercise sole investment discretion and we are
or such account is an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act).

      6. You are entitled to rely upon this letter and you are irrevocably
authorized to produce this letter or a copy hereof to any interested party in
any administrative or legal proceeding or official inquiry with respect to the
matters covered hereby.


                                       -2-
<PAGE>   26
                                    EXHIBIT B

                               NOTICE TO INVESTORS

Offers and Sales by the Initial Purchasers

      The Convertible Notes and the Common Stock issuable upon conversion
thereof have not been registered under the Securities Act and may not be offered
or sold in the United States or to, or for the account or benefit of, U.S.
persons except in accordance with an applicable exemption from the registration
requirements thereof. Accordingly, the Convertible Notes are being offered and
sold only (1) in the United States to qualified institutional buyers ("Qualified
Institutional Buyers") under Rule 144A under the Securities Act and to a limited
number of other institutional "accredited investors" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act) ("Institutional Accredited
Investors") in a private sale exempt from the registration requirements of the
Securities Act, and (2) outside the United States to non-U.S. persons ("foreign
purchasers") in reliance upon Regulation S under the Securities Act. Each
Institutional Accredited Investor that is a purchaser of Convertible Notes from
the Initial Purchasers will be required to sign a certificate in the form of
Exhibit A to the Purchase Agreement. Each foreign purchaser that is a purchaser
of Convertible Notes from an Initial Purchaser (an "Initial Foreign Purchaser")
will be required to sign a certificate in the form provided by the Initial
Purchasers.

Investor Representations and Restrictions on Resale

      Each purchaser of the Convertible Notes will be deemed to have represented
and agreed as follows:

            (1) it is acquiring the Convertible Notes for its own account or for
      an account with respect to which it exercises sole investment discretion,
      and that it or such account is a Qualified Institutional Buyer, an
      Institutional Accredited Investor acquiring the Convertible Notes for
      investment purposes and not for distribution or a foreign purchaser
      outside the United States;

            (2) it acknowledges that the Convertible Notes and the Common Stock
      issuable upon conversion thereof have not been registered under the
      Securities Act and may not be sold except as permitted below;

            (3) it understands and agrees (x) that such Convertible Notes are
      being offered only in a transaction not involving any public offering
      within the meaning of the Securities Act, and (y) that (A) if within three
      years (or such shorter period as may then be applicable under the
      Securities Act regarding the holding period for securities under Rule
      144(k) of the Securities Act or any successor rule) after the date of
      original issuance of the Convertible Notes or if within three months after
      it ceases to be an affiliate (within the meaning of Rule 144 under the
      Securities Act) of the Company, it decides to resell, pledge or otherwise
      transfer such Convertible Notes or the Common Stock issuable upon
      conversion thereof on which the applicable legend set forth below appears,
      such Convertible Notes or Common
<PAGE>   27
      Stock issuable upon conversion thereof may be resold, pledged or
      transferred only (i) to the Company, (ii) so long as such Convertible
      Notes if such Convertible Notes are not in book-entry form or Common Stock
      issuable upon conversion thereof are eligible for resale pursuant to Rule
      144A, to a person whom the seller reasonably believes is a Qualified
      Institutional Buyer that purchases for its own account or for the account
      of Qualified Institutional Buyer to whom notice is given that the resale,
      pledge or transfer is being made in reliance on Rule 144A (as indicated by
      the box checked by the transferor on the Certificate of Transfer on the
      reverse of the Convertible Notes if such Convertible Notes are not in
      book-entry form) and a certificate which may be obtained from the Company
      or the Trustee is delivered by the Transferee to the Company and the
      Trustee, (iii) in an offshore transaction in accordance with Regulation S
      (as indicated by the box checked by the transferor on the Certificate of
      Transfer on the reverse of the Convertible Notes if such Convertible Notes
      are not in book-entry form), but, if such transfer is being effected by an
      Initial Foreign Purchaser or any foreign purchaser who has purchased
      Convertible Notes from an Initial Foreign Purchaser or from any person
      other than a Qualified Institutional Buyer or an Institutional Accredited
      Investor pursuant to this clause (iii) prior to the expiration of the "40
      day restricted period" (within the meaning of Rule 903(c)(3) of Regulation
      S under the Securities Act), the transferee shall have certified to the
      Company and the Trustee for the Convertible Notes (or, in the case of
      Common Stock, the Transfer Agent) that such transferee is a non-U.S.
      Person (within the meaning of Regulation S) and that such transferee is
      acquiring the Convertible Notes or Common Stock in an offshore
      transaction, (iv) to an Institutional Accredited Investor (as indicated by
      the box checked by the transferor on the Certificate of Transfer on the
      reverse of the Convertible Notes if such Convertible Notes are not in
      book-entry form) who has certified to the Company and the Trustee for the
      Convertible Notes (or, in the case of Common Stock, the Transfer Agent)
      that such transferee is an Institutional Accredited Investor and is
      acquiring the Convertible Notes or the Common Stock for investment
      purposes and not for distribution, (provided that no Initial Foreign
      Purchaser or any foreign purchaser who has purchased Convertible Notes
      from an Initial Foreign Purchaser or from any person other than a
      Qualified Institutional Buyer or an Institutional Accredited Investor
      pursuant to clause (iii) shall be permitted to transfer any Convertible
      Notes (or the Common Stock issuable upon conversion thereof) so purchased
      by it to an Institutional Accredited Investor pursuant to this clause (iv)
      prior to the expiration of the "40 day restricted period" and a
      certificate which may be obtained from the Company or the Trustee is
      delivered by the transferee to the Company and the Trustee), (v) pursuant
      to an exemption from registration under the Securities Act provided by
      Rule 144 (if applicable) under the Securities Act, or (vi) pursuant to an
      effective registration statement under the Securities Act, in each case in
      accordance with any applicable securities laws of any state of the United
      States or other jurisdictions, (B) the purchaser will, and each subsequent
      holder is required to, notify any purchaser of Convertible Notes or the
      Common Stock issuable upon conversion thereof from it of the resale
      restrictions referred to in (A) above, if then applicable, and (C) with
      respect to any transfer of Convertible Notes or the Common Stock issuable
      upon conversion thereof by an Institutional Accredited Investor, such
      holder will deliver to the Company and the Trustee (or, in the case of
      Common Stock, the Transfer Agent) such certificates and other information
      as they may reasonably require to


                                       -2-
<PAGE>   28
      confirm that the transfer by it complies with the foregoing restrictions
      including, without limitation, the certificate in the form of Exhibit A to
      the Purchase Agreement; and

            (4) with respect to the Convertible Notes, it understands that the
      notification requirement referred to in (3) above will be satisfied in the
      case only of transfers by physical delivery of Certificated Convertible
      Notes other than a Global Note, by virtue of the fact that the following
      legend will be placed on the Convertible Notes unless otherwise agreed by
      the Company:

            "THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
            1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY
            PURCHASING THIS SECURITY, AGREES FOR THE BENEFIT OF THE COMPANY THAT
            THIS SECURITY MAY NOT BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED
            (X) PRIOR TO THE THIRD ANNIVERSARY (OR SUCH SHORTER PERIOD AS MAY
            THEN BE APPLICABLE UNDER THE SECURITIES ACT) OF THE ISSUANCE HEREOF
            (OR ANY PREDECESSOR SECURITY HERETO) OR (Y) BY ANY HOLDER THAT WAS
            AN AFFILIATE OF THE COMPANY AT ANY TIME DURING THE THREE MONTHS
            PRECEDING THE DATE OF SUCH TRANSFER, IN EITHER CASE OTHER THAN (1)
            TO THE COMPANY, (2) SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE
            PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A
            PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED
            INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A PURCHASING FOR
            ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL
            BUYER TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER
            TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A (AS INDICATED BY THE
            BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE
            REVERSE OF THIS SECURITY) AND A CERTIFICATE WHICH MAY BE OBTAINED
            FROM THE COMPANY OR THE TRUSTEE IS DELIVERED BY THE TRANSFEREE TO
            THE COMPANY AND THE TRUSTEE, (3) IN AN OFFSHORE TRANSACTION IN
            ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT (AS INDICATED
            BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER
            ON THE REVERSE OF THIS SECURITY), AND, IF SUCH TRANSFER IS BEING
            EFFECTED BY CERTAIN TRANSFERORS SPECIFIED IN THE INDENTURE (AS
            DEFINED BELOW) PRIOR TO THE EXPIRATION OF THE "40 DAY RESTRICTED
            PERIOD" (WITHIN THE MEANING OF RULE 903(c)(3) OF REGULATION S UNDER
            THE SECURITIES ACT), A CERTIFICATE WHICH MAY BE OBTAINED FROM THE
            COMPANY OR THE TRUSTEE IS DELIVERED BY THE TRANSFEREE TO THE COMPANY
            AND THE TRUSTEE, (4) TO AN INSTITUTION THAT IS AN "ACCREDITED
            INVESTOR" AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE
            SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY


                                       -3-
<PAGE>   29
            THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS
            SECURITY) THAT IS ACQUIRING THIS SECURITY FOR INVESTMENT PURPOSES
            AND NOT FOR DISTRIBUTION, AND A CERTIFICATE IN THE FORM ATTACHED TO
            THIS SECURITY IS DELIVERED BY THE TRANSFEREE TO THE COMPANY AND THE
            TRUSTEE (PROVIDED THAT CERTAIN HOLDERS SPECIFIED IN THE INDENTURE
            MAY NOT TRANSFER THIS SECURITY PURSUANT TO THIS CLAUSE (4) PRIOR TO
            EXPIRATION OF THE "40 DAY RESTRICTED PERIOD" (WITHIN THE MEANING OF
            RULE 903(c)(3) OF REGULATION S UNDER THE SECURITIES ACT), (5)
            PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
            PROVIDED BY RULE 144 (IF APPLICABLE) UNDER THE SECURITIES ACT AND A
            CERTIFICATE WHICH MAY BE OBTAINED FROM THE COMPANY OR THE TRUSTEE IS
            DELIVERED BY THE TRANSFEREE TO THE COMPANY AND THE TRUSTEE, OR (6)
            PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
            ACT, AND A CERTIFICATE WHICH MAY BE OBTAINED FROM THE COMPANY OR THE
            TRUSTEE IS DELIVERED BY THE TRANSFEREE TO THE COMPANY AND THE
            TRUSTEE, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES
            LAWS OF ANY STATE OF THE UNITED STATES OR OTHER JURISDICTIONS. AN
            INSTITUTIONAL ACCREDITED INVESTOR HOLDING THIS SECURITY AGREES THAT
            IT WILL FURNISH TO THE COMPANY AND THE TRUSTEE SUCH CERTIFICATES AND
            OTHER INFORMATION AS THEY MAY REASONABLY REQUIRE TO CONFIRM THAT ANY
            TRANSFER BY IT OF THIS SECURITY COMPLIES WITH THE FOREGOING
            RESTRICTIONS. THE HOLDER HEREOF, BY PURCHASING THIS SECURITY,
            REPRESENTS AND AGREES FOR THE BENEFIT OF THE COMPANY THAT IT IS (1)
            A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A OR
            (2) AN INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN
            RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT AND THAT IT
            IS HOLDING THIS SECURITY FOR INVESTMENT PURPOSES AND NOT FOR
            DISTRIBUTION OR (3) A NON-U.S. PERSON OUTSIDE THE UNITED STATES
            WITHIN THE MEANING OF (OR AN ACCOUNT SATISFYING THE REQUIREMENTS OF
            PARAGRAPH (o)(2) OF RULE 902 UNDER) REGULATION S UNDER THE
            SECURITIES ACT";

            (5) with respect to the Common Stock issuable upon conversion of the
      Convertible Notes, it understands that the notification requirement
      referred to in (3) above will be satisfied by virtue of the fact that the
      following legend will be placed on the Common Stock unless otherwise
      agreed by the Company:

            "THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
            ACT OF 1933, AS AMENDED (THE "SECURITIES ACT").  THE HOLDER
            HEREOF, BY PURCHASING THIS SECURITY, AGREES FOR THE BENEFIT


                                       -4-
<PAGE>   30
            OF THE COMPANY THAT THIS SECURITY MAY NOT BE RESOLD, PLEDGED OR
            OTHERWISE TRANSFERRED (X) PRIOR TO THE THIRD ANNIVERSARY (OR SUCH
            SHORTER PERIOD AS MAY THEN BE APPLICABLE UNDER THE SECURITIES ACT)
            OF THE ISSUANCE HEREOF (OR ANY PREDECESSOR SECURITY HERETO) OR (Y)
            BY ANY HOLDER THAT WAS AN AFFILIATE OF THE COMPANY AT ANY TIME
            DURING THE THREE MONTHS PRECEDING THE DATE OF SUCH TRANSFER, IN
            EITHER CASE, OTHER THAN (1) TO THE COMPANY, (2) SO LONG AS THIS
            SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE
            SECURITIES ACT ("RULE 144A"), TO A PERSON WHOM THE SELLER REASONABLY
            BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF
            RULE 144A, PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
            QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
            RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE
            144A (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE
            CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY), AND A
            CERTIFICATE WHICH MAY BE OBTAINED FROM THE COMPANY OR THE TRUSTEE IS
            DELIVERED BY THE TRANSFEREE TO THE COMPANY AND THE TRUSTEE, (3) IN
            AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE
            SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON
            THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY), AND
            IF SUCH TRANSFER IS BEING EFFECTED BY CERTAIN TRANSFERORS SPECIFIED
            IN THE INDENTURE (AS DEFINED BELOW) PRIOR TO THE EXPIRATION OF THE
            "40 DAY RESTRICTED PERIOD" (WITHIN THE MEANING OF RULE 903(c)(3) OF
            REGULATION S UNDER THE SECURITIES ACT), A CERTIFICATE WHICH MAY BE
            OBTAINED FROM THE COMPANY OR THE TRUSTEE IS DELIVERED BY THE
            TRANSFEREE TO THE COMPANY AND THE TRUSTEE, (4) TO AN INSTITUTION
            THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(1), (2),
            (3) OR (7) UNDER THE SECURITIES ACT (AS INDICATED BY THE BOX CHECKED
            BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF
            THIS SECURITY) THAT IS ACQUIRING THIS SECURITY FOR INVESTMENT
            PURPOSES AND NOT FOR DISTRIBUTION, AND A CERTIFICATE IN THE FORM
            ATTACHED TO THIS SECURITY IS DELIVERED BY THE TRANSFEREE TO THE
            COMPANY AND THE TRANSFER AGENT, (5) PURSUANT TO AN EXEMPTION FROM
            REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 (IF
            APPLICABLE) UNDER THE SECURITIES ACT AND A CERTIFICATE WHICH MAY BE
            OBTAINED FROM THE COMPANY OR THE TRUSTEE IS DELIVERED BY THE
            TRANSFEREE TO THE COMPANY AND THE TRUSTEE, OR (6) PURSUANT TO AN
            EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND A
            CERTIFICATE WHICH


                                       -5-
<PAGE>   31
            MAY BE OBTAINED FROM THE COMPANY OR THE TRUSTEE IS DELIVERED BY THE
            TRANSFEREE TO THE COMPANY AND THE TRUSTEE, IN EACH CASE IN
            ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
            UNITED STATES OR OTHER JURISDICTIONS. AN INSTITUTIONAL ACCREDITED
            INVESTOR HOLDING THIS SECURITY AGREES THAT IT WILL FURNISH TO THE
            COMPANY AND THE TRANSFER AGENT SUCH CERTIFICATES AND OTHER
            INFORMATION AS THEY MAY REASONABLY REQUIRE TO CONFIRM THAT ANY
            TRANSFER BY IT OF THIS SECURITY COMPLIES WITH THE FOREGOING
            RESTRICTIONS. THE HOLDER HEREOF, BY PURCHASING THIS SECURITY,
            REPRESENTS AND AGREES FOR THE BENEFIT OF THE COMPANY THAT IT IS (1)
            A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A OR
            (2) AN INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN
            RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT AND THAT IS
            HOLDING THIS SECURITY FOR INVESTMENT PURPOSES AND NOT FOR
            DISTRIBUTION OR (3) A NON-U.S. PERSON OUTSIDE THE UNITED STATES
            WITHIN THE MEANING OF (OR AN ACCOUNT SATISFYING THE REQUIREMENTS OF
            PARAGRAPH (o)(2) OF RULE 902 UNDER) REGULATION S UNDER THE
            SECURITIES ACT."

            (6) it (i) is able to fend for itself in the transactions
      contemplated by the Offering Memorandum; (ii) has such knowledge and
      experience in financial and business matters as to be capable of
      evaluating the merits and risks of its prospective investment in the
      Convertible Notes; and (iii) has the ability to bear the economic risks of
      its prospective investment and can afford the complete loss of such
      investment; and

            (7) it understands that the Company, the Initial Purchasers and
      others will rely upon the truth and accuracy of the foregoing
      acknowledgments, representations and agreements and agrees that if any of
      the acknowledgments, representations and warranties deemed to have been
      made by it by its purchase of the Convertible Notes are no longer
      accurate, it shall promptly notify the Company and the Initial Purchasers.
      If it is acquiring the Convertible Notes as a fiduciary or agent for one
      or more investor accounts, it represents that it has sole investment
      discretion with respect to each such account and it has full power to make
      the foregoing acknowledgements, representations and agreements on behalf
      of such account.


                                       -6-

<PAGE>   1
                                                                    EXHIBIT 4.11

                 AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT

      This AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT (this "Credit
Agreement") is made as of August 28, 1996, by and among (a) HMT TECHNOLOGY
CORPORATION (the "Borrower"), a Delaware corporation having its principal place
of business at 1055 Page Avenue, Fremont, California 94538, (b) THE FIRST
NATIONAL BANK OF BOSTON, a national banking association, BANQUE PARIBAS, acting
through its Los Angeles branch, and the other lending institutions listed on
Schedule 1.1, (c) THE FIRST NATIONAL BANK OF BOSTON as administrative and
co-syndication agent for itself, the other lending institutions listed on
Schedule 1.1, and the other Bank Agents (as defined herein), and (d) BANQUE
PARIBAS, as co-syndication agent for itself, the other lending institutions
listed on Schedule 1.1, and the other Bank Agents.

                                    RECITALS

      A. The Borrower, the Banks, and the Bank Agents desire to amend and
restate in its entirety that certain Revolving Credit and Term Loan Agreement
dated as of November 30, 1995, as amended prior to the execution and delivery of
this Credit Agreement (as so amended, the "Original Credit Agreement"), by and
among the Borrower, the Banks and the Bank Agent.

      B. The Banks have agreed to make and maintain the credit described in this
Credit Agreement only on the terms, subject to the conditions and in reliance on
the representations and warranties set forth below.

1. DEFINITIONS AND RULES OF INTERPRETATION.

      1.1. DEFINITIONS. The following terms shall have the meanings set forth in
this Section 1 or elsewhere in the provisions of this Credit Agreement referred
to below:

      Affiliate. Any Person that would be considered to be an affiliate of the
Borrower under Rule 144(a) of the Rules and Regulations of the Securities and
Exchange Commission, as in effect on the date hereof, if the Borrower were
issuing securities.

      Agent. FNBB acting as administrative agent for the Banks and the other
Bank Agents.

      Agent's Head Office. The Agent's head office located at 100 Federal
Street, Boston, Massachusetts 02110 or at such other location as the Agent may
designate as its head office from time to time.

      Assignment and Acceptance.  See Section 19.1.

      Balance Sheet Date.  March 31, 1996.

      Bank Agents. Collectively the Agent and the Co-Syndication Agents.

      Bank Agents' Special Counsel.  Gibson, Dunn & Crutcher LLP or such
other counsel as may be approved by the Bank Agents.
<PAGE>   2
      Banks.  FNBB, Paribas and the other lending institutions listed on
Schedule 1.1 hereto and any other Person who becomes an assignee of any
rights and obligations of a Bank pursuant to Section 19.

      Base Rate. The higher of (i) the annual rate of interest announced from
time to time by the Agent at the Agent's Head Office, as its "base rate" and
(ii) one-half of one percent (1/2%) above the Federal Funds Effective Rate. For
the purposes of this definition, "Federal Funds Effective Rate" shall mean, for
any day, the rate per annum equal to the weighted average of the rates on
overnight federal funds transactions with members of the Federal Reserve System
arranged by federal funds brokers, as published for such day (or, if such day is
not a Business Day, for the next preceding Business Day) by the Federal Reserve
Bank of New York, or, if such rate is not so published for any day that is a
Business Day, the average of the quotations for such day on such transactions
received by the Agent from three funds brokers of recognized standing selected
by the Agent.

      Base Rate Loans.  All or any portion of the Revolving Credit Loans
bearing interest calculated by reference to the Base Rate.

      Borrower. As defined in the preamble hereto.

      Business Day. Any day on which (a) banking institutions in Boston,
Massachusetts and San Francisco, California, are open for the transaction of
banking business and (b) in the case of LIBOR Rate Loans, a day which is also a
LIBOR Business Day.

      Capital Assets. Fixed assets, both tangible (such as land, buildings,
fixtures, machinery and equipment) and intangible (such as patents, copyrights,
trademarks, franchises and good will); provided that Capital Assets shall not
include any item customarily charged directly to expense or depreciated over a
useful life of twelve (12) months or less in accordance with generally accepted
accounting principles.

      Capital Expenditures. Amounts paid or indebtedness incurred by the
Borrower or any of its Subsidiaries in connection with the purchase or lease by
the Borrower or any of its Subsidiaries of Capital Assets that would be required
to be capitalized and shown on the balance sheet of such Person in accordance
with generally accepted accounting principles.

      Capitalized Leases. Leases under which the Borrower or any of its
Subsidiaries is the lessee or obligor, the discounted future rental payment
obligations under which are required to be capitalized on the balance sheet of
the lessee or obligor in accordance with generally accepted accounting
principles.

      Closing Date. The first date on which all of the conditions set forth in
Section 11 have been satisfied.

      Code. The Internal Revenue Code of 1986.

      Commitment. With respect to each Bank, the amount set forth on Schedule
1.1 hereto as the amount of such Bank's commitment to make Revolving Credit
Loans and purchase


                                       2
<PAGE>   3
assignments of Swingline Loans to, and to participate in the issuance, extension
and renewal of Letters of Credit for the account of, the Borrower, as the same
may be reduced from time to time; or, if such commitment is terminated pursuant
to the provisions hereof, zero.

      Commitment Fee. See Section 2.2.

      Commitment Percentage.  With respect to each Bank, the percentage set
forth on Schedule 1.1 hereto as such Bank's percentage of the aggregate
Commitments of all of the Banks.

      Compliance Certificate. See Section 8.4(c).

      Consolidated or consolidated. With reference to any term defined herein,
such term as applied to the accounts of the Borrower and its Subsidiaries,
consolidated in accordance with generally accepted accounting principles.

      Consolidated Net Income (or Deficit). The consolidated net income (or
deficit) of the Borrower and its Subsidiaries, after deduction of all expenses,
taxes, and other proper charges, determined in accordance with generally
accepted accounting principles, after eliminating therefrom all extraordinary
nonrecurring items of income or expense.

      Consolidated Net Worth. On a consolidated basis, the common stockholders'
equity capital plus surplus plus retained earnings, as determined and computed
according to generally accepted accounting principles.

      Consolidated Total Interest Expense. For any period, the aggregate amount
of interest required to be paid or accrued by the Borrower and its Subsidiaries
during such period on all Indebtedness of the Borrower and its Subsidiaries
outstanding during all or any part of such period, whether such interest was or
is required to be reflected as an item of expense or capitalized, including
payments consisting of interest in respect of Capitalized Leases.

      Conversion Request. A notice given by the Borrower to the Agent of the
Borrower's election to convert or continue a Loan in accordance with Section
2.7.

      Co-Syndication Agent(s). Each of FNBB and Paribas acting as co-syndication
agents for the Banks and the other Bank Agents.

      Credit Agreement. This Amended and Restated Revolving Credit Agreement,
including the Schedules and Exhibits hereto, which by this reference are
incorporated into and made a part hereof.

      Current Ratio. On a consolidated basis, the ratio of Borrower's total
current assets, determined in accordance with generally accepted accounting
principles, to Borrower's current liabilities, determined in accordance with
generally accepted accounting principles (provided that all amounts outstanding
in respect of the Loans shall not be deemed to be current liabilities for the
period beginning on the Closing Date and ending on the second anniversary of the
Closing Date).


                                       3
<PAGE>   4
      Default. See Section 13.1.

      Delinquent Bank. See Section 15.5.3.

      Distribution. The declaration or payment of any dividend on or in respect
of any shares of any class of capital stock of the Borrower, other than
dividends payable solely in shares of common stock of the Borrower; the
purchase, redemption, or other retirement of any shares of any class of capital
stock of the Borrower, directly or indirectly through a Subsidiary of the
Borrower or otherwise; the return of capital by the Borrower to its shareholders
as such; or any other distribution on or in respect of any shares of any class
of capital stock of the Borrower or any of its Subsidiaries (other than to the
Borrwer or a direct or indirect wholly-owned Subsidiary of the Borrower).

      Dollars or $. Dollars in lawful currency of the United States of America.

      Domestic Lending Office. Initially, the office of each Bank designated as
such in Schedule 1.1 hereto; thereafter, such other office of such Bank, if any,
located within the United States that will be making or maintaining Base Rate
Loans.

      Drawdown Date. The date on which any Revolving Credit Loan or Swingline
Loan is made or is to be made, and the date on which any Revolving Credit Loan
is converted or continued in accordance with Section 2.7, each of which shall be
a Business Day (and, in accordance with Section 2.7, may also be required to be
a LIBOR Business Day).

      EBIT. For any period, an amount equal to the consolidated earnings (or
loss) from the operations of the Borrower and its Subsidiaries for any period,
after all expenses and other proper charges but before provision for any income
taxes or interest expense for such period, in each case, determined in
accordance with generally accepted accounting principles.

      EBITDA. For any period, an amount equal to the sum of (i) EBIT plus (ii)
depreciation and amortization for such period, in each case, determined in
accordance with generally accepted accounting principles.

      Eligible Assignee. Any of (i) a commercial bank or finance company
organized under the laws of the United States, or any State thereof or the
District of Columbia, and having total assets in excess of $1,000,000,000,
calculated in accordance with generally accepted accounting principles; (ii) a
savings and loan association or savings bank organized under the laws of the
United States, or any State thereof or the District of Columbia, and having a
net worth of at least $100,000,000, calculated in accordance with generally
accepted accounting principles; (iii) a commercial bank organized under the laws
of any other country which is a member of the Organization for Economic
Cooperation and Development (the "OECD"), or a political subdivision of any such
country, and having total assets in excess of $1,000,000,000, provided that such
bank is acting through a branch or agency located in the country in which it is
organized or another country which is also a member of the OECD; (iv) the
central bank of any country which is a member of the OECD; (v) funds and
investment companies that invest in loans expected to earn interest based on the
Base Rate or LIBOR Rate; and (vi) if, but only if an Event of Default has
occurred and is continuing, any other bank, insurance company, commercial


                                       4
<PAGE>   5
finance company or other financial institution or other Person approved by the
Co-Syndication Agents, such approval not to be unreasonably withheld.

      Employee Benefit Plan. Any employee benefit plan within the meaning of
Section 3(3) of ERISA maintained or contributed to by the Borrower or any ERISA
Affiliate, other than a Multiemployer Plan.

      Environmental Laws. Any judgment, decree, order, law, license, rule or
regulation pertaining to environmental matters, including without limitation
those arising under the Resource Conservation and Recovery Act ("RCRA"), the
Comprehensive Environmental Response, Compensation and Liability Act of 1980
("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986 ("SARA"),
the Federal Clean Water Act, the Federal Clean Air Act, the Toxic Substances
Control Act, each as subsequently amended, or any State or local statute,
regulation, ordinance, order or decree relating to health, safety or the
environment.

      Equity Infusion. Any sale of new equity of Borrower, including without
limitation capital stock, stock-like instruments, warrants, and warrant-like
instruments, that results in Borrower's receipt of not less than Seventy-Five
Million Dollars ($75,000,000) in net cash proceeds.

      ERISA. The Employee Retirement Income Security Act of 1974.

      ERISA Affiliate. Any Person which is treated as a single employer with the
Borrower under Section 414 of the Code.

      ERISA Reportable Event. A "reportable event" with respect to a Guaranteed
Pension Plan within the meaning of Section 4043 of ERISA and the regulations
promulgated thereunder as to which the requirement of notice has not been
waived.

      Eurocurrency Reserve Rate. For any day with respect to a LIBOR Rate Loan,
the maximum rate (expressed as a decimal) at which any lender subject thereto
would be required to maintain reserves under Regulation D of the Board of
Governors of the Federal Reserve System (or any successor or similar regulations
relating to such reserve requirements) against "Eurocurrency Liabilities" (as
that term is used in Regulation D), if such liabilities were outstanding. The
Eurocurrency Reserve Rate shall be adjusted automatically on and as of the
effective date of any change in the Eurocurrency Reserve Rate.

      Event of Default. See Section 13.1.

      Fee Letter. The letter agreement dated as of August 28, 1996 between the
Agent and the Borrower.

      FNBB. The First National Bank of Boston, a national banking association,
in its individual capacity.

      generally accepted accounting principles. Generally accepted accounting
principles as a set forth from time to time in the opinions and pronouncements
of the Accounting Principles Board and the American Institute of Certified
Public Accountants and statements and


                                       5
<PAGE>   6
pronouncements of the Financial Accounting Standards Board, or in such
statements by such other Person as may be in general use by significant segments
of the U.S. accounting profession. In the event that generally accepted
accounting principles change during the term of this Credit Agreement such that
the covenants contained in Section 10 would be calculated in a different manner
or with different components, (a) the parties hereto agree to amend this Credit
Agreement in such respects as are necessary to conform those covenants as
criteria for evaluating Borrower's financial condition to substantially the same
criteria as were effective prior to such change, and (b) Borrower shall be
deemed to be in compliance with the covenants contained in Section 10 during the
ninety (90) day period following any such change in generally accepted
accounting principles if and to the extent that Borrower would have been in
compliance therewith under generally accepted accounting principles as in effect
immediately prior to such change.

      Guaranteed Pension Plan. Any employee pension benefit plan within the
meaning of Section 3(2) of ERISA maintained or contributed to by the Borrower or
any ERISA Affiliate the benefits of which are guaranteed on termination in full
or in part by the PBGC pursuant to Title IV of ERISA, other than a Multiemployer
Plan.

      Hazardous Substances. Any hazardous waste, as defined by 42 U.S.C. Section
6903(5), any hazardous substances as defined by 42 U.S.C. Section 9601(14), any
pollutant or contaminant as defined by 42 U.S.C. Section 9601(33) and any toxic
substances, oil or hazardous materials or other chemicals or substances
regulated by any Environmental Laws.

      HML. Hitachi Metals, Ltd., a Japanese corporation.

      Indebtedness. All obligations, contingent and otherwise, that in
accordance with generally accepted accounting principles should be classified
upon the obligor's balance sheet as liabilities, or to which reference should be
made by footnotes thereto (other than contingent liabilities which have not been
quantified in such footnotes), including in any event and whether or not so
classified: (i) all debt and similar monetary obligations, whether direct or
indirect; (ii) all liabilities secured by any mortgage, pledge, security
interest, lien, charge or other encumbrance existing on property owned or
acquired subject thereto, whether or not the liability secured thereby shall
have been assumed; (iii) synthetic leases (i.e., any master lease agreement
pursuant to which the lessor (A) agrees from time to time to acquire from and to
lease back to the lessee, certain equipment or other property, and (B)
remarkets, or contracts with a third party to remarket, such leased equipment or
other property, while retaining the rights of a lessor vis-a-vis the lessee with
respect thereto); and (iv) all guaranties, endorsements and other contingent
obligations whether direct or indirect in respect of indebtedness of others,
including any obligation to supply funds to or in any manner to invest in,
directly or indirectly, the debtor, to purchase indebtedness, or to assure the
owner of indebtedness against loss, through an agreement to purchase goods,
supplies, or services for the purpose of enabling the debtor to make payment of
the indebtedness held by such owner or otherwise, and the obligations to
reimburse the issuer in respect of any letters of credit.

      Initial Leverage Ratio Calculation. See Section 11.6.


                                       6
<PAGE>   7
      Intangible Assets. The value, as stated on the consolidated balance sheet
of the Borrower, of all intangible assets of the Borrower as determined and
computed in accordance with generally accepted accounting principles.

      Interest Payment Date. (i) As to any Base Rate Loan, the last day of each
calendar quarter including the calendar quarter in which the Drawdown Date of
such Base Rate Loan occurs; and (ii) as to any LIBOR Rate Loan, the earlier to
occur of (A) the last day of each calendar quarter including the quarter in
which the Drawdown Date of such LIBOR Rate Loan occurs and (B) last day of the
Interest Period in respect of such LIBOR Rate Loan.

      Interest Period. With respect to each Revolving Credit Loan , (i)
initially, the period commencing on the Drawdown Date of such Loan and ending on
the last day of one of the periods set forth below, as selected by the Borrower
in a Loan Request: (A) for any Base Rate Loan, the calendar quarter in which the
Drawdown Date for such Base Rate Loan occurs; or (B) for any LIBOR Rate Loan, 1,
2 or 3 months; and (ii) thereafter, each period commencing on the first day
immediately succeeding the last day of the immediately preceding Interest Period
applicable to such Revolving Credit Loan and ending on the last day of one of
the periods set forth above, as selected by the Borrower in a Conversion
Request; provided that all of the foregoing provisions relating to Interest
Periods are subject to the following:

            (a) if any Interest Period with respect to a LIBOR Rate Loan would
      otherwise end on a day that is not a LIBOR Business Day, that Interest
      Period shall be extended to the next succeeding LIBOR Business Day, unless
      the result of such extension would be to carry such Interest Period into
      another calendar month, in which event such Interest Period shall end on
      the immediately preceding LIBOR Business Day;

            (b) if any Interest Period with respect to a Base Rate Loan would
      end on a day that is not a Business Day, that Interest Period shall end on
      the next succeeding Business Day;

            (c) if the Borrower shall fail to give notice as provided in Section
      2.7, the Borrower shall be deemed to have requested a conversion of the
      affected LIBOR Rate Loan to a Base Rate Loan and the continuance of all
      Base Rate Loans as Base Rate Loans on the last day of the then current
      Interest Period with respect thereto;

            (d) any Interest Period relating to any LIBOR Rate Loan that 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 end on the last LIBOR Business Day of a
      calendar month; and

            (e) any Interest Period that would otherwise extend beyond the
      Maturity Date shall end on the Maturity Date.

      Investments. All expenditures made and all liabilities incurred
(contingently or otherwise) for the acquisition of stock or Indebtedness of, or
for loans, advances, capital contributions or transfers of property to, or in
respect of any guaranties (or other commitments as described under
Indebtedness), or obligations of, any Person. In determining the aggregate


                                       7
<PAGE>   8
amount of Investments of a Person outstanding at any particular time: (i) the
amount of any Investment represented by a guaranty shall be taken at not less
than the principal amount of the obligations guaranteed and still outstanding;
(ii) there shall be included as an Investment all interest accrued with respect
to Indebtedness constituting an Investment unless and until such interest is
paid; (iii) there shall be deducted in respect of each such Investment any
amount received as a return of capital (but only by repurchase, redemption,
retirement, repayment, liquidating dividend or liquidating distribution); (iv)
there shall not be deducted in respect of any Investment any amounts received as
earnings on such Investment, whether as dividends, interest or otherwise, except
that accrued interest included as provided in the foregoing clause (ii) may be
deducted when paid; and (v) there shall not be deducted from the aggregate
amount of Investments any decrease in the fair market value thereof.

      Issuing Bank. Either of Paribas or FNBB, as determined by the Agent,
acting as letter of credit issuer for the Banks and the other Bank Agents.

      Issuing Bank Head Office. The Issuing Bank's head office located at, in
the case of Paribas, 2029 Century Park East, Suite 3900, Los Angeles, California
90067 or, in the case of FNBB, 100 Federal Street, Boston, Massachusetts 02110,
or at such other locations as the Issuing Bank may designate from time to time.

      Letter of Credit. See Section 5.1.1.

      Letter of Credit Application. See Section 5.1.1.

      Letter of Credit Participation. See Section 5.1.4.

      Leverage Ratio. The ratio of Total Liabilities of the Borrower less
obligations in respect of the Subordinated Debt or any Replacement Subordinated
Debt, as the case may be, to the Borrower's total EBITDA for the immediately
preceding four consecutive quarters, treated as a single accounting period.

      LIBOR Business Day. Any day on which commercial banks are open for
international business (including dealings in Dollar deposits) in London.

      LIBOR Lending Office. Initially, the office of each Bank designated as
such in Schedule 1.1 hereto; thereafter, such other office of such Bank, if any,
that shall be making or maintaining LIBOR Rate Loans.

      LIBOR Rate. For any Interest Period with respect to a LIBOR Rate Loan, the
rate of interest equal to (i) the rate determined by the Agent at which Dollar
deposits for such Interest Period are offered based on information presented on
Telerate Page 3750 as of 11:00 a.m. London time on the second LIBOR Business Day
prior to the first day of such Interest Period, divided by (ii) a number equal
to 1.00 minus the Eurocurrency Reserve Rate, if applicable.

      LIBOR Rate Loans. Revolving Credit Loans bearing interest calculated by
reference to the LIBOR Rate.


                                       8
<PAGE>   9
      LIBOR Spread. In each case, effective from the date on which the Agent
receives the applicable Compliance Certificate, (i) at any time when the
Leverage Ratio calculated as of the end of the previous quarter was equal to or
less than .25, three-quarters of one percent (.75%); (ii) at any time when the
Leverage Ratio calculated as of the end of the previous quarter was greater than
 .25 but less than .50, one percent (1.0%); (iii) at any time when the Leverage
Ratio calculated as of the end of the previous quarter was equal to or greater
than .50 but equal to or less than .75, one and one-quarter percent (1.25%), and
(iv) at any time when the Leverage Ratio calculated as of the end of the
previous quarter was greater than .75%, one and one-half percent (1.50%),
provided that, from and after the date on which Borrower consummates an Equity
Infusion, the LIBOR Spread will be one-quarter of one percent (.25%) less than
it otherwise would be in accordance with clauses (i) through (iv) above;
provided further that any reduction in the LIBOR Spread that would otherwise
occur pursuant to this paragraph shall not be effective during any time when a
Default or an Event of Default has occurred or is continuing.

      Loan Documents.  This Credit Agreement, the Notes, the Letter of Credit
Applications, the Letters of Credit and the Fee Letter.

      Loan Request.  See Section 2.6.

      Loans. The Revolving Credit Loans and the Swingline Loans.

      Majority Banks. As of any date, the Banks (excluding any Delinquent Banks,
provided that if the Commitments have been terminated as of such date, any
Delinquent Bank shall not be excluded) having Total Percentages aggregating to
at least sixty-six and two-thirds percent (66-2/3%) on such date.

      Mandatory Borrowing. See Section 4.6.

      Maturity Date. August 28, 1999.

      Maximum Drawing Amount. The maximum aggregate amount that the
beneficiaries may at any time draw under outstanding Letters of Credit, as such
aggregate amount may be reduced from time to time pursuant to the terms of the
Letters of Credit.

      Multiemployer Plan. Any multiemployer plan within the meaning of Section
3(37) of ERISA maintained or contributed to by the Borrower or any ERISA
Affiliate.

      Net Fixed Assets. The value of property, plant and equipment required to
be reflected on the consolidated balance sheet of the Borrower in accordance
with generally accepted accounting principles, minus accumulated depreciation as
of any date of determination of Net Fixed Assets.

      Notes. Collectively, the Revolving Credit Notes and the Swingline Note.

      Obligations. All indebtedness, obligations and liabilities of any of the
Borrower and its Subsidiaries to any of the Banks and the Agent, individually or
collectively, existing on the date of this Credit Agreement or arising
thereafter, direct or indirect, joint or several, absolute or contingent,
matured or unmatured, liquidated or unliquidated, secured or unsecured, arising
by contract, operation of law or otherwise, arising or incurred under this
Credit Agreement or any of


                                       9
<PAGE>   10
the other Loan Documents or in respect of any of the Loans made or Reimbursement
Obligations incurred or any of the Notes, Letter of Credit Applications, Letters
of Credit or other instruments at any time evidencing any thereof.

      Original Credit Agreement. As defined in the Recitals hereto.

      outstanding. With respect to the Loans, the aggregate unpaid principal
thereof as of any date of determination.

      Paribas. Banque Paribas, acting through its Los Angeles branch, in its
individual capacity.

      PBGC. The Pension Benefit Guaranty Corporation created by Section 4002 of
ERISA and any successor entity or entities having similar responsibilities.

      Permitted Liens. Liens, security interests and other encumbrances
permitted by Section 9.2.

      Person. Any individual, corporation, partnership, trust, unincorporated
association, business, or other legal entity, and any government or any
governmental agency or political subdivision thereof.

      Preferred Stock. As applied to the capital stock of any Person, the
capital stock of any class or classes (however designated) that is preferred as
to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such corporation, over
shares of capital stock of any other class of such Person.

      Real Estate. All real property at any time owned or leased (as lessee or
sublessee) by the Borrower or any of its Subsidiaries.

      Recapitalization Agreement. The Recapitalization Agreement, dated as of
October 31, 1995, among the Borrower and each of the investors listed on Exhibit
A thereto.

      Record. The grid attached to a Note, or the continuation of such grid, or
any other similar record, including computer records, maintained by any Bank
with respect to any Loan referred to in such Note.

      Redemption Agreement. The Redemption Agreement, dated as of October 31,
1995, between the Borrower and HML.

      Reimbursement Obligation. The Borrower's obligation to reimburse the
Issuing Bank and the Banks on account of any drawing under any Letter of Credit
as provided in Section 5.2.

      Replacement Subordinated Debt. Unsecured subordinated Indebtedness of the
Borrower, in an original principal amount not exceeding One Hundred Fifty
Million Dollars ($150,000,000), as to which the following conditions are
satisfied: (i) the first proceeds of such subordinated Indebtedness shall be
used to pay the Subordinated Debt in full; (ii) the proceeds of such
subordinated Indebtedness shall not be used to make payments to the holders of
Borrower's Preferred Stock or to make any other Restricted Payments; (iii) the
terms and conditions of such


                                       10
<PAGE>   11
subordinated Indebtedness shall be substantially the same as those described in
that certain prospectus relating to the issuance by the Borrower of 4,000,000
shares of common stock and $150,000,000 in convertible subordinated notes and
dated June 6, 1996; and (iv) the coupon applicable to such subordinated
Indebtedness shall not exceed twelve percent (12%) per annum.

      Restricted Payments. In relation to the Borrower and its Subsidiaries, any
(a) Distribution or (b) payment or prepayment by the Borrower or any of its
Subsidiaries to any Affiliate of the Borrower other than payments to Affiliates
for goods and services in the ordinary course of business on terms equivalent to
those obtainable in arms'-length transactions.

      Revolving Credit Loans. Revolving credit loans made or to be made by the
Banks to the Borrower pursuant to Section 2.

      Revolving Credit Note Record. A Record with respect to a Revolving Credit
Note.

      Revolving Credit Notes. See Section 2.4.

      Solvent. See Section 7.5.2.

      Subordinated Debt. Indebtedness of the Borrower in respect of the
Subordinated Notes that is expressly subordinated and made junior to the payment
and performance in full of the Obligations, and evidenced as such by the terms
of the Subordinated Notes.

      Subordinated Debt Documents. The Subordinated Notes and the Subordination
Agreement.

      Subordinated Notes. The Subordinated Notes due 2005 issued by the Borrower
in favor of Summit and HML in the original aggregate principal amount of
$46,999,995.

      Subordination Agreement. The Subordination and Intercreditor Agreement
dated as of November 30, 1995 among the Borrower, the Agent, Summit and HML.

      Subsidiary. Any corporation, association, trust, or other business entity
of which the designated parent shall at any time own directly or indirectly
through a Subsidiary or Subsidiaries at least a majority (by number of votes) of
the outstanding Voting Stock.

      Summit. Summit Partners, L.P., a California limited partnership, its
affiliated entities, their partners and all other Persons listed on Exhibit A to
the Recapitalization Agreement.

      Swingline Commitment. Five Million Dollars ($5,000,000).

      Swingline Lender. FNBB, in its individual capacity and not as Agent or
Co-Syndication Agent, and any successor to all or a part of the Swingline
Commitment.

      Swingline Loan. See Section 4.1.

      Swingline Maturity Date. The date which is five Business Days prior to the
Maturity Date.


                                       11
<PAGE>   12
      Swingline Note. See Section 4.2.

      Swingline Note Record. A Record with respect to the Swingline Note.

      Tangible Net Worth. At any date of determination thereof, on a
consolidated basis, Borrower's Consolidated Net Worth, less all Intangible
Assets.

      Total Commitment. The sum of the Commitments of the Banks, as in effect
from time to time, provided that the initial Total Commitment shall be Fifty
Million Dollars ($50,000,000).

      Total Liabilities. The total liabilities of a Person that would be
required to be reflected on such Person's balance sheet in accordance with
generally accepted accounting principles.

      Total Percentage. With respect to each Bank, the portion of the Commitment
(or, if the Commitments are terminated, Revolving Credit Loans, Swingline Loans,
Letter of Credit Participations in Unpaid Reimbursement Obligations and
participating interests in the risk relating to outstanding Letters of Credit)
held by such Bank as a percentage of the greater of (i) the Total Commitment and
(ii) the outstanding principal amount of the Revolving Credit Loans, Swingline
Loans, Unpaid Reimbursement Obligations and the Maximum Drawing Amount.

      Type. As to any Revolving Credit Loan, its nature as a Base Rate Loan or a
LIBOR Rate Loan.

      Uniform Customs. With respect to any Letter of Credit, the Uniform Customs
and Practice for Documentary Credits (1993 Revision), International Chamber of
Commerce Publication No. 500 or any successor version thereto adopted by the
Issuing Bank in the ordinary course of its business as a letter of credit issuer
and in effect at the time of issuance of such Letter of Credit.

      Unpaid Reimbursement Obligation. Any Reimbursement Obligation for which
the Borrower does not reimburse the Issuing Bank and the Banks on the date
specified in, and in accordance with, Section 5.2.

      Voting Stock. Stock or similar interests, of any class or classes (however
designated), the holders of which are at the time entitled, as such holders, to
vote for the election of a majority of the directors (or persons performing
similar functions) of the corporation, association, trust or other business
entity involved, whether or not the right so to vote exists by reason of the
happening of a contingency.

      1.2. RULES OF INTERPRETATION.

            (a) A reference to any document or agreement shall include such
      document or agreement as amended, modified or supplemented from time to
      time in accordance with its terms and the terms of this Credit Agreement.

            (b) The singular includes the plural and the plural includes the
      singular.


                                       12
<PAGE>   13
            (c) A reference to any law includes any amendment or modification to
      such law.

            (d) A reference to any Person includes its permitted successors and
      permitted assigns.

            (e) Accounting terms not otherwise defined herein have the meanings
      assigned to them by generally accepted accounting principles, applied on a
      consistent basis, by the accounting entity to which they refer.

            (f) The words "include", "includes" and "including" are not
      limiting.

            (g) All terms not specifically defined herein or by generally
      accepted accounting principles, which terms are defined in the Uniform
      Commercial Code as in effect in the State of California, have the meanings
      assigned to them therein, with the term "instrument" being that defined
      under Article 9 of the Uniform Commercial Code.

            (h) Reference to a particular "Section " refers to that section of
      this Credit Agreement unless otherwise indicated.

            (i) The words "herein", "hereof", "hereunder" and words of like
      import shall refer to this Credit Agreement as a whole and not to any
      particular section or subdivision of this Credit Agreement.

2. THE REVOLVING CREDIT FACILITY.

      2.1. COMMITMENT TO LEND. Subject to the terms and conditions set forth in
this Credit Agreement, each of the Banks severally agrees to lend to the
Borrower and the Borrower may borrow, repay, and reborrow from time to time
between the Closing Date and the Maturity Date upon notice by the Borrower to
the Agent given in accordance with Section 2.6, such sums as are requested by
the Borrower up to a maximum aggregate amount outstanding (after giving effect
to all amounts requested) at any one time equal to such Bank's Commitment minus
such Bank's Commitment Percentage of the sum of the Maximum Drawing Amount and
all Unpaid Reimbursement Obligations and such Bank's Commitment Percentage of
any then-outstanding Swingline Loans, provided that the sum of the outstanding
amount of the Revolving Credit Loans (after giving effect to all amounts
requested) plus the Maximum Drawing Amount, the then-outstanding amount of any
Swingline Loans, and all Unpaid Reimbursement Obligations shall not at any time
exceed the Total Commitment. The Revolving Credit Loans shall be made pro rata
in accordance with each Bank's Commitment Percentage. Each request for a
Revolving Credit Loan hereunder shall constitute a representation and warranty
by the Borrower that the conditions set forth in Section 12 have been satisfied
on the date of such request.

      2.2. COMMITMENT FEE. The Borrower agrees to pay to the Agent for the
accounts of the Banks in accordance with their respective Commitment Percentages
a Commitment Fee (each a "Commitment Fee" and, in the aggregate, the "Commitment
Fee") calculated as follows, in each case effective from the date on which the
Agent receives the applicable Compliance Certificate: (i) at any time when the
Leverage Ratio calculated as of the end of the previous


                                       13
<PAGE>   14
quarter was equal to or less than .25, eighteen one-hundredths of one percent
(.18%) per annum; (ii) at any time when the Leverage Ratio calculated as of the
end of the previous quarter was greater than .25 but less than .50, twenty
one-hundredths of one percent (.20%) per annum; and (iii) at any time when the
Leverage Ratio calculated as of the end of the previous quarter was equal to or
greater than .50, one-quarter of one percent (.25%) per annum, in each case
calculated on the average daily amount during each calendar quarter, or such
shorter period as may exist from the Closing Date to the first immediately
succeeding end of a calendar quarter or from the end of the final calendar
quarter occurring prior to the Maturity Date until the Maturity Date, by which
the Total Commitment minus the sum of the Maximum Drawing Amount and all Unpaid
Reimbursement Obligations exceeds the outstanding amount of Revolving Credit
Loans during such calendar quarter. The Commitment Fee shall be payable
quarterly in arrears on the first day of each calendar quarter for the
immediately preceding calendar quarter commencing on the first such date
following the date hereof, with a final payment on the earlier to occur of (i)
the Maturity Date and (ii) any earlier date on which the Commitments shall
terminate pursuant hereto.

      2.3. REDUCTION OF TOTAL COMMITMENT. The Borrower shall have the right, at
any time and from time to time, upon two (2) Business Days' prior written notice
to the Agent, to reduce by $500,000 or an integral multiple thereof, or
terminate entirely, the Total Commitment, whereupon the Commitments of the Banks
shall be reduced pro rata in accordance with their respective Commitment
Percentages of the amount specified in such notice or, as the case may be,
terminated. The Total Commitment may not at any time be reduced below the amount
of any Swingline Loans outstanding at the time of such reduction or termination.
Promptly after receiving any notice of the Borrower delivered pursuant to this
Section 2.3, the Agent will notify the Banks of the substance thereof. Upon the
effective date of any such reduction or termination, the Borrower shall pay to
the Agent for the respective accounts of the Banks the full amount of any
Commitment Fee then accrued on the amount of the reduction. No reduction or
termination of the Commitments may be reinstated.

      2.4. THE REVOLVING CREDIT NOTES. The Revolving Credit Loans shall be
evidenced by separate restated promissory notes of the Borrower, each in
substantially the form of Exhibit A hereto (each a "Revolving Credit Note"),
dated the Closing Date (or such other date on which a Bank may become a party
hereto pursuant to Section 19 hereof) and completed with appropriate insertions.
One Revolving Credit Note shall be payable to the order of each Bank in a
principal amount equal to such Bank's Commitment or, if less, the outstanding
amount of all Revolving Credit Loans made by such Bank, plus interest accrued
thereon, as set forth below. The Borrower irrevocably authorizes each Bank to
make or cause to be made, at or about the time of the Drawdown Date of any
Revolving Credit Loan or at the time of receipt of any payment of principal on
such Bank's Revolving Credit Note, an appropriate notation on such Bank's
Revolving Credit Note Record reflecting the making of such Revolving Credit Loan
or (as the case may be) the receipt of such payment. The outstanding amount of
the Revolving Credit Loans set forth on such Bank's Revolving Credit Note Record
shall be prima facie evidence of the principal amount thereof owing and unpaid
to such Bank, but the failure to record, or any error in so recording, any such
amount on such Bank's Revolving Credit Note Record shall not limit or otherwise
affect the obligations of the Borrower hereunder or under any Revolving


                                       14
<PAGE>   15
Credit Note to make payments of principal of or interest on any Revolving Credit
Note when due.

      2.5. INTEREST ON REVOLVING CREDIT LOANS. Except as otherwise provided in
Section 6.10,

            (a) Each Base Rate Loan shall bear interest for the period
      commencing with the Drawdown Date thereof and ending on the last day of
      the Interest Period with respect thereto at a rate per annum equal to the
      Base Rate;

            (b) Each LIBOR Rate Loan shall bear interest for the period
      commencing with the Drawdown Date thereof and ending on the last day of
      the Interest Period with respect thereto at the rate per annum equal to
      the LIBOR Rate determined for such Interest Period plus the applicable
      LIBOR Spread;

            (c) The Borrower promises to pay interest on each Revolving Credit
      Loan, in arrears, on each Interest Payment Date with respect thereto.

      2.6. REQUESTS FOR REVOLVING CREDIT LOANS. The Borrower shall give to the
Agent written notice in the form of Exhibit B hereto (or telephonic notice
confirmed in a writing in the form of Exhibit B hereto) of each Revolving Credit
Loan requested hereunder (a "Loan Request") no less than (i) one (1) Business
Day prior to the proposed Drawdown Date of any Base Rate Loan and (ii) three (3)
LIBOR Business Days prior to the proposed Drawdown Date of any LIBOR Rate Loan.
Each such notice shall specify (A) the aggregate principal amount of the
Revolving Credit Loans requested, (B) the proposed Drawdown Date of such
Revolving Credit Loans, (C) the Interest Period for such Revolving Credit Loans,
and (D) the Type of such Revolving Credit Loans. Promptly upon receipt of any
such notice, the Agent shall notify each of the Banks thereof. Each Loan Request
shall be irrevocable and binding on the Borrower and shall obligate the Borrower
to accept the Revolving Credit Loans requested from the Banks on the proposed
Drawdown Date. Each Loan Request with respect to Base Rate Loans shall be in a
minimum aggregate amount of $500,000 or an integral multiple thereof and each
Loan Request in respect of LIBOR Rate Loans shall be in a minimum aggregate
amount of $1,000,000 or an integral multiple thereof.

      2.7. CONVERSION OPTIONS.

            2.7.1. CONVERSION TO DIFFERENT TYPE OF REVOLVING CREDIT LOAN. The
      Borrower may elect from time to time to convert any outstanding Revolving
      Credit Loan to a Revolving Credit Loan of another Type, provided that (i)
      with respect to any such conversion of a LIBOR Rate Loan to a Base Rate
      Loan, the Borrower shall give the Agent at least one (1) Business Day's
      prior written notice of such election; (ii) with respect to any such
      conversion of a Base Rate Loan to a LIBOR Rate Loan, the Borrower shall
      give the Agent at least three (3) LIBOR Business Days' prior written
      notice of such election; (iii) with respect to any such conversion of a
      LIBOR Rate Loan into a Base Rate Loan, such conversion shall only be made
      at the end of business on the last day of the Interest Period with respect
      thereto; (iv) no more than three (3) LIBOR Rate Loans having different
      Interest Rate Periods may be outstanding at any time; and (v) no Loan may
      be converted into a LIBOR Rate Loan when any Default or Event of Default
      has

                                       15
<PAGE>   16
      occurred and is continuing. On the date on which such conversion is
      being made each Bank shall take such action as is necessary to transfer
      its Commitment Percentage of such Revolving Credit Loans to its Domestic
      Lending Office or its LIBOR Lending Office, as the case may be. All or any
      part of outstanding Revolving Credit Loans of any Type may be converted
      into a Revolving Credit Loan of another Type as provided herein, provided
      that any partial conversion shall be in an aggregate principal amount of
      $500,000 (subject to Section 2.7.3 hereof) or a whole multiple thereof.
      Each Conversion Request relating to the conversion of a Base Rate Loan to
      a LIBOR Rate Loan shall be irrevocable by the Borrower.

            2.7.2. CONTINUATION OF TYPE OF REVOLVING CREDIT LOAN. Any Revolving
      Credit Loan of any Type may be continued as a Revolving Credit Loan of the
      same Type upon the expiration of an Interest Period with respect thereto
      by compliance by the Borrower with the notice provisions contained in
      Section 2.7.1; provided that no LIBOR Rate Loan may be continued as such
      when any Default or Event of Default has occurred and is continuing, but
      shall be automatically converted to a Base Rate Loan at the end of
      business on the last day of the first Interest Period relating thereto
      ending during the continuance of any Default or Event of Default of which
      officers of the Agent active in respect of the Borrower's account have
      actual knowledge. In the event that the Borrower fails to provide any such
      notice with respect to the continuation of any LIBOR Rate Loan as such,
      then such LIBOR Rate Loan shall be automatically converted to a Base Rate
      Loan at the end of business on the last day of the first Interest Period
      relating thereto. The Agent shall notify the Banks promptly when any such
      automatic conversion contemplated by this Section 2.7.2 is scheduled to
      occur.

            2.7.3. LIBOR RATE LOANS. Any conversion to or from LIBOR Rate Loans
      shall be in such amounts and be made pursuant to such elections so that,
      after giving effect thereto, the aggregate principal amount of all LIBOR
      Rate Loans having the same Interest Period shall not be less than
      $5,000,000 or a whole multiple of $1,000,000 in excess thereof.

      2.8. FUNDS FOR REVOLVING CREDIT LOAN.

            2.8.1. FUNDING PROCEDURES. Not later than 11:00 a.m. (California
      time) on the proposed Drawdown Date of any Revolving Credit Loans, each of
      the Banks will make available to the Agent, at its Head Office, in
      immediately available funds, the amount of such Bank's Commitment
      Percentage of the aggregate amount of the requested Revolving Credit
      Loans. Upon receipt from each Bank of such amount, and upon receipt of the
      documents required by Sections 11 and 12 and the satisfaction of the other
      conditions set forth therein, to the extent applicable, the Agent will
      make available to the Borrower the aggregate amount of such Revolving
      Credit Loans made available to the Agent by the Banks. The failure or
      refusal of any Bank to make available to the Agent at the aforesaid time
      and place on any Drawdown Date the amount equal to its Commitment
      Percentage of the aggregate amount of the requested Revolving Credit Loans
      shall not relieve any other Bank from its several obligation hereunder to
      make available to the Agent the


                                       16
<PAGE>   17
      amount equal to such other Bank's Commitment Percentage of the aggregate
      amount of any requested Revolving Credit Loans.

            2.8.2. ADVANCES BY AGENT. The Agent may, unless notified to the
      contrary by any Bank prior to a Drawdown Date, assume that such Bank has
      made available to the Agent on such Drawdown Date the amount equal to such
      Bank's Commitment Percentage of the aggregate Revolving Credit Loans to be
      made on such Drawdown Date, and the Agent may (but it shall not be
      required to), in reliance upon such assumption, make available to the
      Borrower a corresponding amount. If any Bank makes available to the Agent
      such amount on a date after such Drawdown Date, such Bank shall pay to the
      Agent, on demand, an amount equal to the product of (i) the average
      computed for the period referred to in clause (iii) of this sentence, of
      the weighted average interest rate paid by the Agent for federal funds
      acquired by the Agent during each day included in such period, times (ii)
      the amount equal to such Bank's Commitment Percentage of such Revolving
      Credit Loans, times (iii) a fraction, the numerator of which is the number
      of days that elapse from and including such Drawdown Date to the date on
      which the amount equal to such Bank's Commitment Percentage of such
      Revolving Credit Loans shall become immediately available to the Agent,
      and the denominator of which is 365. A statement of the Agent submitted to
      such Bank with respect to any amounts owing under this Section 2.8.2 shall
      be prima facie evidence of the amount due and owing to the Agent by such
      Bank. If the amount equal to such Bank's Commitment Percentage of such
      Revolving Credit Loans is not made available to the Agent by such Bank
      within three (3) Business Days following such Drawdown Date, the Agent
      shall be entitled to recover (a) such amount from the Banks (excluding the
      Delinquent Bank) on a pro rata basis up to each Bank's Commitment
      Percentage of such amount); provided that in no event shall any Bank be
      required to advance more than the difference between such Bank's
      Commitment in effect at such time minus the sum equal to its Commitment
      Percentage of (i) all Revolving Credit Loans then outstanding, plus (ii)
      the Maximum Drawing Amount plus (iii) all Unpaid Reimbursement
      Obligations) plus (iv) any then-outstanding Swingline Loans and (b) any
      amount not recovered pursuant to the foregoing clause (a) from the
      Borrower on demand, with interest thereon at the rate per annum applicable
      to the Revolving Credit Loans made on such Drawdown Date.

3. REPAYMENT OF THE REVOLVING CREDIT LOANS.

      3.1. MATURITY. The Borrower promises to pay on the Maturity Date, and
there shall become absolutely due and payable on the Maturity Date, all of the
Revolving Credit Loans outstanding on such date, together with any and all
accrued and unpaid interest thereon.

      3.2. MANDATORY REPAYMENTS OF REVOLVING CREDIT LOANS. If at any time the
sum of the outstanding amount of the Revolving Credit Loans, the Maximum Drawing
Amount, any Swingline Loans, and all Unpaid Reimbursement Obligations exceeds
the amount of the Total Commitment, then the Borrower shall immediately and
without demand therefor pay the amount of such excess to the Agent for the
respective accounts of the Banks for application: first, to any Unpaid
Reimbursement Obligations; second to the Swingline Loans, third to the Revolving
Credit Loans; and fourth, to provide to the Agent cash collateral for
Reimbursement Obligations


                                       17
<PAGE>   18
as contemplated by Sections 5.2(b) and (c). Each payment of any Unpaid
Reimbursement Obligations or prepayment of Revolving Credit Loans shall be
allocated among the Banks, in proportion, as nearly as practicable, to each
Unpaid Reimbursement Obligation or (as the case may be) the respective unpaid
principal amount of each Bank's Revolving Credit Note, with adjustments to the
extent practicable to equalize any prior payments or repayments not exactly in
proportion.

      3.3. OPTIONAL REPAYMENTS OF REVOLVING CREDIT LOANS.

            3.3.1. REPAYMENTS OF BASE RATE LOANS. The Borrower shall have the
      right, at its election, to repay the outstanding amount of the Base Rate
      Loans, as a whole or in part, at any time without penalty or premium. The
      Borrower shall give the Agent, no later than 11:00 a.m., California time,
      at least one (1) Business Day's prior written notice of any proposed
      prepayment pursuant to this Section 3.3.1 of such Base Rate Loans,
      specifying the proposed date of prepayment of Base Rate Loans and the
      principal amount to be prepaid. Accrued but unpaid interest on amounts
      repaid pursuant to this Section 3.3.1 shall be payable on the
      next-occurring Interest Payment Date in accordance with Section 2.5(c).
      Each such repayment of Base Rate Loans shall be in an integral multiple of
      $500,000 and shall be allocated among the Banks, in proportion, as nearly
      as practicable, to the respective unpaid principal amount of each Bank's
      Revolving Credit Note, with adjustments to the extent practicable to
      equalize any prior repayments not exactly in proportion.

            3.3.2. PREPAYMENT OF LIBOR LOANS. The Borrower shall have the right,
      at its election, to prepay the outstanding amount of any LIBOR Rate Loans,
      as a whole or in part, at any time, provided that any full or partial
      prepayment of the outstanding amount of any LIBOR Rate Loans pursuant to
      this Section 3.3.2 made on any day other than the last day of the Interest
      Period relating thereto shall be accompanied by tender of all costs
      incurred by the Bank Agents and the Banks as a result thereof, including
      reasonable costs of redeployment of funds. The Borrower shall give the
      Agent, no later than 11:00 a.m., California time, at least three (3) LIBOR
      Business Days' notice of any proposed prepayment pursuant to this Section
      3.3.2 of LIBOR Rate Loans, specifying the proposed date of prepayment and
      the principal amount to be prepaid. Each such prepayment of the LIBOR Rate
      Loans shall be in an integral multiple of $500,000, shall be accompanied
      by the payment of costs, as described in this Section 3.3.2, and of
      accrued but unpaid interest on the principal prepaid to the date of
      prepayment. Each partial prepayment shall be allocated among the Banks, in
      proportion, as nearly as practicable, to the respective unpaid principal
      amount of each Bank's Revolving Credit Note, with adjustments to the
      extent practicable to equalize any prior repayments not exactly in
      proportion.

4. THE SWINGLINE LOANS.

      4.1. COMMITMENT TO LEND. Subject to the terms and conditions set forth in
this Credit Agreement, theSwingline Lender severally agrees to lend to the
Borrower, and the Borrower may borrow, repay, and reborrow from time to time
between the Closing Date and the Swingline Maturity Date upon notice by the
Borrower to the Swingline Lender given in accordance with Section 4.4, such sums
as are requested by Borrower (each a "Swingline Loan") up to a maximum aggregate
amount outstanding (after giving effect to all amounts requested) at any one
time equal to the Swingline Commitment, provided that the sum of the outstanding
amount


                                       18
<PAGE>   19
 of the Swingline Loans (after giving effect to all amounts requested),
plus the then-outstanding aggregate amount of all of the Revolving Credit Loans,
plus the Maximum Drawing Amount and all Unpaid Reimbursement Obligations shall
not at any time exceed the Total Commitment. Each request for a Swingline Loan
hereunder shall constitute a representation and warranty by the Borrower that
the conditions set forth in Section 12 have been satisfied on the date of such
request.

      4.2. THE SWINGLINE NOTE. The Swingline Loan shall be evidenced by a
promissory note of the Borrower in substantially the form of Exhibit C hereto
(the "Swingline Note"), dated the Closing Date and completed with appropriate
insertions. The Swingline Note shall be payable to the order of the Swingline
Lender in a principal amount equal to the Swingline Commitment. The Borrower
irrevocably authorizes the Swingline Lender to make or cause to be made, at or
about the time of the Drawdown Date of any Swingline Loan or at the time of
receipt of any payment of principal on the Swingline Note, an appropriate
notation on the Swingline Lender's Swingline Note Record reflecting the making
of such Swingline Loan or (as the case may be) the receipt of such payment. The
outstanding amount of the Swingline Loans set forth on the Swingline Lender's
Swingline Note Record shall be prima facie evidence of the principal amount
thereof owing and unpaid to the Swingline Lender, but the failure to record, or
any error in so recording, any such amount on the Swingline Lender's Swingline
Note Record shall not limit or otherwise affect the obligations of the Borrower
hereunder or under the Swingline Note to make payments of principal of or
interest on the Swingline Note when due.

      4.3. INTEREST ON SWINGLINE LOANS. Except as otherwise provided in Section
6.10, each Swingline Loan shall bear interest for the period commencing with the
Drawdown Date thereof and ending on the date of repayment thereof at a rate per
annum equal to the Base Rate. The Borrower promises to pay interest on each
Swingline Loan in arrears on the earlier to occur of (a) the day on which such
Swingline Loan is repaid and (b) the next occurring Interest Payment Date for
Base Rate Loans.

      4.4. REQUESTS FOR SWINGLINE LOANS. The Borrower shall give to the Agent
written notice in the form of Exhibit B hereto (or telephonic notice confirmed
in a writing in the form of Exhibit B hereto) of each Swingline Loan requested
hereunder (a "Swingline Loan Request") no later than 11:00 a.m., California
time, on the proposed Drawdown Date of any Swingline Loan. Each such notice
shall specify (A) the principal amount of the Swingline Loan requested, and (B)
the proposed Drawdown Date of such Swingline Loan. At any time when the Agent is
not a Swingline Lender, the Agent shall promptly give the Swingline Lender
written notice (or telephonic notice promptly confirmed in writing) of each
proposed borrowing of Swingline Loans and of the other matters covered by the
Swingline Loan Request. Each Swingline Loan Request shall be irrevocable and
binding on the Borrower and shall obligate the Borrower to accept the Swingline
Loan requested from the Swingline Lender on the proposed Drawdown Date. Each
Swingline Loan Request shall be in a minimum amount of $10,000 or an integral
multiple thereof. Swingline Lender will use its best effort to honor each
Swingline Loan Request that is timely made pursuant to the terms hereof, but
Borrower agrees and acknowledges that the Swingline Lender shall incur no
liability as a result of its inability to fund the amount requested in any
Swingline Loan Request until the Business Day following the day on which such
Swingline Loan Request is made.


                                       19
<PAGE>   20
      4.5. LIMITATIONS ON SWINGLINE LENDER'S OBLIGATION TO MAKE SWINGLINE LOANS.
The Swingline Lender will not make any Swingline Loan after it has received
written notice from the Majority Lenders that one or more of the applicable
conditions precedent set forth in Section 12 are not then satisfied (provided
that the delivery and receipt of such written notice shall not limit, affect or
modify the Banks' obligations in respect of a Mandatory Borrowing in respect of
any Swingline Loan made prior to the receipt of such notice, as specified in
Section 4.6). In addition, at any time when there is a Delinquent Bank, the
Swingline Lender shall not be required to make a Swingline Loan exceeding the
aggregate unused Commitments of the Banks other than the Delinquent Bank, unless
the Swingline Lender has entered into arrangements satisfactory to it and the
Borrower to eliminate the Swingline Lender's risk with respect to the
participation in Mandatory Borrowings by the Delinquent Bank or Banks, including
by cash collateralizing same.

      4.6. MANDATORY BORROWINGS. On any Business Day, either the Borrower or the
Swingline Lender may, in its sole discretion, give notice to Agent pursuant to
Section 2.6 that all then outstanding Swingline Loans shall be funded with a
borrowing of Revolving Credit Loans (provided that such notice shall be deemed
to have been automatically given by the Swingline Lender upon the occurrence of
a Default), in which case a borrowing of Revolving Credit Loans constituting
Base Rate Loans (each such borrowing, a "Mandatory Borrowing") shall be made on
the Drawdown Date set forth in the notice of such Mandatory Borrowing, by all
Banks pro rata in accordance with each Bank's Commitment Percentage, and the
proceeds thereof shall be applied directly to repay the Swingline Lender for all
outstanding Swingline Loans. Each Bank hereby irrevocably agrees to make
Revolving Credit Loans pursuant to each Mandatory Borrowing in the amount and in
the manner specified in the preceding sentence, and on the date specified in
writing by the Swingline Lender, notwithstanding (i) whether any conditions
specified in Section 12 are then satisfied; (ii) whether a Default or Event of
Default has occurred and is continuing; (iii) the date of such Mandatory
Borrowing; and (iv) any reduction in the Commitments after any such Swingline
Loans were made. In the event that any Mandatory Borrowing cannot for any reason
be made on the date otherwise required above (including, without limitation, as
a result of the commencement of a case under the Bankruptcy Code in respect of
Borrower), each Bank (other than the Swingline Lenders) hereby agrees that it
will forthwith purchase from the Swingline Lenders (without recourse or
warranty) such assignment of their outstanding Swingline Loans as shall be
necessary to cause the Banks to share in such Swingline Loans ratably based upon
their respective Commitment Percentages, provided that all interest payable on
such Swingline Loans shall be for the account of the Swingline Lenders until the
date the respective assignment is purchased and, to the extent attributable to
the purchased assignment, shall be payable to the Bank purchasing such
assignment from and after the date of purchase. Each Bank's obligations under
this Section 4.6 shall be absolute and unconditional.

5. LETTERS OF CREDIT.

      5.1. LETTER OF CREDIT COMMITMENTS.

            5.1.1. COMMITMENT TO ISSUE LETTERS OF CREDIT. Subject to the terms
      and conditions hereof and the execution and delivery by the Borrower of a
      fully-completed and executed letter of credit application on the Issuing
      Bank's customary form (a "Letter


                                       20
<PAGE>   21
      of Credit Application"), the Issuing Bank on behalf of the Banks and in
      reliance upon the agreement of the Banks set forth in Section 5.1.4 and
      upon the representations and warranties of the Borrower contained herein,
      agrees, in its individual capacity, to issue, extend and renew for the
      account of the Borrower one or more standby or documentary letters of
      credit (individually, a "Letter of Credit"), in such form as may be
      requested from time to time by the Borrower and agreed to by the Issuing
      Bank; provided, however, that, after giving effect to such request, (a)
      the sum of the aggregate Maximum Drawing Amount and all Unpaid
      Reimbursement Obligations shall not exceed $10,000,000 at any one time and
      (b) the sum of (i) the Maximum Drawing Amount, (ii) all Unpaid
      Reimbursement Obligations, and (iii) the amount of all Revolving Credit
      Loans and Swingline Loans outstanding shall not exceed the Total
      Commitment. Upon receipt of a Letter of Credit Application, the Issuing
      Bank shall notify the Agent of such request for the issuance, extension or
      renewal of a Letter of Credit, and the Agent shall confirm to the Issuing
      Bank that after giving effect to such request, the sum of the Maximum
      Drawing Amount plus all Unpaid Reimbursement Obligations plus all
      outstanding Revolving Credit Loans, plus all outstanding Swingline Loans
      does not exceed the Total Commitment. Notwithstanding the foregoing, the
      Issuing Bank shall have no obligation to issue any Letter of Credit to
      support or secure any Indebtedness of the Borrower or any of its
      Subsidiaries to the extent that such Indebtedness was incurred prior to
      the proposed issuance date of such Letter of Credit, unless in any such
      case the Borrower demonstrates to the satisfaction of the Issuing Bank
      that (x) such prior incurred Indebtedness was then fully-secured by a
      perfected and unavoidable security interest in collateral provided by the
      Borrower or such Subsidiary to the proposed beneficiary of such Letter of
      Credit or (y) such prior incurred Indebtedness was then secured or
      supported by a letter of credit issued for the account of the Borrower or
      such Subsidiary and the reimbursement obligation with respect to such
      letter of credit was fully-secured by a perfected and unavoidable security
      interest in collateral provided to the issuer of such letter of credit by
      the Borrower or such Subsidiary. Neither Issuing Bank shall issue any
      Letter of Credit after it has received written notice from the Majority
      Lenders that one or more of the applicable conditions precedent set forth
      in Section 12 are not then satisfied (provided that the delivery and
      receipt of such written notice shall not limit, affect or modify the
      Banks' obligations in respect of unpaid reimbursement obligations under
      Letters of Credit issued prior to the receipt of such notice, as specified
      in Section 5.1.4).

            5.1.2. LETTER OF CREDIT APPLICATIONS. Each Letter of Credit
      Application shall be completed to the satisfaction of the Issuing Bank. In
      the event that any provision of a Letter of Credit Application shall be
      inconsistent with any provision of this Credit Agreement, then the
      provision of this Credit Agreement shall, to the extent of any such
      inconsistency, govern.

            5.1.3. TERMS OF LETTERS OF CREDIT. Each Letter of Credit issued,
      extended or renewed hereunder shall, among other things, (i) provide for
      the payment of sight drafts for honor thereunder when presented in
      accordance with the terms thereof and when accompanied by the documents
      described therein, and (ii) have an expiry date no later than the date
      which is fourteen (14) days (or, if the Letter of Credit is confirmed by a
      confirmer or otherwise provides for one or more nominated persons,
      forty-five (45) days)


                                       21
<PAGE>   22
      prior to the Maturity Date. Without limiting the generality of clause (ii)
      of the immediately preceding sentence, each documentary Letter of Credit
      issued, extended or renewed hereunder shall have an expiry date not later
      than three hundred sixty (360) days after the date of its issuance,
      extension or renewal. Each Letter of Credit so issued, extended or renewed
      shall be subject to the Uniform Customs.

            5.1.4. REIMBURSEMENT OBLIGATIONS OF BANKS. Each Bank severally
      agrees that it shall be absolutely liable, without regard to the
      occurrence of any Default or Event of Default or any other condition
      precedent whatsoever, to the extent of such Bank's Commitment Percentage,
      to reimburse the Issuing Bank on demand for the amount of each draft paid
      by the Issuing Bank under each Letter of Credit to the extent that such
      amount is not reimbursed by the Borrower pursuant to Section 5.2 (such
      agreement for a Bank being called herein the "Letter of Credit
      Participation" of such Bank).

            5.1.5. PARTICIPATIONS OF BANKS. Each such payment made by a Bank
      shall be treated as the purchase by such Bank of a participating interest
      in the Borrower's Reimbursement Obligation under Section 5.2 in an amount
      equal to such payment. Each Bank shall share in accordance with its
      participating interest in any interest which accrues pursuant to Section
      5.2.

      5.2. REIMBURSEMENT OBLIGATION OF THE BORROWER. In order to induce the
Issuing Bank to issue, extend and renew each Letter of Credit and the Banks to
participate therein, the Borrower hereby agrees to reimburse or pay to the
Issuing Bank, for the account of the Issuing Bank or (as the case may be) the
Banks, with respect to each Letter of Credit issued, extended or renewed by the
Issuing Bank hereunder,

            (a) except as otherwise expressly provided in Sections 5.2(b) and
      (c), on each date that any draft presented under such Letter of Credit is
      honored by the Issuing Bank, or the Issuing Bank otherwise makes a payment
      with respect thereto, (i) the amount paid by the Issuing Bank under or
      with respect to such Letter of Credit, and (ii) the amount of any taxes,
      fees, charges or other costs and expenses whatsoever incurred by the
      Issuing Bank or any Bank in connection with any payment made by the
      Issuing Bank or any Bank under, or with respect to, such Letter of Credit,

            (b) upon the reduction (but not termination) of the Total Commitment
      to an amount less than the Maximum Drawing Amount, an amount equal to such
      difference, which amount shall be held by the Issuing Bank for the benefit
      of the Banks and the Issuing Bank as cash collateral for all Reimbursement
      Obligations, and

            (c) upon the termination of the Total Commitment, or the
      acceleration of the Reimbursement Obligations with respect to all Letters
      of Credit in accordance with Section 13, an amount equal to the then
      Maximum Drawing Amount, which amount shall be held by the Issuing Bank for
      the benefit of the Banks and the Issuing Bank as cash collateral for all
      Reimbursement Obligations.

Each such payment shall be made to the Issuing Bank at the Issuing Bank's Head
Office in immediately available funds. Interest on any and all amounts remaining
unpaid by the Borrower


                                       22
<PAGE>   23
under this Section 5.2 at any time from the date such amounts become due and
payable (whether as stated in this Section 5.2, by acceleration or otherwise)
until payment in full (whether before or after judgment) shall be payable to the
Issuing Bank on demand at the rate specified in Section 6.10 for overdue
principal on the Revolving Credit Loans.

      5.3. LETTER OF CREDIT PAYMENTS. If any draft shall be presented or other
demand for payment shall be made under any Letter of Credit, the Issuing Bank
shall notify the Borrower of the date and amount of the draft presented or
demand for payment and of the date and time when it expects to pay such draft or
honor such demand for payment. If the Borrower fails to reimburse the Issuing
Bank as provided in Section 5.2 on or before the date that such draft is paid or
other payment is made by the Issuing Bank, the Issuing Bank may at any time
thereafter notify the Banks of the amount of any such Unpaid Reimbursement
Obligation. No later than 11:00 a.m. (California time) on the Business Day next
following the receipt of such notice, each Bank shall make available to the
Issuing Bank, at the Issuing Bank's Head Office, in immediately available funds,
such Bank's Commitment Percentage of such Unpaid Reimbursement Obligation,
together with an amount equal to the product of (i) the average, computed for
the period referred to in clause (iii) of this sentence, of the weighted average
interest rate paid by the Issuing Bank for federal funds acquired by the Issuing
Bank during each day included in such period, times (ii) the amount equal to
such Bank's Commitment Percentage of such Unpaid Reimbursement Obligation, times
(iii) a fraction, the numerator of which is the number of days that elapse from
and including the date the Issuing Bank paid the draft presented for honor or
otherwise made payment to the date on which such Bank's Commitment Percentage of
such Unpaid Reimbursement obligation shall become immediately available to the
Issuing Bank, and the denominator of which is 365. The responsibility of the
Issuing Bank to the Borrower and the Banks shall be only to determine that the
documents (including each draft) delivered under each Letter of Credit in
connection with such presentment shall be in conformity in all material respects
with such Letter of Credit.

      5.4. OBLIGATIONS ABSOLUTE. The Borrower's obligations under this Section 5
shall be absolute and unconditional under any and all circumstances and
irrespective of the occurrence of any Default or Event of Default or any
condition precedent whatsoever or any setoff, counterclaim or defense to payment
which the Borrower may have or have had against the Issuing Bank, any Bank or
any beneficiary of a Letter of Credit. The Borrower further agrees with the
Agent, the Issuing Bank and the Banks that the Issuing Bank and the Banks shall
not be responsible for, and the Borrower's Reimbursement Obligations under
Section 5.2 shall not be affected by, among other things, the validity or
genuineness of documents or of any endorsements thereon, even if such documents
should in fact prove to be in any or all respects invalid, fraudulent or forged,
or any dispute between or among the Borrower, the beneficiary of any Letter of
Credit or any financing institution or other party to which any Letter of Credit
may be transferred or any claims or defenses whatsoever of the Borrower against
the beneficiary of any Letter of Credit or any such transferee. The Issuing Bank
and the Banks shall not be liable for any error, omission, interruption or delay
in transmission, dispatch or delivery of any message or advice, however
transmitted, in connection with any Letter of Credit. The Borrower agrees that
any action taken or omitted by the Issuing Bank or any Bank under or in
connection with each Letter of Credit and the related drafts and documents, if
done in good faith, shall be binding upon


                                       23
<PAGE>   24
the Borrower and shall not result in any liability on the part of the Issuing
Bank or any Bank to the Borrower.

      5.5. RELIANCE BY ISSUER. To the extent not inconsistent with Section 5.4,
the Issuing Bank shall be entitled to rely, and shall be fully protected in
relying upon, any Letter of Credit, draft, writing, resolution, notice, consent,
certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype
message, statement, order or other document believed by it to be genuine and
correct and to have been signed, sent or made by the proper Person or Persons
and upon advice and statements of legal counsel, independent accountants and
other experts selected by the Issuing Bank. The Issuing Bank shall be fully
justified in failing or refusing to take any action under this Credit Agreement
unless it shall first have received such advice or concurrence of the Majority
Banks as it reasonably deems appropriate or it shall first be indemnified to its
reasonable satisfaction by the Banks against any and all liability and expense
which may be incurred by it by reason of taking or continuing to take any such
action. The Issuing Bank shall in all cases be fully protected in acting, or in
refraining from acting, under this Agreement in accordance with a request of the
Majority Banks, and such request and any action taken or failure to act pursuant
thereto shall be binding upon the Banks and all future holders of the Revolving
Credit Notes, the Swingline Note or of a Letter of Credit Participation.

      5.6. LETTER OF CREDIT FEE. The Borrower shall, on the date of issuance or
any extension or renewal of any Letter of Credit and at such other time or times
as such charges are customarily made by the Issuing Bank, pay a fee (in each
case, a "Letter of Credit Fee") to the Issuing Bank (i) in respect of each
standby Letter of Credit a percentage, equal to the LIBOR Spread in effect on
the date of such issuance, of the face amount of such standby Letter of Credit
plus the Issuing Bank's issuance fee equal to one-eighth of one percent (1/8%)
per annum of the face amount of such standby Letter of Credit; and (ii) in
respect of each documentary Letter of Credit, equal to the Issuing Bank's
customary fees for such Letter of Credit at such time plus, in each case, the
Issuing Bank's customary amendment and other administrative processing fees,
such Letter of Credit Fee (but not such issuance, amendment or administrative
fees) to be for the accounts of the Banks in accordance with their respective
Commitment Percentages. Nothing herein shall (A) effect any change in the Letter
of Credit Fee paid in connection with any Letters of Credit issued pursuant to
the Original Credit Agreement that are outstanding on the Closing Date or (B)
require any adjustment to any Letter of Credit Fee as a result of any subsequent
change in the LIBOR Spread. If any existing Letters of Credit of the type
described in clause (A) above are extended or renewed, the Letter of Credit Fee
for such extension or renewal shall be calculated pursuant to this Section 5.6.

6. CERTAIN GENERAL PROVISIONS.

      6.1. AGENT'S FEE. The Borrower shall pay to the Agent an Agent's Fee in
accordance with the Fee Letter.

      6.2. FUNDS FOR PAYMENTS.

            6.2.1. PAYMENTS TO AGENT. All payments of principal, interest,
      Reimbursement Obligations, Commitment Fees, Letter of Credit Fees and any
      other amounts due hereunder or under any of the other Loan Documents shall
      be made to the


                                       24
<PAGE>   25
      Agent, for the respective accounts of the Banks and the Agent, at the
      Agent's Head Office or at such other location that the Agent may from time
      to time designate, in each case in immediately available funds.

            6.2.2. NO OFFSET, ETC. All payments by the Borrower hereunder or
      under any of the other Loan Documents shall be made without setoff or
      counterclaim and free and clear of, and without deduction for, any taxes,
      levies, imposts, duties, charges, fees, deductions, withholdings,
      compulsory loans, restrictions or conditions of any nature now or
      hereafter imposed or levied by any jurisdiction or any political
      subdivision thereof or taxing or other authority therein unless the
      Borrower is compelled by law to make such deduction or withholding. If any
      such obligation is imposed upon the Borrower with respect to any amount
      payable by it hereunder or under any of the other Loan Documents, the
      Borrower will pay to the Agent, for the account of the Banks or (as the
      case may be) the Agent, on the date on which such amount is due and
      payable hereunder or under such other Loan Document, such additional
      amount in Dollars as shall be necessary to enable the Banks or the Agent
      to receive the same net amount which the Banks or the Agent would have
      received on such due date had no such obligation been imposed upon the
      Borrower. The Borrower will deliver promptly to the Agent certificates or
      other valid vouchers for all taxes or other charges deducted from or paid
      with respect to payments made by the Borrower hereunder or under such
      other Loan Document.

            6.2.3. WITHHOLDING FORMS.

                  (a) Each Bank that is organized under the laws of a
            jurisdiction outside the United States hereby agrees that, if and to
            the extent it is legally able to do so and has not already done so,
            it shall, prior to the date of the first payment by the Borrower
            hereunder to be made to such Bank or for such Bank's account,
            deliver to the Borrower and the Agent, as applicable, such
            certificates, documents or other evidence, as and when required by
            the Code or Treasury Regulations issued pursuant thereto, including
            two (2) duly completed originals of Internal Revenue Service Form
            1001 or Form 4224 and any other certificate or statement of
            exemption required by Treasury Regulations, or any subsequent
            versions thereof or successors thereto, properly completed and duly
            executed by such Bank establishing that with respect to payments of
            principal, interest or fees hereunder it is (i) not subject to
            United States federal withholding tax under the Code because such
            payment is effectively connected with the conduct by such Bank of a
            trade or business in the United States or (ii) totally exempt from
            United States federal withholding taxes under a provision of an
            applicable tax treaty or, in the case of a Bank that is not a "bank"
            under Section 881(c) of the Code, a Form W-8 and a certificate
            stating that such Bank is not a "bank" within the meaning of the
            aforementioned Code Section .

                  (b) The Borrower shall not be required to pay any additional
            amounts to any Bank pursuant to this Section 6.2, if (i) the
            obligation to pay such additional amounts would not have arisen but
            for a failure by such Bank to deliver the forms contemplated by this
            Section 6.2.3; or (ii) the Bank is not eligible for complete


                                       25
<PAGE>   26
            exemption from United States federal withholding tax with respect to
            payments of interest, principal or fees under this Credit Agreement
            or under any of the other Loan Documents, other than by reason of
            any change, after the Initial Date, of any applicable law, treaty or
            regulations by any governmental authority or other agency charged
            with the interpretation or administration thereof. For purposes of
            this Section 6.2.3, the term "Initial Date" shall mean, with respect
            to any Bank which is a party hereto on the date hereof, the date
            hereof, and with respect to each assignee or transferee of any Bank,
            the date of the grant of the participation in, or transfer or
            assignment of an interest hereunder to, such assignee or transferee.

                  (c) If at any time any Bank makes any changes necessitating a
            new Form 4224 or Form 1001 or Form W-8, if applicable, it shall:

                        (i) with reasonable promptness deliver to the Borrower
            in replacement for, or in addition to, the forms previously
            delivered by it hereunder, two completed originals of Form 1001 or
            Form 4224 or Form W-8, as appropriate, in each case properly
            completed and duly executed by such Bank establishing that such Bank
            is on the date of delivery thereof entitled to receive payments of
            principal, interest and fees under this Credit Agreement free from
            withholding of United States Federal income tax;

                        (ii) before or promptly after the occurrence of any
            event (including the passing of time but excluding any event
            mentioned in (i) above) requiring a change in the most recent Form
            4224, Form 1001, or, as the case may be, Form W-8 previously
            delivered by such Bank and if the delivery of the same be lawful,
            deliver to the Borrower two completed originals of Form 4224, Form
            1001, or, as the case may be, Form W-8 in replacement for the forms
            previously delivered by the relevant Bank, in each case properly
            completed and duly executed; and

                        (iii) promptly upon the Borrower's reasonable request,
            deliver to the Borrower such other forms or similar documentation as
            may be required from time to time by any applicable law, treaty,
            rule or regulation in order to establish such Bank's tax status for
            withholding purposes.

                  (d) If the Borrower is required to pay any additional amounts
            to any Bank on account of required withholdings pursuant to this
            Section 6.2.3, then such Bank shall use its reasonable best efforts
            (consistent with legal and regulatory restrictions) to change the
            jurisdiction of its lending office so as to minimize any additional
            payments which may thereafter accrue; provided, that no Bank shall
            be required to change its lending office if such change would be, in
            the sole judgment of such Bank, otherwise disadvantageous to such
            Bank.

      6.3. COMPUTATIONS. All computations of interest on the Loans and of
Commitment Fees, Letter of Credit Fees or other fees shall, unless otherwise
expressly provided herein, be based on a 360-day year and paid for the actual
number of days elapsed. Except as otherwise provided in the definition of the
term "Interest Period" with respect to LIBOR Rate Loans,


                                       26
<PAGE>   27
whenever a payment hereunder or under any of the other Loan Documents becomes
due on a day that is not a Business Day, the due date for such payment shall be
extended to the next succeeding Business Day, and interest shall accrue during
such extension. The outstanding amount of the Loans as reflected on the
Revolving Credit Note Records and the Swingline Note Record from time to time
shall be considered correct and binding on the Borrower absent manifest error.

      6.4. INABILITY TO DETERMINE LIBOR RATE. In the event, prior to the
commencement of any Interest Period relating to any LIBOR Rate Loan, the Agent
shall determine or be notified by the Majority Banks that adequate and
reasonable methods do not exist for ascertaining the LIBOR Rate that would
otherwise determine the rate of interest to be applicable to any LIBOR Rate Loan
during any Interest Period, the Agent shall forthwith give notice of such
determination (which shall be conclusive and binding on the Borrower and the
Banks) to the Borrower and the Banks. In such event (i) any Loan Request or
Conversion Request with respect to LIBOR Rate Loans shall be automatically
withdrawn and shall be deemed a request for Base Rate Loans, (ii) each LIBOR
Rate Loan will automatically, on the last day of the then current Interest
Period relating thereto, become a Base Rate Loan, and (iii) the obligations of
the Banks to make LIBOR Rate Loans shall be suspended until the Agent or the
Majority Banks determines that the circumstances giving rise to such suspension
no longer exist, whereupon the Agent or, as the case may be, the Agent upon the
instruction of the Majority Banks, shall so notify the Borrower and the Banks.

      6.5. ILLEGALITY. Notwithstanding any other provisions herein, if any
present or future law, regulation, treaty or directive or in the interpretation
or application thereof shall make it unlawful for any Bank to make or maintain
LIBOR Rate Loans, such Bank shall forthwith give notice of such circumstances to
the Borrower and the other Banks and thereupon (i) the commitment of such Bank
to make LIBOR Rate Loans or convert Loans of another Type to LIBOR Rate Loans
shall forthwith be suspended and (ii) such Bank's Revolving Credit Loans then
outstanding as LIBOR Rate Loans, if any, shall be converted automatically to
Base Rate Loans on the last day of each Interest Period applicable to such LIBOR
Rate Loans or within such earlier period as may be required by law. The Borrower
hereby agrees promptly to pay the Agent for the account of such Bank, upon
demand by such Bank, any additional amounts necessary to compensate such Bank
for any costs incurred by such Bank in making any conversion in accordance with
this Section 6.5, including any interest or fees payable by such Bank to lenders
of funds obtained by it in order to make or maintain its LIBOR Rate Loans
hereunder.

      6.6. ADDITIONAL COSTS, ETC. If after the Closing Date any present or
future applicable law, which term, as used herein, includes statutes, rules and
regulations thereunder and interpretations thereof by any competent court or by
any governmental or other regulatory body or official charged with the
administration or the interpretation thereof and requests, directives,
instructions and notices at any time or from time to time hereafter made upon or
otherwise issued to any Bank or the Agent by any central bank or other fiscal,
monetary or other authority (whether or not having the force of law), shall:

            (a) subject any Bank or the Agent to any tax, levy, impost, duty,
      charge, fee, deduction or withholding of any nature with respect to this
      Credit Agreement, the other


                                       27
<PAGE>   28
      Loan Documents, any Letters of Credit, such Bank's Commitment or the Loans
      (other than taxes based upon or measured by the income or profits of such
      Bank or the Agent), or

            (b) materially change the basis of taxation (except for changes in
      taxes on income or profits) of payments to any Bank of the principal of or
      the interest on any Loans or any other amounts payable to any Bank or the
      Agent under this Credit Agreement or any of the other Loan Documents, or

            (c) impose or increase or render applicable (other than to the
      extent specifically provided for elsewhere in this Credit Agreement) any
      special deposit, reserve, assessment, liquidity, capital adequacy or other
      similar requirements (whether or not having the force of law) against
      assets held by, or deposits in or for the account of, or loans by, or
      letters of credit issued by, or commitments of an office of any Bank, or

            (d) impose on any Bank or the Agent any other conditions or
      requirements with respect to this Credit Agreement, the other Loan
      Documents, any Letters of Credit, the Loans, such Bank's Commitment, or
      any class of loans, letters of credit or commitments of which any of the
      Loans, the Letters of Credit or such Bank's Commitment forms a part, and
      the result of any of the foregoing is

                        (i) to increase the cost to any Bank of making, funding,
            issuing, renewing, extending or maintaining any of the Loans or such
            Bank's Commitment or any Letter of Credit, or

                        (ii) to reduce the amount of principal, interest,
            Reimbursement Obligation or other amount payable to such Bank or the
            Agent hereunder on account of such Bank's Commitment, any Letter of
            Credit or any of the Loans, or

                        (iii) to require such Bank or the Agent to make any
            payment or to forgo any interest or Reimbursement Obligation or
            other sum payable hereunder, the amount of which payment or forgone
            interest or Reimbursement Obligation or other sum is calculated by
            reference to the gross amount of any sum receivable or deemed
            received by such Bank or the Agent from the Borrower hereunder,

then, and in each such case, the Borrower will, upon demand made by such Bank or
(as the case may be) the Agent at any time and from time to time and as often as
the occasion therefor may arise, pay to such Bank or the Agent such additional
amounts as would be sufficient to compensate such Bank or the Agent for such
additional cost, reduction, payment or forgone interest or Reimbursement
Obligation or other sum.

      6.7. CAPITAL ADEQUACY. If after the date hereof any Bank or the Agent
determines that (i) the adoption of or change in any law, governmental rule,
regulation, policy, guideline or directive (whether or not having the force of
law) regarding capital requirements for banks or bank holding companies or any
change in the interpretation or application thereof by a court or governmental
authority with appropriate jurisdiction, or (ii) compliance by such Bank or the


                                       28
<PAGE>   29
Agent or any corporation controlling such Bank or the Agent with any law,
governmental rule, regulation, policy, guideline or directive (whether or not
having the force of law) of any such entity regarding capital adequacy, has the
effect of reducing the return on such Bank's or the Agent's commitment with
respect to any Loans to a level below that which such Bank or the Agent could
have achieved but for such adoption, change or compliance (taking into
consideration such Bank's or the Agent's then existing policies with respect to
capital adequacy and assuming full utilization of such entity's capital) by any
amount deemed by such Bank or (as the case may be) the Agent to be material,
then such Bank or the Agent may notify the Borrower of such fact. To the extent
that the amount of such reduction in the return on capital is not reflected in
the Base Rate, the Borrower and such Bank shall thereafter attempt to negotiate
in good faith, within thirty (30) days after the day on which the Borrower
receives such notice, an adjustment payable hereunder that will adequately
compensate such Bank in light of these circumstances. If the Borrower and such
Bank are unable to agree to such adjustment within thirty (30) days after the
date on which the Borrower receives such notice, then commencing on the date of
such notice (but not earlier than the effective date of any such increased
capital requirement), the fees payable to such Bank hereunder shall increase by
an amount that will, in such Bank's reasonable determination, provide adequate
compensation. Each Bank shall allocate such cost increases among its customers
in good faith and on an equitable basis.

      6.8. CERTIFICATE. A certificate setting forth any additional amounts
payable pursuant to Section 6.6 or Section 6.7 and a brief explanation of such
amounts which are due, submitted by any Bank or the Agent to the Borrower, shall
constitute prima facie evidence that such amounts are due and owing.

      6.9. INDEMNITY. The Borrower agrees to indemnify each Bank and to hold
each Bank harmless from and against any loss, cost or expense (including loss of
anticipated profits) that such Bank may sustain or incur as a consequence of (i)
default by the Borrower in payment of the principal amount of or any interest on
any LIBOR Rate Loans as and when due and payable, including any such loss or
expense arising from interest or fees payable by such Bank to lenders of funds
obtained by it in order to maintain its LIBOR Rate Loans, (ii) default by the
Borrower in making a borrowing or conversion after the Borrower has given (or is
deemed to have given) a Loan Request or a Conversion Request relating thereto in
accordance with Section 2.6, Section 2.7 or 4.4 or (iii) the making of any
payment of a LIBOR Rate Loan or the making of any conversion of any such LIBOR
Rate Loan to a Base Rate Loan on a day that is not the last day of the
applicable Interest Period with respect thereto, including interest or fees
payable by such Bank to lenders of funds obtained by it in order to maintain any
such Loans.

      6.10. INTEREST AFTER DEFAULT. Overdue principal and (to the extent
permitted by applicable law) interest on the Loans and all other overdue amounts
payable hereunder or under any of the other Loan Documents shall bear interest
compounded monthly and payable on demand at a rate per annum equal to two
percent (2%) above the interest rate then otherwise applicable to such Loans
hereunder until such amount shall be paid in full (after as well as before
judgment).


                                       29
<PAGE>   30
7. REPRESENTATIONS AND WARRANTIES.

      As of the date of this Agreement, the Closing Date, each Drawdown Date,
and the date of the issuance, extension, or renewal of any Letter of Credit, the
Borrower represents and warrants to each of the Banks and the Agent as follows:

      7.1. CORPORATE AUTHORITY.

            7.1.1. INCORPORATION: GOOD STANDING. Each of the Borrower and its
      Subsidiaries (i) is a corporation duly organized, validly existing and in
      good standing under the laws of its state of incorporation, (ii) has all
      requisite corporate power to own its property and conduct its business as
      now conducted and as presently contemplated, and (iii) is in good standing
      as a foreign corporation and is duly authorized to do business in each
      jurisdiction where such qualification is necessary except where a failure
      to be so qualified would not have a materially adverse effect on the
      business, assets or financial condition of the Borrower or such
      Subsidiary.

            7.1.2. AUTHORIZATION. The execution, delivery and performance of
      this Credit Agreement and the other Loan Documents to which the Borrower
      or any of its Subsidiaries is or is to become a party and the transactions
      contemplated hereby and thereby (i) are within the corporate authority of
      such Person, (ii) have been duly authorized by all necessary corporate
      proceedings, (iii) do not conflict with or result in any breach or
      contravention of any provision of law, statute, rule or regulation to
      which such Person is subject or any judgment, order, writ, injunction,
      license or permit applicable to such Person and (iv) do not conflict with
      any provision of the corporate charter or bylaws of', or any agreement or
      other instrument binding upon, the Borrower or any of its Subsidiaries.

            7.1.3. ENFORCEABILITY. The execution and delivery of this Credit
      Agreement and the other Loan Documents to which the Borrower or any of its
      Subsidiaries is or is to become a party will result in valid and legally
      binding obligations of such Person enforceable against it in accordance
      with the respective terms and provisions hereof and thereof, except as
      enforceability is limited by bankruptcy, insolvency, reorganization,
      moratorium or other laws relating to or affecting generally the
      enforcement of creditors' rights and except to the extent that
      availability of the remedy of specific performance or injunctive relief or
      other equitable remedy is subject to the discretion of the court before
      which any proceeding therefor may be brought.

      7.2. GOVERNMENTAL APPROVALS. The execution, delivery and performance by
the Borrower and any of its Subsidiaries of this Credit Agreement and the other
Loan Documents to which the Borrower or any of its Subsidiaries is or is to
become a party and the transactions contemplated hereby and thereby do not
require the approval or consent of' or filing with, any governmental agency or
authority other than those already obtained.

      7.3. FINANCIAL STATEMENTS. There has been furnished to each of the Banks a
      consolidated balance sheet of the Borrower and its Subsidiaries as at the
      Balance Sheet Date, and a consolidated statement of income of the Borrower
      and its Subsidiaries for the


                                       30
<PAGE>   31
      fiscal year then ended, certified by Coopers & Lybrand LLP as fairly
      presenting the consolidated financial position of the Borrower as at such
      date and for such period in all material respects in accordance with
      generally accepted accounting principles. Such balance sheet and statement
      of income have been prepared in accordance with generally accepted
      accounting principles and fairly present the financial condition of the
      Borrower as at the close of business on the date thereof and the results
      of operations for the fiscal year then ended. There are no contingent
      liabilities of the Borrower or any of its Subsidiaries as of such date
      involving material amounts, known to the officers of the Borrower, which
      were not disclosed in such balance sheet and the notes related thereto.

      7.4. NO MATERIAL CHANGES, ETC.; SOLVENCY.

            7.4.1. CHANGES. Since the Balance Sheet Date, there has occurred no
      materially adverse change in the financial condition or business of the
      Borrower and its Subsidiaries as shown on or reflected in the consolidated
      balance sheet of the Borrower and its Subsidiaries as at the Balance Sheet
      Date, or the consolidated statement of income for the fiscal year then
      ended, other than changes in the ordinary course of business that have not
      had any materially adverse effect, either individually or in the
      aggregate, on the business or financial condition of the Borrower or any
      of its Subsidiaries. Since the Balance Sheet Date, the Borrower has not
      made any Distribution.

            7.4.2. SOLVENCY. The Borrower and its Subsidiaries, taken as a
      whole, are, and will be after giving effect to the transactions
      contemplated by the Loan Documents, Solvent. As used herein, "Solvent"
      shall mean that the Borrower and its Subsidiaries, taken as a whole, (i)
      shall have a fair value and present fair saleable value of their assets
      that would exceed their stated liabilities and identified contingent
      liabilities, (ii) should be able to pay their debts as such debts become
      absolute and mature, and (iii) have and expect to continue to have, access
      to capital that would not be unreasonably small for the conduct of their
      business as now conducted and as proposed to be conducted following the
      Closing Date.

      7.5. FRANCHISES; PATENTS; COPYRIGHTS, ETC. Each of the Borrower and its
Subsidiaries possesses all franchises, patents, copyrights, trademarks, trade
names, licenses and permits, and rights in respect of the foregoing, adequate
for the conduct of its business substantially as now conducted without known
conflict with any rights of others.

      7.6. LITIGATION. Except as set forth in Schedule 7.6 hereto, there are no
actions, suits, proceedings or investigations of any kind pending or threatened
against the Borrower or any of its Subsidiaries before any court, tribunal or
administrative agency or board that, if adversely determined, either in any case
or in the aggregate, could reasonably be expected to materially adversely affect
the properties, assets, financial condition or business of the Borrower and its
Subsidiaries or materially impair the right of the Borrower and its
Subsidiaries, considered as a whole, to carry on business substantially as now
conducted by them, or result in any substantial liability not adequately covered
by insurance, or for which adequate reserves are not maintained on the
consolidated balance sheet of the Borrower and its Subsidiaries, or which
question the validity of this Credit Agreement or any of the other Loan
Documents, or any action taken or to be taken pursuant hereto or thereto.


                                       31
<PAGE>   32
      7.7. NO MATERIALLY ADVERSE CONTRACTS, ETC. Neither the Borrower nor any of
its Subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation that has or is
expected in the future to have a materially adverse effect on the business,
assets or financial condition of the Borrower or any of its Subsidiaries.
Neither the Borrower nor any of its Subsidiaries is a party to any contract or
agreement that has or is expected, in the reasonable judgment of the Borrower's
officers, to have a materially adverse effect on the business, assets or
financial condition of the Borrower or any of its Subsidiaries.

      7.8. COMPLIANCE WITH OTHER INSTRUMENTS, LAWS, ETC. Neither the Borrower
nor any of its Subsidiaries is in violation of any provision of its charter
documents, bylaws, or any agreement or instrument to which it may be subject or
by which it or any of its properties may be bound or any decree, order,
judgment, statute, license, rule or regulation, in any of the foregoing cases in
a manner that could result in the imposition of substantial penalties or
materially and adversely affect the financial condition, properties or business
of the Borrower or any of its Subsidiaries.

      7.9. TAX STATUS. The Borrower and its Subsidiaries (i) have made or filed
all federal and state income and all other tax returns, reports and declarations
required by any jurisdiction to which any of them is subject, (ii) have paid all
taxes and other governmental assessments and charges shown or determined to be
due on such returns, reports and declarations, except those being contested in
good faith and by appropriate proceedings and (iii) have set aside on their
books provisions reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations apply.
There are no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Borrower know of no basis
for any such claim.

      7.10. NO EVENT OF DEFAULT. No Default or Event of Default has occurred and
is continuing.

      7.11. HOLDING COMPANY AND INVESTMENT COMPANY ACTS. Neither the Borrower
nor any of its Subsidiaries is a "holding company", or a "subsidiary company" of
a "holding company", or an "affiliate" of a "holding company", as such terms are
defined in the Public Utility Holding Company Act of 1935; nor is it an
"investment company", or an "affiliated company" or a "principal underwriter" of
an "investment company", as such terms are defined in the Investment Company Act
of 1940.

      7.12. ABSENCE OF FINANCING STATEMENTS, ETC. Except with respect to
Permitted Liens, there is no financing statement, security agreement, chattel
mortgage, real estate mortgage or other document filed or recorded with any
filing records, registry or other public office, that purports to cover, affect
or give notice of any present or possible future lien on, or security interest
in, any assets or property of the Borrower or any of its Subsidiaries or any
rights relating thereto.

      7.13. CERTAIN TRANSACTIONS. Except for arm's length transactions pursuant
to which the Borrower or any of its Subsidiaries makes payments in the ordinary
course of business upon terms no less favorable than the Borrower or such
Subsidiary could obtain from third parties, none of the officers, directors, or
employees of the Borrower or any of its Subsidiaries is


                                       32
<PAGE>   33
presently a party to any transaction with the Borrower or any of its
Subsidiaries (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Borrower, any corporation,
partnership, trust or other entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.

      7.14. EMPLOYEE BENEFIT PLANS.

            7.14.1. IN GENERAL. Each Employee Benefit Plan has been maintained
      and operated in compliance in all material respects with the provisions of
      ERISA and, to the extent applicable, the Code including, but not limited
      to, the provisions thereunder respecting prohibited transactions. The
      Borrower has heretofore delivered to the Agent the most recently completed
      annual report, Form 5500, with all required attachments, and actuarial
      statement required to be submitted under Section 103(d) of ERISA, with
      respect to each Guaranteed Pension Plan.

            7.14.2. TERMINABILITY OF WELFARE PLANS. Under each Employee Benefit
      Plan which is an employee welfare benefit plan within the meaning of
      Section 3(1) or Section 3(2)(B) of ERISA, no benefits are due unless the
      event giving rise to the benefit entitlement occurs prior to plan
      termination (except as required by Title I, Part 6 of ERISA). The Borrower
      or an ERISA Affiliate, as appropriate, may terminate each such Plan at any
      time (or at any time subsequent to the expiration of any applicable
      bargaining agreement) in the discretion of the Borrower or such ERISA
      Affiliate without liability to any Person.

            7.14.3. GUARANTEED PENSION PLANS. Each contribution required to be
      made to a Guaranteed Pension Plan, whether required to be made to avoid
      the incurrence of an accumulated funding deficiency, the notice or lien
      provisions of Section 302(f) of ERISA, or otherwise, has been timely made.
      No waiver of an accumulated funding deficiency or extension of
      amortization periods has been received with respect to any Guaranteed
      Pension Plan. No liability to the PBGC (other than required insurance
      premiums, all of which have been paid) has been incurred by the Borrower
      or any ERISA Affiliate with respect to any Guaranteed Pension Plan and
      there has not been any ERISA Reportable Event, or any other event or
      condition which presents a material risk of termination of any Guaranteed
      Pension Plan by the PBGC. Based on the latest valuation of each Guaranteed
      Pension Plan (which in each case occurred within twelve months prior to
      the date of this representation), and on the actuarial methods and
      assumptions employed for that valuation, the aggregate benefit liabilities
      of all such Guaranteed Pension Plans within the meaning of Section 4001 of
      ERISA did not exceed the aggregate value of the assets of all such
      Guaranteed Pension Plans, disregarding for this purpose the benefit
      liabilities and assets of any Guaranteed Pension Plan with assets in
      excess of benefit liabilities.

            7.14.4. MULTIEMPLOYER PLANS. Neither the Borrower nor any ERISA
      Affiliate has incurred any material liability (including secondary
      liability) to any Multiemployer Plan as a result of a complete or partial
      withdrawal from such Multiemployer Plan under Section 4201 of ERISA or as
      a result of a sale of assets described in Section 4204 of ERISA. Neither


                                       33
<PAGE>   34
      the Borrower nor any ERISA Affiliate has been notified that any
      Multiemployer Plan is in reorganization or insolvent under and within the
      meaning of Section 4241 or Section 4245 of ERISA or that any Multiemployer
      Plan intends to terminate or has been terminated under Section 4041A of
      ERISA.

      7.15. REGULATIONS U AND X. The proceeds of the Loans shall be used solely
for general corporate purposes including working capital and Capital
Expenditures of the Borrower. The Borrower will obtain Letters of Credit solely
for working capital and general corporate purposes. No portion of any Loan is to
be used, and no portion of any Letter of Credit is to be obtained, for the
purpose of purchasing or carrying any "margin security" or "margin stock" as
such terms are used in Regulations U and X of the Board of Governors of the
Federal Reserve System, 12 C.F.R. Parts 221 and 224.

      7.16. ENVIRONMENTAL COMPLIANCE. The Borrower, and each of its
Subsidiaries, has obtained all permits, licenses and other authorizations which
are required under all Environmental Laws, except to the extent failure to have
any such permit, license or authorization would not have a material adverse
effect on the business, assets or financial condition of the Borrower and its
Subsidiaries, taken as a whole. The Borrower, and each of its Subsidiaries, is
in compliance in all material respects with the terms and conditions of all such
permits, licenses and authorizations, and is also in compliance with all other
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules, and timetables contained in any applicable Environmental
Law, except to the extent failure to comply would not have a material adverse
effect on the business, assets or financial condition of the Borrower and its
Subsidiaries, taken as a whole.

      7.17. SUBSIDIARIES, ETC. The Borrower currently has no Subsidiaries except
HMT FSC Ltd., a Barbados West Indies Company. Except as set forth on Schedule
7.17 hereto the Borrower is not engaged in any joint venture or partnership with
any other Person.

      7.18. FISCAL YEAR. The Borrower and each of its Subsidiaries has a fiscal
year which is twelve (12) calendar months ending on March 31 of each year.

      7.19. NO AMENDMENTS TO CERTAIN DOCUMENTS. The Borrower has not amended any
of the Recapitalization Documents insofar as they relate to the character of the
Preferred Stock of the Borrower, has not amended any of the Subordinated Debt
Documents, and has not otherwise amended any of the Recapitalization Documents
in any way that could materially adversely affect the interest of the Banks.

      7.20. DISCLOSURE. No representation or warranty made by the Borrower in
this Credit Agreement or in any of the other Loan Documents or in any agreement,
instrument, document, certificate, statement or letter furnished to any of the
Bank Agents or any Bank by or on behalf of the Borrower as requested by the
Borrower in connection with any of the transactions contemplated by any of the
Loan Documents contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained
therein not misleading in light of the circumstances in which they are made.


                                       34
<PAGE>   35
8. AFFIRMATIVE COVENANTS OF THE BORROWER.

      The Borrower covenants and agrees that, so long as any Loan, Unpaid
Reimbursement Obligation, Letter of Credit or Note, or other amount in respect
of any of the foregoing, is outstanding or any Bank has any obligation to make
any Loans or the Issuing Bank has any obligation to issue, extend or renew any
Letters of Credit:

      8.1. PUNCTUAL PAYMENT. The Borrower will duly and punctually pay or cause
to be paid the principal and interest on the Loans, all Reimbursement
Obligations, the Letter of Credit Fees, the Commitment Fees, the Agent's fee and
all other amounts provided for in this Credit Agreement and the other Loan
Documents to which the Borrower or any of its Subsidiaries is a party, all in
accordance with the terms of this Credit Agreement and such other Loan
Documents.

      8.2. MAINTENANCE OF OFFICE. The Borrower will maintain its chief executive
office at 1055 Page Avenue, Fremont, California 94538, or at such other place in
the United States of America as the Borrower shall designate upon written notice
to the Agent, where notices, presentations and demands to or upon the Borrower
in respect of the Loan Documents to which the Borrower is a party may be given
or made.

      8.3. RECORDS AND ACCOUNTS. The Borrower will (i) keep, and cause each of
its Subsidiaries to keep, true and accurate records and books of account in
which full, true and correct entries will be made in accordance with generally
accepted accounting principles and (ii) maintain adequate accounts and reserves
for all taxes (including income taxes), depreciation, depletion, obsolescence
and amortization of its properties and the properties of its Subsidiaries,
contingencies, and other reserves.

      8.4. FINANCIAL STATEMENTS CERTIFICATES AND INFORMATION. The Borrower will
deliver to each of the Banks :

            (a) Promptly upon filing with the Securities and Exchange
      Commission, and in no event later than ninety (90) days after the
      Borrower's fiscal year end, annual financial statements for such fiscal
      year, which may include a copy of the Borrower's Annual Report as filed
      with Form 10-K, but shall include in any event (i) the consolidated
      balance sheets of the Borrower and its Subsidiaries, and (ii) the related
      consolidated statements of income and statements of cash flow, each
      setting forth in comparative form the figures for the previous fiscal year
      and in reasonable detail and prepared in accordance with generally
      accepted accounting principles. All such statements shall be certified
      without qualification by Coopers & Lybrand LLP or by other independent
      certified public accountants satisfactory to the Agent, and shall be
      accompanied by copies of any "management letter" provided by such
      accountants and by a written statement from such accountants to the effect
      that, in making the examination necessary to said certification, they have
      obtained no knowledge of any Default or Event of Default, or, if such
      accountants shall have obtained knowledge of any then existing Default or
      Event of Default they shall disclose in such statement the nature of any
      such Default or Event of Default; provided that such accountants shall not
      be liable to the Banks for failure to obtain knowledge of any Default or
      Event of Default;


                                       35
<PAGE>   36
            (b) Promptly upon filing with the Securities and Exchange Commission
      and in no event later than forty-five (45) days after the end of each
      fiscal quarter of the Borrower, quarterly financial statements for such
      quarter, which may include a copy of the financial reports as filed with
      Form 10-Q for such fiscal quarter, but shall include in any event (i) the
      consolidated balance sheets of the Borrower and its Subsidiaries as at the
      end of such quarter, and (ii) the related consolidated statements of
      income and statements of cash flow for the portion of the Borrower's
      fiscal year then elapsed, all in reasonable detail and prepared in
      accordance with generally accepted accounting principles, together with a
      certification by the principal financial or accounting officer of the
      Borrower that the information contained in such financial statements
      fairly presents the financial position of the Borrower and its
      Subsidiaries on the date thereof (subject to customary year-end
      adjustments).

            (c) simultaneously with the delivery of the financial statements
      referred to in subsections (a) and (b) above, (i) a statement certified by
      the principal financial or accounting officer of the Borrower in
      substantially the form of Exhibit D hereto (a "Compliance Certificate")
      and setting forth in reasonable detail computations evidencing compliance
      with the covenants contained in Section 10 and (if applicable)
      reconciliations to reflect changes in generally accepted accounting
      principles since the Balance Sheet Date, and (ii) if an Event of Default
      has occurred and is continuing, and if Borrower has received a request
      from the Agent therefor, the consolidating financial statements relating
      to the statements delivered pursuant to subsections (a) and (b) above;

            (d) contemporaneously with the filing or mailing thereof, copies of
      all material of a financial nature filed with the Securities and Exchange
      Commission or sent generally to the stockholders of the Borrower;

            (e) No later than ninety (90) days after the end of each fiscal year
      of the Borrower, financial projections of the Borrower and its
      Subsidiaries on a consolidated basis for the immediately upcoming fiscal
      year of the Borrower;

            (f) from time to time such other financial data and information
      (including accountants' management letters) as the Agent or any Bank may
      reasonably request.

      8.5. NOTICES.

            8.5.1. DEFAULTS. The Borrower will promptly notify the Agent and
      each of the Banks in writing of the occurrence of any Default or Event of
      Default. If any Person shall give any notice or take any other action in
      respect of a claimed default (whether or not constituting an Event of
      Default) under this Credit Agreement or any other note, evidence of
      indebtedness, indenture or other obligation to which or with respect to
      which the Borrower or any of its Subsidiaries is a party or obligor,
      whether as principal, guarantor, surety or otherwise, the Borrower shall
      forthwith give written notice thereof to the Agent and each of the Banks,
      describing the notice or action and the nature of the claimed default.


                                       36
<PAGE>   37
            8.5.2. ENVIRONMENTAL EVENTS. The Borrower will promptly give notice
      to the Agent and each of the Banks (i) of any violation of any
      Environmental Law that the Borrower or any of its Subsidiaries reports in
      writing or is reportable by such Person in writing (or for which any
      written report supplemental to any oral report is made) to any federal,
      state or local environmental agency and (ii) upon becoming aware thereof
      of any inquiry, proceeding, investigation, or other action, including a
      notice from any agency of potential environmental liability, of any
      federal, state or local environmental agency or board, that has the
      potential to materially affect the assets, liabilities, financial
      conditions or operations of the Borrower and its Subsidiaries, taken as a
      whole.

            8.5.3. NOTICE OF LITIGATION AND JUDGMENTS. The Borrower will, and
      will cause each of its Subsidiaries to, give notice to the Agent and each
      of the Banks in writing within fifteen (15) days after becoming aware of
      any litigation or proceedings threatened in writing or any pending
      litigation and proceedings affecting the Borrower or any of its
      Subsidiaries or to which the Borrower or any of its Subsidiaries is or
      becomes a party involving a claim against the Borrower or any of its
      Subsidiaries that could reasonably be expected to have a materially
      adverse effect on the Borrower and its Subsidiaries (on a consolidated
      basis) and stating the nature and status of such litigation or
      proceedings. The Borrower will, and will cause each of its Subsidiaries
      to, give notice to the Agent and each of the Banks, in writing, in form
      and detail satisfactory to the Agent, within ten (10) days of any final
      judgment, against the Borrower or any of its Subsidiaries in an amount in
      excess of $2,000,000.

      8.6. CORPORATE EXISTENCE: MAINTENANCE OF PROPERTIES. The Borrower will do
or cause to be done all things necessary to preserve and keep in full force and
effect its corporate existence, rights and franchises and those of its
Subsidiaries and will not, and will not cause or permit any of its Subsidiaries
to, convert to a limited liability company or a limited liability partnership.
It (i) will cause all of its properties and those of its Subsidiaries used or
useful in the conduct of its business or the business of its Subsidiaries to be
maintained and kept in good condition, repair and working order and supplied
with all necessary equipment; (ii) will cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereof, all as in the
judgment of the Borrower may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at all times;
and (iii) will, and will cause each of its Subsidiaries to, continue to engage
primarily in the businesses now conducted by them and in related businesses;
provided that nothing in this Section 8.6 shall prevent the Borrower from
discontinuing the operation and maintenance of any of its properties or any of
those of its Subsidiaries if such discontinuance is, in the reasonable judgment
of the Borrower, desirable in the conduct of its or their business and that do
not in the aggregate materially adversely affect the business of the Borrower
and its Subsidiaries on a consolidated basis.

      8.7. INSURANCE. The Borrower will, and will cause each of its Subsidiaries
to, maintain with financially sound and reputable insurers insurance with
respect to its properties and business against such casualties and contingencies
as shall be in accordance with the general practices of similar size businesses
engaged in similar activities in similar geographic areas and in amounts,
containing such terms, in such forms and for such periods as may be reasonable
and prudent.


                                       37
<PAGE>   38
      8.8. TAXES. The Borrower will, and will cause each of its Subsidiaries to,
duly pay and discharge, or cause to be paid and discharged, before the same
shall become overdue, all taxes, assessments and other governmental charges
imposed upon it and its real properties, sales and activities, or any part
thereof, or upon the income or profits therefrom, as well as all claims for
labor, materials, or supplies that if unpaid might by law become a lien or
charge upon any of its property; provided that any such tax, assessment, charge,
levy or claim need not be paid if the validity or amount thereof shall currently
be contested in good faith by appropriate proceedings and if the Borrower or
such Subsidiary shall have set aside on its books adequate reserves with respect
thereto; and provided further that the Borrower and each Subsidiary of the
Borrower will pay all such taxes, assessments, charges, levies or claims
forthwith upon the commencement of proceedings to foreclose any lien that may
have attached as security therefor.

      8.9. INSPECTION OF PROPERTIES AND BOOKS, ETC.

            8.9.1. GENERAL. The Borrower shall permit the Banks, through the
      Agent or any of the Banks' other designated representatives, to visit and
      inspect any of the properties of the Borrower or any of its Subsidiaries,
      to examine the books of account of the Borrower and its Subsidiaries (and
      to make copies thereof and extracts therefrom), and to discuss the
      affairs, finances and accounts of the Borrower and its Subsidiaries with,
      and to be advised as to the same by, its and their officers, all at such
      reasonable times and intervals as the Agent or any Bank may reasonably
      request.

            8.9.2. COMMERCIAL FINANCE EXAMINATIONS. If an Event of Default shall
      have occurred and be continuing, at the Agent's request, the Borrower
      shall permit the Bank Agents' commercial finance examiners to conduct
      commercial finance examinations of the Borrower's and its Subsidiaries'
      property, all at such reasonable times and intervals as the Agent may
      reasonably request. All such commercial finance examinations shall be
      conducted and made at the expense of the Borrower.

            8.9.3. COMMUNICATIONS WITH ACCOUNTANTS. The Borrower will, at the
      reasonable request of the Agent, authorize the Agent and, if accompanied
      by the Agent, the Banks to communicate directly with the Borrower's
      independent certified public accountants and hereby authorizes such
      accountants to disclose to the Agent and the Banks any and all financial
      statements and other supporting financial documents and schedules with
      respect to the business, financial condition, assets and other affairs of
      the Borrower or any of its Subsidiaries. At the reasonable request of the
      Agent, the Borrower shall deliver a letter addressed to such accountants
      instructing them to comply with the provisions of this Section 8.9.3.

      8.10. COMPLIANCE WITH LAWS, CONTRACTS, LICENSES, AND PERMITS. The Borrower
will, and will cause each of its Subsidiaries to, comply with (i) the applicable
laws and regulations wherever its business is conducted, including all
Environmental Laws, (ii) the provisions of its charter documents and by-laws,
(iii) all agreements and instruments by which it or any of its properties is or
may be bound and (iv) all applicable decrees, orders, and judgments. If any
authorization, consent, approval, permit or license from any officer, agency or
instrumentality of any government shall become necessary or required in order
that the Borrower or any of its Subsidiaries may fulfill any of its obligations
hereunder or any of the other Loan Documents to


                                       38
<PAGE>   39
which the Borrower or such Subsidiary is a party, the Borrower will, or (as the
case may be) will cause such Subsidiary to, immediately take or cause to be
taken all reasonable steps within the power of the Borrower or such Subsidiary
to obtain such authorization, consent, approval, permit or license and furnish
the Agent and the Banks with evidence thereof.

      8.11. EMPLOYEE BENEFIT PLANS. The Borrower will (i) promptly upon filing
the same with the Department of Labor or Internal Revenue Service, upon request
of the Agent, furnish to the Agent a copy of the most recent actuarial statement
required to be submitted under Section 103(d) of ERISA and Annual Report, Form
5500, with all required attachments, in respect of each Guaranteed Pension Plan
and (ii) promptly upon receipt or dispatch, furnish to the Agent any notice,
report or demand sent or received in respect of a Guaranteed Pension Plan under
Sections 302, 4041, 4042, 4043, 4063, 4065, 4066, and 4068 of ERISA, or in
respect of a Multiemployer Plan, under Sections 4041A, 4202, 4219, 4242, or 4245
of ERISA.

      8.12. USE OF PROCEEDS. The Borrower will use the proceeds of the Loans and
will obtain letters of credit solely for the purposes set forth in Section 7.15
hereof.

      8.13. FURTHER ASSURANCES. The Borrower will, and will cause each of its
Subsidiaries to, cooperate with the Banks and the Agent and execute such further
instruments and documents as each of the Banks or the Agent shall reasonably
request to carry out to their satisfaction the transactions contemplated by this
Credit Agreement and the other Loan Documents.

9. CERTAIN NEGATIVE COVENANTS OF THE BORROWER.

      The Borrower covenants and agrees that, so long as any Loan, Unpaid
Reimbursement Obligation, Letter of Credit or Note, or other amount in respect
of any of the foregoing, is outstanding or any Bank has any obligation to make
any Loans or the Issuing Bank has any obligations to issue, extend or renew any
Letters of Credit:

      9.1. RESTRICTIONS ON INDEBTEDNESS. The Borrower will not, and will not
permit any of its Subsidiaries to, create, incur, assume, guarantee or be or
remain liable, contingently or otherwise, with respect to any Indebtedness other
than:

            (a) Indebtedness to the Banks and the Agent arising under any of the
      Loan Documents;

            (b) current liabilities of the Borrower or such Subsidiary incurred
      in the ordinary course of business not incurred through (i) the borrowing
      of money, or (ii) the obtaining of credit except for credit on an open
      account basis customarily extended and in fact extended in connection with
      normal purchases of goods and services;

            (c) Indebtedness in respect of taxes, assessments, governmental
      charges or levies and claims for labor, materials and supplies to the
      extent that payment therefor shall not at the time be required to be made
      in accordance with the provisions of Section 8.8;

            (d) Indebtedness in respect of judgments or awards (a) that (i) have
      been in force for less than the applicable period for taking an appeal so
      long as execution is not


                                       39
<PAGE>   40
      levied thereunder, or (ii) in respect of which the Borrower or such
      Subsidiary shall at the time in good faith be prosecuting an appeal or
      proceedings for review and in respect of which a stay of execution shall
      have been obtained pending such appeal or review, and (b) the existence of
      which does not constitute an Event of Default under Section 13.1;

            (e) endorsements for collection, deposit or negotiation and
      warranties of products or services, in each case incurred in the ordinary
      course of business;

            (f) Subordinated Debt or Replacement Subordinated Debt;

            (g) Indebtedness secured by "purchase money security interests," as
      such term is defined in the Uniform Commercial Code as adopted in the
      State of California, in an aggregate principal amount at any time
      outstanding not exceeding an amount equal to (i) the lesser of (A) 25% of
      Borrower's Net Fixed Assets and (B) $50,000,000 minus (ii) the principal
      amount of all Indebtedness of the type described in this Section 9.1(g)
      then outstanding;

            (h) Indebtedness not otherwise permitted by this Section 9.1
      existing on the Closing Date and listed and described on Schedule 9. 1(h)
      hereto;

            (i) Indebtedness with respect to the mandatory redemption rights of
      the holders of Preferred Stock of the Borrower, provided that such rights
      do not become operative prior to the seventh anniversary of the Closing
      Date of the Original Credit Agreement;

            (j) Indebtedness incurred to refinance existing Indebtedness,
      provided, that the principal amount thereof does not exceed the principal
      amount of the Indebtedness to be refinanced outstanding immediately prior
      to such refinancing and the terms and provisions of the new Indebtedness
      (including subordination provisions) are not otherwise more favorable to
      the holder thereof (including without limitation by stating an earlier
      maturity) than those of the Indebtedness to be refinanced; and

            (k) Indebtedness owing by Subsidiaries of the Borrower to the
      Borrower.

      9.2. RESTRICTIONS ON LIENS. The Borrower will not, and will not permit any
of its Subsidiaries to, (i) create or incur or suffer to be created or incurred
or to exist any lien, encumbrance, mortgage, pledge, charge, restriction or
other security interest of any kind upon any of its property or assets of any
character whether now owned or hereafter acquired, or upon the income or profits
therefrom; (ii) transfer any of such property or assets or the income or profits
therefrom for the purpose of subjecting the same to the payment of Indebtedness
or performance of any other obligation in priority to payment of its general
creditors; (iii) acquire, or agree or have an option to acquire, any property or
assets upon conditional sale or other title retention or purchase money security
agreement, device or arrangement; (iv) suffer to exist for a period of more than
thirty (30) days after the same shall have been incurred any Indebtedness or
claim or demand against it that if unpaid might by law or upon its bankruptcy or
insolvency, or otherwise, be given any priority whatsoever over its general
creditors; or (v) sell, assign, pledge or otherwise transfer any accounts,
contract rights, general intangibles, chattel paper or


                                       40
<PAGE>   41
instruments, with or without recourse; provided that the Borrower and any
Subsidiary of the Borrower may create or incur or suffer to be created or
incurred or to exist:

            (a) liens in favor of the Borrower on all or part of the assets of
      Subsidiaries of the Borrower securing Indebtedness owing by Subsidiaries
      of the Borrower to the Borrower;

            (b) liens to secure taxes, assessments and other government charges
      in respect of obligations not overdue or liens to secure claims for labor,
      material or supplies in respect of obligations not overdue;

            (c) deposits or pledges made in connection with, or to secure
      payment of' workmen's compensation, unemployment insurance, old age
      pensions or other social security obligations;

            (d) liens in respect of judgments or awards, the indebtedness with
      respect to which is permitted by Section 9.1(d);

            (e) liens of carriers, warehousemen, mechanics and materialmen, and
      other like liens on properties in existence less than 120 days from the
      date of creation thereof in respect of obligations not overdue;

            (f) encumbrances on Real Estate consisting of easements, rights of
      way, zoning restrictions, restrictions on the use thereof and defects and
      irregularities in the title thereto, landlord's or lessor's liens under
      leases to which the Borrower or a Subsidiary of the Borrower is a party,
      and other minor liens or encumbrances, none of which in the reasonable
      opinion of the Borrower interferes materially with the use of the property
      affected in the ordinary conduct of the business of the Borrower and its
      Subsidiaries, which defects do not individually or in the aggregate have a
      materially adverse effect on the business of the Borrower individually or
      of the Borrower and its Subsidiaries on a consolidated basis;

            (g) liens existing on the date hereof and listed on Schedule 9.2
      hereto;

            (h) purchase money security interests in or purchase money mortgages
      on real or personal property acquired after the date hereof to secure
      purchase money Indebtedness of the type and amount permitted by Section
      9.1(g), incurred in connection with the acquisition of such property,
      which security interests or mortgages cover only the real or personal
      property so acquired;

            (i) the interest of lessors under leases of real or personal
      property made by the Borrower or any of its Subsidiaries in the ordinary
      course of business and listed on Schedule 9.2 hereto;

            (j) leases, subleases, licenses, and sublicenses granted to third
      parties the Indebtedness in respect of which is permitted under Section
      9.1(h) and the granting of which


                                       41
<PAGE>   42
      does not result in a material adverse effect on the business or financial
      condition of the Borrower;

            (m) liens in favor of customs and revenue authorities which secure
      payment of customs in connection with the importation of goods;

            (n) liens which constitute rights of set-off of a customary nature
      or bankers' liens on amounts on deposit, whether arising by contract or by
      operation of law, in connection with arrangements entered into with
      depository institutions in the ordinary course of business not to exceed
      at any time $25,000 in the aggregate; and

            (o) replacement liens for any lien referred to above securing
      Indebtedness refinanced pursuant to Section 9.1(j), provided that the
      principal amount of the Indebtedness or other liability secured thereby is
      not increased as a result of such refinancing, that the terms and
      provisions of such refinancing are not otherwise more favorable to the
      holder thereof than those of the existing Indebtedness to be refinanced
      and lien to be replaced, and that such refinancing is limited to the
      property originally encumbered thereby.

      9.3. RESTRICTIONS ON INVESTMENTS. The Borrower will not, and will not
permit any of its Subsidiaries to, make or permit to exist or to remain
outstanding any Investment except Investments in:

            (a) marketable direct or guaranteed obligations of the United States
      of America that mature within one (1) year from the date of purchase by
      the Borrower;

            (b) demand deposits, certificates of deposit, bankers acceptances
      and time deposits of United States banks having total assets in excess of
      $ 1,000,000,000;

            (c) securities commonly known as "commercial paper" issued by a
      corporation organized and existing under the laws of the United States of
      America or any State thereof that at the time of purchase have been rated
      and the ratings for which are not less than "P 1" if rated by Moody's
      Investors Services, Inc., and not less than "A l" if rated by Standard and
      Poor's Ratings Group, a division of McGraw Hill, Inc.;

            (d) Investments not otherwise permitted by this Section 9.3 existing
      on the date hereof and listed on Schedule 9.3 hereto;

            (e) Investments by the Borrower in Subsidiaries of the Borrower
      created after the Closing Date, provided, however, that (i) such
      Investments with respect to U.S. Subsidiaries shall not at any time
      exceed, in the aggregate, an amount equal to five percent (5%) of
      Borrower's total assets, determined in accordance with generally accepted
      accounting principles, as at such time, (ii) such Investments with respect
      to non-U.S. Subsidiaries shall not exceed $500,000 in the aggregate, and
      (iii) at any time when Borrower's aggregate Investments in Subsidiaries
      equal or exceed Ten Million Dollars ($10,000,000), Agent may request that
      some or all of Borrower's Subsidiaries provide guaranties of the
      Obligations, and neither Borrower nor any of its Subsidiaries will
      unreasonably deny any such request;


                                       42
<PAGE>   43
            (f) Investments consisting of promissory notes received as proceeds
      of asset dispositions permitted by Section 9.5.2;

            (g) Investments consisting of loans and advances to employees for
      moving, entertainment, travel and other similar expenses in the ordinary
      course of business; and

            (h) other Investments not otherwise permitted by this Section 9.3
      but made in accordance with an investment policy approved by Borrower's
      Board of Directors and determined by the Agent to be reasonably
      satisfactory prior to any Investment hereunder being made.

      9.4. RESTRICTED PAYMENTS. The Borrower will not make any Restricted
Payments, other than:

      (a) payments in respect of the Subordinated Debt or Replacement
Subordinated Debt to the extent permitted by Section 9.8 hereof;

      (b) if no Default or Event of Default has occurred and is continuing or
would result therefrom, repurchase by the Borrower of its common stock from
employees of the Borrower, provided the aggregate amount of all such repurchases
from the Closing Date to the Maturity Date does not exceed $500,000;

      (c) non-cash payments to the holders of Preferred Stock of the Borrower;
and

      (d) Investments permitted under Section 9.3(g).

      9.5. MERGER; CONSOLIDATION AND DISPOSITION OF ASSETS.

            9.5.1. MERGERS AND ACQUISITIONS. The Borrower will not, and will not
      permit any of its Subsidiaries to, become a party to any merger or
      consolidation, or agree to or effect any asset acquisition or stock
      acquisition (other than the acquisition of assets in the ordinary course
      of business consistent with past practices) except the merger or
      consolidation of one or more of the Subsidiaries of the Borrower with and
      into the Borrower, or the merger or consolidation of two or more
      Subsidiaries of the Borrower.

            9.5.2. DISPOSITION OF ASSETS. Other than the disposition of assets
      in the ordinary course of business, the Borrower will not, and will not
      permit any of its Subsidiaries to, become a party to or agree to or effect
      any disposition of assets or properties exceeding ten percent (10%) of its
      total assets, such ten percent (10%) being calculated on a cumulative
      basis beginning on the Closing Date.

      9.6. NO SUBSIDIARIES, ETC. The Borrower will not create or acquire any
Subsidiaries nor acquire any interest in any joint venture or partnership, other
than Subsidiaries which engage in substantially the same business as the
Borrower.

      9.7. SALE AND LEASEBACK. The Borrower will not, and will not permit any of
its Subsidiaries to, enter into any arrangement, directly or indirectly, whereby
the Borrower or any Subsidiary of the Borrower shall sell or transfer any
property owned by it in order then or


                                       43
<PAGE>   44
thereafter to lease such property or lease other property that the Borrower or
any Subsidiary of the Borrower intends to use for substantially the same purpose
as the property being sold or transferred.

      9.8. SUBORDINATED DEBT. Except in connection with the issuance of
Replacement Subordinated Debt, the Borrower will not, and will not permit any of
its Subsidiaries to, amend, supplement or otherwise modify the terms of any of
the Subordinated Debt or, after issued, the Replacement Subordinated Debt. The
Borrower will not, and will not permit any of its Subsidiaries to, prepay,
redeem or repurchase any of the Subordinated Debt (except in connection with the
issuance of Replacement Subordinated Debt) or the Replacement Subordinated Debt.
The Borrower will not make any principal payments on any Subordinated Debt or
Replacement Subordinated Debt and will not make any interest payments on any
Subordinated Debt or Replacement Subordinated Debt other than regularly
scheduled interest payments permitted to be paid under the Subordinated Debt
Documents or the documents executed in connection with any Replacement
Subordinated Debt, as the case may be.

      9.9. EMPLOYEE BENEFIT PLANS. Neither the Borrower nor any ERISA Affiliate
will

                  (a) engage in any "prohibited transaction" within the meaning
            of Section 406 of ERISA or Section 4975 of the Code which could
            result in a material liability for the Borrower or any of its
            Subsidiaries; or

                  (b) permit any Guaranteed Pension Plan to incur an
            "accumulated funding deficiency", as such term is defined in Section
            302 of ERISA, whether or not such deficiency is or may be waived; or

                  (c) fail to contribute to any Guaranteed Pension Plan to an
            extent which, or terminate any Guaranteed Pension Plan in a manner
            which, could result in the imposition of a lien or encumbrance on
            the assets of the Borrower or any of its Subsidiaries pursuant to
            Section 302(f) or Section 4068 of ERISA; or

                  (d) permit or take any action which would result in the
            aggregate benefit liabilities (with the meaning of Section 4001 of
            ERISA) of all Guaranteed Pension Plans exceeding the value of the
            aggregate assets of such Plans, disregarding for this purpose the
            benefit liabilities and assets of any such Plan with assets in
            excess of benefit liabilities, by more than the amount set forth in
            Section 7.14.3.

      9.10. CHANGE OF FISCAL YEAR. The Borrower will not, and will not permit
its Subsidiaries to, change the date of the end of their respective fiscal years
from that set forth in Section 7.18 hereof.

      9.11. CAPITALIZATION. The Borrower will not issue any capital stock having
mandatory redemption rights or redemption at the option of the holder, sinking
fund payments, guaranteed return or exchange ability or conversion into debt
instruments of the Borrower or any other "debt-like" features other than the
mandatory rights of redemption of the Preferred Stock of the


                                       44
<PAGE>   45
Borrower following the seventh anniversary of the Closing Date of the Original
Credit Agreement.

      9.12. NO MATERIAL CHANGES, ETC. The Borrower shall not permit, at any time
after the Closing Date, any materially adverse change in the financial condition
or business of the Borrower and its Subsidiaries, taken as a whole, as of the
Closing Date (after giving effect to the transactions contemplated in this
Credit Agreement), other than changes in the ordinary course of business that
have not had any materially adverse effect either individually or in the
aggregate on the business or financial condition of the Borrower and its
Subsidiaries, taken as a whole.

10. FINANCIAL COVENANTS OF THE BORROWER.

      The Borrower covenants and agrees that, so long as any Loan, Unpaid
Reimbursement Obligation, Letter of Credit or Note, or other amount in respect
of any of the foregoing, is outstanding or any Bank has any obligation to make
any Loans or the Issuing Bank has any obligation to issue, extend or renew any
Letters of Credit:

      10.1. TOTAL LIABILITIES TO EBITDA. The Borrower will not permit the ratio
of (a) an amount equal to (i) Total Liabilities minus (ii) the Subordinated Debt
or the Replacement Subordinated Debt, as the case may be, as at the end of any
fiscal quarter to (b) EBITDA for such fiscal quarter and the immediately
preceding three fiscal quarters (treated as a single accounting period) to
exceed 1.0:1.0.

      10.2. INTEREST COVERAGE. The Borrower will not, for any fiscal quarter,
permit the ratio of (i) EBIT for such fiscal quarter to (ii) Consolidated Total
Interest Expense for such fiscal quarter to be less than 5.0:1.0.

      10.3. CURRENT RATIO. The Borrower will not permit its Current Ratio to be
less than 1.25 as of the end of any fiscal quarter.

      10.4 PROFITABLE OPERATIONS.

      (a) The Borrower will not permit EBIT or Consolidated Net Income, for any
two consecutive fiscal quarters of the Borrower, to be less than $1.00.

      (b) The Borrower will not permit EBIT or Consolidated Net Income for any
fiscal quarter of the Borrower to be less than zero by an amount which exceeds
five percent (5%) of the Borrower's Tangible Net Worth.

      10.5. OPERATING LEASES. The Borrower will not, and will not permit any of
its Subsidiaries at any time to create, incur, assume, guarantee or be or remain
liable, contingently or otherwise, with respect to operating leases of the
Borrower having annual payments in an aggregate amount in excess of $2,500,000.

11. CLOSING CONDITIONS.

      The obligations of the Banks to extend credit hereunder shall be subject
to the satisfaction of the following conditions precedent:


                                       45
<PAGE>   46
      11.1. LOAN DOCUMENTS, ETC. Each of the Loan Documents shall have been duly
executed and delivered by the respective parties thereto, shall be in full force
and effect and shall be in form and substance satisfactory to each of the Banks
and the Agent. Each Bank and the Agent shall have received a fully executed copy
of each such document.

      11.2. CERTIFIED COPIES OF CHARTER DOCUMENTS. Each of the Banks shall have
received from the Borrower a copy, certified by a duly authorized officer of the
Borrower to be true and complete on the Closing Date, of each of (i) its charter
or other incorporation documents as in effect on such date of certification, and
(ii) its by-laws as in effect on such date.

      11.3. CORPORATE ACTION. All corporate action necessary for the valid
execution, delivery and performance by the Borrower and any of its Subsidiaries
of this Credit Agreement and the other Loan Documents to which it is or is to
become a party shall have been duly and effectively taken, and evidence thereof
satisfactory to the Banks shall have been provided to each of the Banks.

      11.4. INCUMBENCY CERTIFICATE. Each of the Banks shall have received from
the Borrower an incumbency certificate, dated as of the Closing Date, signed by
a duly authorized officer of the Borrower and giving the name and bearing a
specimen signature of each individual who shall be authorized: (i) to sign, in
the name and on behalf of the Borrower each of the Loan Documents to which the
Borrower is or is to become a party; (ii) to make Loan Requests and Conversion
Requests and to apply for Letters of Credit; and (iii) to give notices and to
take other action on its behalf under this Credit Agreement and the other Loan
Documents.

      11.5. OPINION OF COUNSEL. Each of the Banks, the Agent and the Bank Agents
shall have received a favorable legal opinion addressed to the Banks, the Agent
and the Bank Agents, dated as of the Closing Date, in form and substance
satisfactory to the Banks, the Agent and the Bank Agents.

      11.6 INITIAL LEVERAGE RATIO CALCULATION. The Agent shall have received
Borrower's certificate as to the Leverage Ratio as of June 30, 1996 (the
"Initial Leverage Ratio Calculation").

12. CONDITIONS TO ALL BORROWINGS.

      The obligations of the Banks to make any Loan, including Revolving Credit
Loans and Swingline Loans, and of the Issuing Bank to issue, extend or renew any
Letter of Credit, in each case whether on or after the Closing Date, shall also
be subject to the satisfaction of the following conditions precedent:

      12.1. REPRESENTATIONS TRUE; NO EVENT OF DEFAULT. Each of the
representations and warranties of any of the Borrower and its Subsidiaries
contained in this Credit Agreement, the other Loan Documents or in any document
or instrument delivered pursuant to or in connection with this Credit Agreement
shall be true as of the date as of which they were made and shall also be true
at and as of the time of the making of such Loan or the issuance, extension or
renewal of such Letter of Credit, with the same effect as if made at and as of
that time (except to the extent of changes resulting from transactions
contemplated or permitted by this Credit Agreement and the other Loan Documents
and changes occurring in the ordinary course of business that singly


                                       46
<PAGE>   47
or in the aggregate are not materially adverse, and to the extent that such
representations and warranties relate expressly to an earlier date) and no
Default or Event of Default shall have occurred and be continuing. The Agent
shall have received a certificate of the Borrower signed by an authorized
officer of the Borrower to such effect.

      12.2. NO LEGAL IMPEDIMENT. No change shall have occurred in any law or
regulations thereunder or interpretations thereof that in the reasonable opinion
of any Bank would make it illegal for such Bank to make such Loan or to
participate in the issuance, extension or renewal of such Letter of Credit or in
the reasonable opinion of the Issuing Bank would make it illegal for the Issuing
Bank to issue, extend or renew such Letter of Credit.

      12.3. GOVERNMENTAL REGULATION. Each Bank shall have received such
statements, in substance and form reasonably satisfactory to such Bank as such
Bank, shall require for the purpose of compliance with any applicable
regulations of the Comptroller of the Currency or the Board of Governors of the
Federal Reserve System.

      12.4. PROCEEDINGS AND DOCUMENTS. All proceedings in connection with the
transactions contemplated by this Credit Agreement, the other Loan Documents and
all other documents incident thereto shall be satisfactory in substance and in
form to the Banks and to the Agent and the Agent's Special Counsel, and the
Banks, the Agent and such counsel shall have received all information and such
counterpart originals or certified or other copies of such documents as the
Agent may reasonably request.

13. EVENTS OF DEFAULT; ACCELERATION; ETC.

      13.1. EVENTS OF DEFAULT AND ACCELERATION. If any of the following events
("Events of Default" or, if the giving of notice or the lapse of time or both is
required, then, prior to such notice or lapse of time, "Defaults") shall occur:

            (a) the Borrower shall fail to pay any principal of the Loans or any
      Reimbursement Obligation when the same shall become due and payable,
      whether at the stated date of maturity or any accelerated date of maturity
      or at any other date fixed for payment thereof;

            (b) the Borrower shall fail to pay any interest on the Loans, the
      Commitment Fee, any Letter of Credit Fee, the Agent's fee, or other sums
      due hereunder or under any of the other Loan Documents, when the same
      shall become due and payable, whether at the stated date of maturity or
      any accelerated date of maturity or at any other date fixed for payment
      thereof;

            (c) the Borrower shall fail to comply with any of its covenants
      contained in Sections 8.1, 8.4, 8.5, the first sentence of 8.6, 8.7, 8.8,
      8.10, 8.12, 9 or 10;

            (d) the Borrower or any of its Subsidiaries shall fail to perform
      any term, covenant or agreement contained herein or in any of the other
      Loan Documents (other than those specified elsewhere in this Section 13.1)
      for fifteen (15) days after written notice of such failure has been given
      to the Borrower by the Agent or any Bank;


                                       47
<PAGE>   48
            (e) any representation or warranty of the Borrower or any of its
      Subsidiaries in this Credit Agreement or any of the other Loan Documents
      or in any other document or instrument delivered pursuant to or in
      connection with this Credit Agreement shall prove to have been false in
      any material respect upon the date when made or deemed to have been made
      or repeated;

            (f) the Borrower or any of its Subsidiaries shall fail to pay at
      maturity, or within any applicable period of grace, any obligation for
      borrowed money or credit received or in respect of any Capitalized Leases
      in excess of $2,000,000 in aggregate principal amount, or fail to observe
      or perform any material term, covenant or agreement contained in any
      agreement by which it is bound, evidencing or securing borrowed money or
      credit received or in respect of any Capitalized Leases in excess of
      $2,000,000 in aggregate principal amount for such period of time as would
      permit (assuming the giving of appropriate notice if required) the holder
      or holders thereof or of any obligations issued thereunder to accelerate
      the maturity thereof;

            (g) the Borrower or any of its Subsidiaries shall make an assignment
      for the benefit of creditors, or admit in writing its inability to pay or
      generally fail to pay its debts as they mature or become due, or shall
      petition or apply for the appointment of a trustee or other custodian,
      liquidator or receiver of the Borrower or any of its Subsidiaries or of
      any substantial part of the assets of the Borrower or any of its
      Subsidiaries or shall commence any case or other proceeding relating to
      the Borrower or any of its Subsidiaries under any bankruptcy,
      reorganization, arrangement, insolvency, readjustment of debt, dissolution
      or liquidation or similar law of any jurisdiction, now or hereafter in
      effect, or shall take any action to authorize or in furtherance of any of
      the foregoing, or if any such petition or application shall be filed or
      any such case or other proceeding shall be commenced against the Borrower
      or any of its Subsidiaries and the Borrower or any of its Subsidiaries
      shall indicate its approval thereof', consent thereto or acquiescence
      therein or such petition or application shall not have been dismissed
      within forty-five (45) days following the filing thereof;

            (h) a decree or order is entered appointing any such trustee,
      custodian, liquidator or receiver or adjudicating the Borrower or any of
      its Subsidiaries bankrupt or insolvent, or approving a petition in any
      such case or other proceeding, or a decree or order for relief is entered
      in respect of the Borrower or any Subsidiary of the Borrower in an
      involuntary case under federal bankruptcy laws as now or hereafter
      constituted;

            (i) there shall remain in force, undischarged, unsatisfied and
      unstayed, for more than thirty (30) days, whether or not consecutive, any
      final judgment against the Borrower or any of its Subsidiaries that, with
      other outstanding final judgments, undischarged, against the Borrower or
      any of its Subsidiaries exceeds in the aggregate $2,000,000 and the
      Borrower shall have failed to provide evidence satisfactory to the Agent
      and the Banks that such judgment or award is fully covered by independent
      third-party insurance;

            (j) the holders of all or any part of the Subordinated Debt or
      Replacement Subordinated Debt shall accelerate the maturity of all or any
      part of such Indebtedness or


                                       48
<PAGE>   49
      the Subordinated Debt shall be redeemed or repurchased in whole or in part
      (other than with proceeds from Replacement Subordinated Debt) or the
      Replacement Subordinated Debt shall be redeemed or repurchased in whole or
      in part;

            (k) if any of the Loan Documents or any material provision thereof
      shall be canceled, terminated, revoked or rescinded, otherwise than in
      accordance with the terms thereof or with the express prior written
      agreement, consent or approval of the Banks, or any action at law, suit or
      in equity or other legal proceeding to cancel, revoke or rescind any of
      the Loan Documents or any material provision thereof shall be commenced by
      or on behalf of the Borrower [or any of its Subsidiaries party thereto] or
      any of their respective stockholders, or any court or any other
      governmental or regulatory authority or agency of competent jurisdiction
      shall make a determination that, or issue a judgment, order, decree or
      ruling to the effect that, any one or more of the Loan Documents or any
      material provision thereof is illegal, invalid or unenforceable in
      accordance with the terms thereof;

            (l) with respect to any Guaranteed Pension Plan, an ERISA Reportable
      Event shall have occurred and the Majority Banks shall have reasonably
      determined that such event reasonably could be expected to result in
      liability of the Borrower or any of its Subsidiaries to the PBGC or such
      Guaranteed Pension Plan in an aggregate amount exceeding $2,000,000 and
      such event in the circumstances occurring reasonably could constitute
      grounds for the termination of such Guaranteed Pension Plan by the PBGC or
      for the appointment by the appropriate United States District Court of a
      trustee to administer such Guaranteed Pension Plan; or a trustee shall
      have been appointed by the United States District Court to administer such
      Plan; or the PBGC shall have instituted proceedings to terminate such
      Guaranteed Pension Plan;

            (m) the Borrower or any of its Subsidiaries shall be enjoined,
      restrained or in any way prevented by the order of any court or any
      administrative or regulatory agency from conducting any material part of
      its business and such order shall continue in effect for more than thirty
      (30) days;

            (n) there shall occur any strike, lockout, labor dispute, embargo,
      condemnation, act of God or public enemy, or other casualty, which in any
      such case causes, for more than fifteen (15) consecutive days, the
      cessation or substantial curtailment of revenue producing activities of
      the Borrower and its Subsidiaries on a consolidated basis if such event or
      circumstance is not covered by business interruption insurance and would
      have a material adverse effect on the business or financial condition of
      the Borrower and its Subsidiaries, taken as a whole;

            (o) there shall occur the loss, suspension or revocation of, or
      failure to renew, any license, permit or consent issued by any government
      or government agency or authority now held or hereafter acquired by the
      Borrower or any of its Subsidiaries if such loss, suspension, revocation
      or failure to renew would have a material adverse effect on the business
      or financial condition of the Borrower and its Subsidiaries, taken as a
      whole; or


                                       49
<PAGE>   50
            (p) any Person or group of affiliated Persons, other than a group
      comprised of some or all of Summit Ventures II, L.P., Summit Ventures IV,
      L.P., Summit Ventures II, L.P. and Summit Subordinated Debt Fund, L.P.,
      including for this purpose their affiliates and partners, and current
      management of the Borrower and employee stockholders of the Borrower shall
      acquire in excess of fifty percent (50%) of the outstanding shares of
      Voting Stock of the Borrower;

then, and in any such event, so long as the same may be continuing, the Agent
may, and upon the request of the Majority Banks shall, by notice in writing to
the Borrower declare all Obligations to be, and they shall thereupon forthwith
become, immediately due and payable without presentment, demand, protest or
other notice of any kind, all of which are hereby expressly waived by the
Borrower; provided that in the event of any Event of Default specified in
Section 13.1(g), 13.1(h) or 13.1(j), all such amounts shall become immediately
due and payable automatically and without any requirement of notice from the
Agent or any Bank.

      13.2. TERMINATION OF COMMITMENTS. If any one or more of the Events of
Default specified in Section 13.1(g), 13.1(h) or 13.1(j) shall occur, any unused
portion of the Commitments shall forthwith automatically terminate and each of
the Banks shall be relieved of all further obligations to make Loans to the
Borrower and the Issuing Bank shall be relieved of all further obligations to
issue, extend or renew Letters of Credit. If any other Event of Default shall
have occurred and be continuing, or if on any Drawdown Date or other date for
issuing, extending or renewing any Letter of Credit the conditions precedent to
the making of the Loans to be made on such Drawdown Date or (as the case may be)
to issuing, extending or renewing such Letter of Credit on such other date are
not satisfied, the Agent may and, upon the request of the Majority Banks, shall,
by notice to the Borrower, terminate the unused portion of the Total Commitment
hereunder, and upon such notice being given such unused portion of the Total
Commitment hereunder shall terminate immediately and each of the Banks shall be
relieved of all further obligations to make Loans and the Issuing Bank shall be
relieved of all further obligations to issue, extend or renew Letters of Credit.
No termination of the Total Commitment hereunder shall relieve the Borrower or
any of its Subsidiaries of any of the Obligations.

      13.3. REMEDIES. In case any one or more Events of Default shall have
occurred and be continuing, and whether or not the Banks shall have accelerated
the maturity of the Loans pursuant to Section 13.1, each Bank, if owed any
amount with respect to the Loans or the Reimbursement Obligations, may, with the
prior written consent of the Agent and the Majority Banks (including the Agent
in the calculation of "Majority Banks"), but not otherwise, proceed to protect
and enforce its rights by suit in equity, action at law or other appropriate
proceeding, whether for the specific performance of any covenant or agreement
contained in this Credit Agreement and the other Loan Documents or any
instrument pursuant to which the Obligations to such Bank are evidenced,
including as permitted by applicable law the obtaining of the ex parte
appointment of a receiver, and, if such amount shall have become due, by
declaration or otherwise, proceed to enforce the payment thereof or any other
legal or equitable right of such Bank. No remedy herein conferred upon any Bank
or the Agent or the holder of any Note or purchaser of any Letter of Credit
Participation is intended to be exclusive of any other remedy and each and every
remedy shall be cumulative and shall be in addition to every other remedy


                                       50
<PAGE>   51
given hereunder or now or hereafter existing at law or in equity or by statute
or any other provision of law.

14. SETOFF.

      During the continuance of any Event of Default, any deposits or other sums
credited by or due from any of the Banks to the Borrower and any securities or
other property of the Borrower in the possession of such Bank may be applied to
or set off by such Bank against the payment of Obligations and any and all other
liabilities, direct or indirect, of the Borrower to such Bank which are then due
and payable. Each of the Banks agrees with each other Bank that (i) if an amount
to be set off is to be applied to Indebtedness of the Borrower to such Bank,
other than Indebtedness evidenced by the Notes held by such Bank or constituting
Reimbursement Obligations owed to such Bank, such amount shall be applied
ratably to such other Indebtedness and to the Indebtedness evidenced by all such
Notes held by such Bank or constituting Reimbursement Obligations owed to such
Bank, and (ii) if such Bank shall receive from the Borrower, whether by
voluntary payment, exercise of the right of setoff, counterclaim, cross action,
enforcement of the claim evidenced by the Notes held by, or constituting
Reimbursement Obligations owed to, such Bank by proceedings against the Borrower
at law or in equity or by proof thereof in bankruptcy, reorganization,
liquidation, receivership or similar proceedings, or otherwise, and shall retain
and apply to the payment of the Note or Notes held by, or Reimbursement
Obligations owed to, such Bank any amount in excess of its ratable portion of
the payments received by all of the Banks with respect to the Notes held by, and
Reimbursement Obligations owed to, all of the Banks, such Bank will make such
disposition and arrangements with the other Banks with respect to such excess,
either by way of distribution, pro tanto assignment of claims, subrogation or
otherwise as shall result in each Bank receiving in respect of the Notes held by
it or Reimbursement Obligations owed it, its proportionate payment as
contemplated by this Credit Agreement; provided that if all or any part of such
excess payment is thereafter recovered from such Bank, such disposition and
arrangements shall be rescinded and the amount restored to the extent of such
recovery, but without interest.

15. THE AGENT.

      15.1. AUTHORIZATION.

            (a) Each of the Bank Agents and the Agent is authorized to take such
      action on behalf of each of the Banks and to exercise all such powers as
      are hereunder and under any of the other Loan Documents and any related
      documents delegated to each of the Bank Agents and the Agent, together
      with such powers as are reasonably incident thereto, provided that no
      duties or responsibilities not expressly assumed herein or therein shall
      be implied to have been assumed by either of the Bank Agents.

            (b) The relationship between each of the Bank Agents, the Agent and
      each of the Banks is that of an independent contractor. The use of the
      terms "Bank Agents" and "Agent" is for convenience only and is used to
      describe, as a form of convention, the independent contractual
      relationship between each of the Bank Agents, the Agent and each of the
      Banks. Nothing contained in this Credit Agreement nor the other Loan


                                       51
<PAGE>   52
      Documents shall be construed to create an agency, trust or other fiduciary
      relationship between each of the Bank Agents, the Agent and any of the
      Banks.

      15.2. EMPLOYEES AND AGENTS. Each of the Bank Agents and the Agent may
exercise its powers and execute its duties by or through employees or agents and
shall be entitled to take, and to rely on, advice of counsel concerning all
matters pertaining to its rights and duties under this Credit Agreement and the
other Loan Documents. Each of the Bank Agents and the Agent may utilize the
services of such Persons as such Bank Agent or Agent in its sole discretion may
reasonably determine, and all reasonable fees and expenses of any such Persons
shall be paid by the Borrower.

      15.3. NO LIABILITY. None of the Bank Agents, the Agent nor any of their
shareholders, directors, officers or employees nor any other Person assisting
them in their duties nor any agent or employee thereof' shall be liable for any
waiver, consent or approval given or any action taken, or omitted to be taken,
in good faith by it or them hereunder or under any of the other Loan Documents,
or in connection herewith or therewith, or be responsible for the consequences
of any oversight or error of judgment whatsoever, except that each of the Bank
Agents and the Agent or such other Person, as the case may be, may be liable for
losses exclusively due to its willful misconduct or gross negligence.

      15.4. NO REPRESENTATIONS. None of the Bank Agents or the Agent shall be
responsible for the execution or validity or enforceability of this Credit
Agreement, the Notes, the Letters of Credit, any of the other Loan Documents or
for the validity, enforceability or collectibility of any such amounts owing
with respect to the Notes, or for any recitals or statements, warranties or
representations made herein or in any of the other Loan Documents or in any
certificate or instrument hereafter furnished to it by or on behalf of the
Borrower or any of its Subsidiaries, or be bound to ascertain or inquire as to
the performance or observance of any of the terms, conditions, covenants or
agreements herein or to inspect any of the properties, books or records of the
Borrower or any of its Subsidiaries. None of the Bank Agents nor the Agent shall
be bound to ascertain whether any notice, consent, waiver or request delivered
to it by the Borrower or any holder of any of the Notes shall have been duly
authorized or is true, accurate and complete. None of the Bank Agents nor the
Agent has made nor does any of them now make any representations or warranties,
express or implied, nor does any of them assume any liability to the Banks, with
respect to the credit worthiness or financial conditions of the Borrower or any
of its Subsidiaries. Each Bank acknowledges that it has, independently and
without reliance upon any of the Bank Agents, the Agent or any other Bank, and
based upon such information and documents as it has deemed appropriate, made its
own credit analysis and decision to enter into this Credit Agreement and to
accept Borrower's Note and, in the case of the Issuing Bank, issue, renew and
extend Letters of Credit, and that it will continue to do so in connection with
making each Loan and issuance, renewal and extension of each Letter of Credit,
as applicable.

      15.5. PAYMENTS.

            15.5.1. PAYMENTS TO AGENT. A payment by the Borrower to the Agent
      hereunder or any of the other Loan Documents for the account of any Bank
      shall constitute a payment to such Bank. The Agent agrees promptly to
      distribute to each Bank such Bank's pro rata share of payments received by
      the Agent for the account of the


                                       52
<PAGE>   53
      Banks except as otherwise expressly provided herein or in any of the other
      Loan Documents.

            15.5.2. DISTRIBUTION BY AGENT. If in the opinion of the Agent the
      distribution of any amount received by it in such capacity hereunder,
      under the Notes or under any of the other Loan Documents might result in
      the incurrence by it of any liability, it may refrain from making such
      distribution until its right to make such distribution shall have been
      adjudicated by a court of competent jurisdiction. If a court of competent
      jurisdiction shall adjudge that any amount received from the Borrower and
      distributed by the Agent is to be repaid, each Person to whom any such
      distribution shall have been made shall either repay to the Agent its
      proportionate share of the amount so adjudged to be repaid or shall pay
      over the same in such manner and to such Persons as shall be determined by
      such court.

            15.5.3. DELINQUENT BANKS. Notwithstanding anything to the contrary
      contained in this Credit Agreement or any of the other Loan Documents, any
      Bank that fails (i) to make available to the Agent its pro rata share of
      any Loan or to purchase any Letter of Credit Participation or (ii) to
      comply with the provisions of Section 14 with respect to making
      dispositions and arrangements with the other Banks, where such Bank's
      share of any payment received, whether by setoff or otherwise, is in
      excess of its pro rata share of such payments due and payable to all of
      the Banks, in each case as, when and to the full extent required by the
      provisions of this Credit Agreement, shall be deemed delinquent (a
      "Delinquent Bank") and shall be deemed a Delinquent Bank until such time
      as such delinquency is remedied. A Delinquent Bank shall be deemed to have
      assigned any and all payments due to it from the Borrower, whether on
      account of outstanding Loans, Unpaid Reimbursement Obligations, interest,
      fees or otherwise, to the remaining nondelinquent Banks for application
      to, and reduction of, their respective pro rata shares of all outstanding
      Loans and Unpaid Reimbursement Obligations. The Delinquent Bank hereby
      authorizes the Agent to distribute such payments to the nondelinquent
      Banks in proportion to their respective pro rata shares of all outstanding
      Loans and Unpaid Reimbursement Obligations. A Delinquent Bank shall be
      deemed to have remedied in full a delinquency when and if', as a result of
      application of the assigned payments to all outstanding Loans and Unpaid
      Reimbursement Obligations of the nondelinquent Banks, the Banks'
      respective pro rata shares of all outstanding Loans and Unpaid
      Reimbursement Obligations have returned to those in effect immediately
      prior to such delinquency and without giving effect to the nonpayment
      causing such delinquency. Until such time as its delinquency is remedied,
      a Delinquent Bank shall have no right to vote with respect to any matters
      under or in respect of this Credit Agreement and shall not be entitled to
      receive its portion of any Commitment Fee paid in accordance with Section
      2.2 of this Credit Agreement.

      15.6. HOLDERS OF NOTES. The Agent may deem and treat the holder of any
Note or the purchaser of any Letter of Credit Participation as the absolute
owner or purchaser thereof for all purposes until it shall have been furnished
in writing with a different name by such payee or by a subsequent holder,
assignee or transferee.


                                       53
<PAGE>   54
      15.7. INDEMNITY. The Banks ratably (computed by reference to each Bank's
Total Percentage) agree hereby to indemnify and hold harmless the Bank Agents
and the Agent from and against any and all claims, actions and suits (whether
groundless or otherwise), losses, damages, costs, expenses (including any
expenses for which the Agent has not been reimbursed by the Borrower as required
by Section 16), and liabilities of every nature and character arising out of or
related to this Credit Agreement, the Notes, or any of the other Loan Documents
or the transactions contemplated or evidenced hereby or thereby, or the Bank
Agents' or the Agent's actions taken hereunder or thereunder, except to the
extent that any of the same shall be directly and exclusively caused by the Bank
Agents' or the Agent's willful misconduct or gross negligence.

      15.8. AGENT AS BANK. In its individual capacity, FNBB shall have the same
obligations and the same rights, powers and privileges in respect to its
Commitment, the Swingline Commitment and the Loans made by it, and as the holder
of any of the Notes and as the purchaser of any Letter of Credit Participations,
as it would have were it not also the Agent and a Co-Syndication Agent. In its
individual capacity, Paribas shall have the same obligations and the same
rights, powers and privileges in respect to its Commitment and the Loans made by
it, and as the holder of any of the Notes and as the purchaser of any Letter of
Credit Participations, as it would have were it not also a Co-Syndication Agent.
Each of the Banks acknowledges that each of the Bank Agents holds warrants for
the capital stock of the Borrower and is the holder of a Subordinated Note.

      15.9. RESIGNATION. Each Bank Agent may resign at any time by giving sixty
(60) days' prior written notice thereof to the Banks and the Borrower. Upon any
such resignation, the Majority Banks shall have the right to appoint a successor
Bank Agent in such capacity. Unless a Default or Event of Default shall have
occurred and be continuing, such successor Bank Agent shall be reasonably
acceptable to the Borrower; if a Default or Event of Default shall have occurred
and be continuing, the Borrower shall not be entitled to review the identity of
any proposed successor Bank Agent. If no successor Bank Agent shall have been so
appointed by the Majority Banks and other Bank Agents and shall have accepted
such appointment within thirty (30) days after the retiring Bank Agent's giving
of notice of resignation, then the retiring Bank Agent may, on behalf of the
Banks, appoint a successor Bank Agent in such capacity, which shall be a
financial institution having a rating of not less than A or its equivalent by
Standard & Poor's Ratings Group, a division of McGraw-Hill, Inc. Upon the
acceptance of any appointment as Bank Agent hereunder by a successor Bank Agent,
such successor Bank Agent shall thereupon succeed to and become vested with all
the rights, powers, privileges and duties of the retiring Bank Agent, and the
retiring Bank Agent shall be discharged from its duties and obligations
hereunder. After any retiring Bank Agent's resignation, the provisions of this
Credit Agreement and the other Loan Documents shall continue in effect for its
benefit in respect of any actions taken or omitted to be taken by it while it
was acting as Bank Agent.

      15.10. NOTIFICATION OF DEFAULTS AND EVENTS OF DEFAULT. Each Bank hereby
agrees that, upon an officer of such Bank active in respect of the Borrower's
account learning of the existence of a Default or an Event of Default, it shall
promptly notify the Agent thereof. The Agent hereby agrees that upon receipt of
any notice under this Section 15.10 it shall promptly notify the other Banks of
the existence of such Default or Event of Default.


                                       54
<PAGE>   55
      15.11. DUTIES IN THE CASE OF ENFORCEMENT. In case one or more Events of
Default have occurred and shall be continuing, and whether or not acceleration
of the Obligations shall have occurred, the Agent shall, if (i) so requested by
the Majority Banks and (ii) the Banks have provided to the Agent such additional
indemnities and assurances against expenses and liabilities as the Agent may
reasonably request, proceed to exercise all or any such other legal and
equitable and other rights or remedies as the Bank may have in respect of such
Event of Default. The Majority Banks may direct the Agent in writing as to the
method and the extent of any such enforcement, the Banks hereby ratably
(computed by reference to each Bank's Total Percentage) agreeing to indemnify
and hold the Agent harmless from all liabilities incurred in respect of all
actions taken or omitted in accordance with such directions, provided that the
Agent need not comply with any such direction to the extent that the Agent
reasonably believes the Agent's compliance with such direction to be unlawful or
inadvisable.

16. EXPENSES.

      The Borrower agrees to pay (i) the reasonable costs of producing and
reproducing this Credit Agreement, the other Loan Documents and the other
agreements and instruments mentioned herein, (ii) any taxes (including any
interest and penalties in respect thereto) payable by any of the Bank Agents or
any of the Banks (other than taxes based upon any Bank Agent's or any Bank's net
income, subject to the limitations set forth in Section 6.2.3) on or with
respect to the transactions contemplated by this Credit Agreement (the Borrower
hereby agreeing to indemnify each Bank Agent and each Bank with respect
thereto), (iii) the reasonable fees, expenses and disbursements of the Bank
Agent's Special Counsel incurred in connection with the preparation,
administration or interpretation of the Loan Documents and other instruments
mentioned herein, each closing hereunder, amendments, modifications, approvals,
consents or waivers hereto or hereunder, and the syndication hereof (including
those incurred in connection with syndication occurring after the Closing Date),
(iv) the reasonable fees, expenses and disbursements of the Bank Agents incurred
by the Bank Agents in connection with the preparation, administration or
interpretation of the Loan Documents and other instruments mentioned herein,
including all surveyor, engineering and appraisal charges and commercial finance
examination fees, (v) the reasonable fees, expenses and disbursements incurred
by the each of the Banks in connection with the syndication of its Commitment
hereunder, and (vi) all reasonable out-of-pocket expenses (including, without
limitation, reasonable attorneys' fees and costs, which attorneys may be
employees of any Bank or any of the Bank Agents, and reasonable consulting,
accounting, appraisal, investment banking and similar professional fees and
charges) incurred by any Bank or any of the Bank Agents in connection with (A)
the enforcement of or preservation of rights under any of the Loan Documents
against the Borrower or any of its Subsidiaries or the administration thereof
after the occurrence of a Default or Event of Default and (B) any litigation,
proceeding or dispute, whether arising hereunder or otherwise, in any way
related to any Bank's or any of the Bank Agents' relationship with the Borrower
or any of its Subsidiaries. The covenants of this Section 16 shall survive
payment or satisfaction of all other Obligations.

17. INDEMNIFICATION.

      The Borrower agrees to indemnify and hold harmless the Bank Agents and the
Banks from and against any and all claims, actions and suits, whether groundless
or otherwise, and from


                                       55
<PAGE>   56
and against any and all liabilities, losses, damages and expenses of every
nature and character arising out of this Credit Agreement or any of the other
Loan Documents or the transactions contemplated hereby including, without
limitation, (i) any actual or proposed use by the Borrower or any of its
Subsidiaries of the proceeds of any of the Loans or Letters of Credit, (ii) the
Borrower or any of its Subsidiaries entering into or performing this Credit
Agreement or any of the other Loan Documents or (iii) with respect to the
Borrower and its Subsidiaries and their respective properties and assets, the
violation of any Environmental Law, the presence, disposal, escape, seepage,
leakage, spillage, discharge, emission, release or threatened release of any
Hazardous Substances or any action, suit, proceeding or investigation brought or
threatened with respect to any Hazardous Substances (including, but not limited
to, claims with respect to wrongful death, personal injury or damage to
property), in each case including, without limitation, the reasonable fees and
disbursements of counsel and allocated costs of internal counsel incurred in
connection with any such investigation, litigation or other proceeding. In
litigation, or the preparation therefor, the Banks and the Bank Agents shall be
entitled to select their own counsel and, in addition to the foregoing
indemnity, the Borrower agrees to pay promptly the reasonable fees and expenses
of such counsel. If and to the extent that the obligations of the Borrower
under this Section 17 are unenforceable for any reason, the Borrower hereby
agrees to make the maximum contribution to the payment in satisfaction of such
obligations which is permissible under applicable law. The covenants contained
in this Section 17 shall survive payment or satisfaction in full of all other
Obligations. The foregoing notwithstanding, the Borrower shall not be required
to indemnify any Bank Agent or any Bank for any liabilities, losses, damages or
expenses to the extent that the foregoing arise directly and exclusively from
such Bank Agent's or such Bank's gross negligence or willful misconduct.

18. SURVIVAL OF COVENANTS, ETC.

      All covenants, agreements, representations and warranties made herein, in
the Notes, in any of the other Loan Documents or in any documents or other
papers delivered by or on behalf of the Borrower or any of its Subsidiaries
pursuant hereto shall be deemed to have been relied upon by the Banks and the
Bank Agents, notwithstanding any investigation heretofore or hereafter made by
any of them, and shall survive the making by the Banks of any of the Loans and
the issuance, extension or renewal of any Letters of Credit, as herein
contemplated, and shall continue in full force and effect so long as any Letter
of Credit or any Obligation remains outstanding or any Bank has any obligation
to make any Loans or the Issuing Bank has any obligation to issue, extend or
renew any Letter of Credit, and for such further time as may be otherwise
expressly specified in this Credit Agreement. All statements contained in any
certificate or other paper delivered to any Bank or any Bank Agent at any time
by or on behalf of the Borrower or any of its Subsidiaries pursuant hereto or in
connection with the transactions contemplated hereby shall constitute
representations and warranties by the Borrower or such Subsidiary hereunder.

19. ASSIGNMENT AND PARTICIPATION.

      19.1. CONDITIONS TO ASSIGNMENT BY BANKS. Except as provided herein, each
Bank may assign to one or more Eligible Assignees all or a portion of its
interests, rights and obligations under this Credit Agreement (including all or
a portion of its Commitment


                                       56
<PAGE>   57
Percentage and Commitment and the same portion of the Loans at the time owing to
it, the Notes held by it, its participating interest in the risk relating to any
Letters of Credit, and its obligation to purchase assignments of Swingline
Loans) and the other Loan Documents; provided that (i) each of the Bank Agents
and, unless a Default or Event of Default shall have occurred and be continuing,
the Borrower shall have given its prior written consent to such assignment,
which consent, in the case of the Borrower and the Bank Agents, will not be
unreasonably withheld, (ii) each such assignment shall be of a constant, and not
a varying, percentage of all the assigning Bank's rights and obligations in
respect of the Revolving Credit Loans, the Swingline Loans and the Letters of
Credit under this Credit Agreement, (iii) each assignment shall be in a minimum
amount of $5,000,000 and (iv) the parties to such assignment shall execute and
deliver to the Agent, for recording in the Register (as hereinafter defined), an
Assignment and Acceptance, substantially in the form of Exhibit E hereto (an
"Assignment and Acceptance"), together with any Notes subject to such
assignment. In the event that a Bank Agent holds a Total Percentage under this
Credit Agreement in an amount less than eleven percent (11%), such Bank Agent
agrees that, at the request of the Borrower and the Majority Banks, and provided
no Default or Event of Default shall have occurred and be continuing, such Bank
Agent shall resign as Bank Agent in accordance with Section 15.9 hereof. Upon
such execution, delivery, acceptance and recording, from and after the effective
date specified in each Assignment and Acceptance, which effective date shall be
at least five (5) Business Days after the execution thereof', (i) the assignee
thereunder shall be a party hereto and, to the extent provided in such
Assignment and Acceptance, have the rights and obligations of a Bank hereunder
(including, without limitation, those under Section 6.2.3), and (ii) the
assigning Bank shall, to the extent provided in such assignment and upon payment
to the Agent of the registration fee referred to in Section 19.3, be released
from its obligations under this Credit Agreement.

      19.2. CERTAIN REPRESENTATIONS AND WARRANTIES; LIMITATIONS; COVENANTS. By
executing and delivering an Assignment and Acceptance, the parties to the
assignment thereunder confirm to and agree with each other and the other parties
hereto as follows:

            (a) other than the representation and warranty that it is the legal
      and beneficial owner of the interest being assigned thereby free and clear
      of any adverse claim, the assigning Bank makes no representation or
      warranty, express or implied, and assumes no responsibility with respect
      to any statements, warranties or representations made in or in connection
      with this Credit Agreement or the execution, legality, validity,
      enforceability, genuineness, sufficiency or value of this Credit
      Agreement, the other Loan Documents or any other instrument or document
      furnished pursuant hereto or the attachment, perfection or priority of any
      security interest or mortgage;

            (b) the assigning Bank makes no representation or warranty and
      assumes no responsibility with respect to the financial condition of the
      Borrower and its Subsidiaries or any other Person primarily or secondarily
      liable in respect of any of the Obligations, or the performance or
      observance by the Borrower and its Subsidiaries or any other Person
      primarily or secondarily liable in respect of any of the Obligations of
      any of their obligations under this Credit Agreement or any of the other
      Loan Documents or any other instrument or document furnished pursuant
      hereto or thereto;


                                       57
<PAGE>   58
            (c) such assignee confirms that it has received a copy of this
      Credit Agreement and each of the other Loan Documents, together with
      copies of the most recent financial statements referred to in Section 7.3
      and Section 8.4 and such other documents and information as it has deemed
      appropriate to make its own credit analysis and decision to enter into
      such Assignment and Acceptance;

            (d) such assignee will, independently and without reliance upon the
      assigning Bank, the Agent or any other Bank and based on such documents
      and information as it shall deem appropriate at the time, continue to make
      its own credit decisions in taking or not taking action under this Credit
      Agreement;

            (e) such assignee represents and warrants that it is an Eligible
      Assignee;

            (f) such assignee appoints and authorizes the Agent to take such
      action as agent on its behalf and to exercise such powers under this
      Credit Agreement and the other Loan Documents as are delegated to the
      Agent by the terms hereof or thereof, together with such powers as are
      reasonably incidental thereto;

            (g) such assignee agrees that it will perform in accordance with
      their terms all of the obligations that by the terms of this Credit
      Agreement are required to be performed by it as a Bank;

            (h) such assignee represents and warrants that it is legally
      authorized to enter into such Assignment and Acceptance; and

            (i) such assignee acknowledges that it has made arrangements with
      the assigning Bank satisfactory to such assignee with respect to its pro
      rata share of Letter of Credit Fees in respect of outstanding Letters of
      Credit.

      19.3. REGISTER. The Agent shall maintain a copy of each Assignment and
Acceptance delivered to it and a register or similar list (the "Register") for
the recordation of the names and addresses of the Banks and the Commitment
Percentage of' and principal amount of the Revolving Credit Loans and Swingline
Loans owing to, and Letter of Credit Participations purchased by, the Banks from
time to time. The entries in the Register shall be conclusive, in the absence of
manifest error, and the Borrower, the Agent and the Banks may treat each Person
whose name is recorded in the Register as a Bank hereunder for all purposes of
this Credit Agreement. The Register shall be available for inspection by the
Borrower and the Banks at any reasonable time and from time to time upon
reasonable prior notice. Upon each such recordation, the assigning Bank agrees
to pay or cause the assignee Bank to pay to the Agent a registration fee in the
sum of $3,500.

      19.4. NEW NOTES. Upon its receipt of an Assignment and Acceptance executed
by the parties to such assignment, together with each Note subject to such
assignment, the Agent shall (i) record the information contained therein in the
Register, and (ii) give prompt notice thereof to the Borrower and the Banks
(other than the assigning Bank). Within five (5) Business Days after receipt of
such notice, the Borrower, at its own expense, shall execute and deliver to the
Agent, in exchange for each surrendered Note, a new Note to the order of such
Eligible Assignee in an


                                       58
<PAGE>   59
amount equal to the amount assumed by such Eligible Assignee pursuant to such
Assignment and Acceptance and, if the assigning Bank has retained some portion
of its obligations hereunder, a new Note to the order of the assigning Bank in
an amount equal to the amount retained by it hereunder. Such new Notes shall
provide that they are replacements for the surrendered Notes, shall be in an
aggregate principal amount equal to the aggregate principal amount of the
surrendered Notes, shall be dated the effective date of such Assignment and
Acceptance and shall otherwise be in substantially the form of the assigned
Notes. Within five (5) days of issuance of any new Notes pursuant to this
Section 19.4, the Borrower shall deliver an opinion of counsel, addressed to the
Banks and the Agent, relating to the due authorization, execution and delivery
of such new Notes and the legality, validity and binding effect thereof, in form
and substance satisfactory to the Banks, provided that the Borrower shall be
required to deliver such an opinion only at the request and the expense of the
Eligible Assignee. The surrendered Notes shall be marked "canceled" and returned
to the Borrower.

      19.5. PARTICIPATIONS. Each Bank may sell participations to one or more
banks or other Persons in all or a portion of such Bank's rights and obligations
under this Credit Agreement and the other Loan Documents; provided that (i) each
such participation shall be in an amount of not less than $5,000,000, (ii) any
such sale or participation shall not affect the rights and duties of the selling
Bank hereunder to the Borrower and (iii) the only rights granted to the
participant pursuant to such participation arrangements with respect to waivers,
amendments or modifications of the Loan Documents shall be the rights to approve
waivers, amendments or modifications that would reduce the principal of or the
interest rate on any Loans, extend the term or increase the amount of the
Commitment of such Bank as it relates to such participant, reduce the amount of
any Commitment Fees or Letter of Credit Fees to which such participant is
entitled or extend any regularly scheduled payment date for principal or
interest or fees.

      19.6. DISCLOSURE. The Borrower agrees that in addition to disclosures made
in accordance with standard and customary banking practices, any Bank may
disclose information obtained by such Bank pursuant to this Credit Agreement to
assignees or participants and potential assignees or participants hereunder;
provided that such assignees or participants or potential assignees or
participants shall agree (i) to treat in confidence such information unless such
information otherwise becomes public knowledge, (ii) not to disclose such
information to a third party, except to their legal counsel or as required by
law or legal process, and (iii) not to make use of such information for purposes
of transactions unrelated to such contemplated assignment or participation.

      19.7. ASSIGNEE OR PARTICIPANT AFFILIATED WITH THE BORROWER. If any
assignee Bank is an Affiliate of the Borrower, then any such assignee Bank shall
have no right to vote as a Bank hereunder or under any of the other Loan
Documents for purposes of granting consents or waivers or for purposes of
agreeing to amendments or other modifications to any of the Loan Documents or
for purposes of making requests to the Agent pursuant to Section 13.1 or Section
13.2, and the determination of the Majority Banks shall for all purposes of this
Agreement and the other Loan Documents be made without regard to such assignee
Bank's interest in any of the Loans. If any Bank sells a participating interest
in any of the Loans or Reimbursement Obligations to a participant, and such
participant is the Borrower or an Affiliate of the Borrower, then such
transferor Bank shall promptly notify the Agent of the sale of such
participation. A transferor


                                       59
<PAGE>   60
Bank shall have no right to vote as a Bank hereunder or under any of the other
Loan Documents for purposes of granting consents or waivers or for purposes of
agreeing to amendments or modifications to any of the Loan Documents or for
purposes of making requests to the Agent pursuant to Section 13.1 or Section
13.2 to the extent that such participation is beneficially owned by the Borrower
or any Affiliate of the Borrower, and the determination of the Majority Banks
shall for all purposes of this Agreement and the other Loan Documents be made
without regard to the interest of such transferor Bank in the Loans to the
extent of such participation.

      19.8. MISCELLANEOUS ASSIGNMENT PROVISIONS. Any assigning Bank shall retain
its rights to be indemnified pursuant to Section 16 or Section 17 with respect
to any claims or actions arising prior to the date of such assignment. If any
assignee Bank is not incorporated under the laws of the United States of America
or any state thereof, it shall, prior to the date on which any interest or fees
are payable hereunder or under any of the other Loan Documents for its account,
deliver to the Borrower and the Agent certification as to its exemption from
deduction or withholding of any United States federal income taxes. Anything
contained in this Section 19 to the contrary notwithstanding, any Bank may at
any time pledge all or any portion of its interest and rights under this Credit
Agreement (including all or any portion of its Notes) to any of the twelve
Federal Reserve Banks organized under Section 4 of the Federal Reserve Act, 12
U.S.C. Section 341. No such pledge or the enforcement thereof shall release the
pledgor Bank from its obligations hereunder or under any of the other Loan
Documents.

      19.9. ASSIGNMENT BY BORROWER. The Borrower shall not assign or transfer
any of its rights or obligations under any of the Loan Documents without the
prior written consent of each of the Banks, which consent may be withheld in
such Bank's sole and absolute discretion, and any attempted assignment in
violation of this Section 19 shall be void ab initio.

20. NOTICES, ETC.

      Except as otherwise expressly provided in this Credit Agreement, all
notices and other communications made or required to be given pursuant to this
Credit Agreement or the Notes or any Letter of Credit Applications or any other
Loan Document shall be in writing and shall be delivered by hand, mailed by
United States registered or certified first class mail, postage prepaid, sent by
overnight courier, or sent by telegraph, telecopy, facsimile or telex and
confirmed by delivery via courier or postal service, addressed as follows:

            (a) if to the Borrower, at 1055 Page Avenue, Fremont, California
      94538, Attention: Chief Financial Officer, or at such other address for
      notice as the Borrower shall last have furnished in writing to the Person
      giving the notice;

            (b) if to the Agent, at 435 Tasso Street, Suite 250, Palo Alto,
      California 94301, Attention: Michelle Arellano, or such other address for
      notice as the Agent shall last have furnished in writing to the Person
      giving the notice; and

            (c) if to any of the Bank Agents or any Bank, at such Bank Agent's
      or such Bank's address set forth on Schedule 1.1 hereto, or such other
      address for notice as such Bank Agent or Bank shall have last furnished in
      writing to the Person giving the notice.


                                       60
<PAGE>   61
      Any such notice or demand shall be deemed to have been duly given or made
and to have become effective (i) if delivered by hand, overnight courier or
facsimile to a responsible officer of the party to which it is directed, at the
time of the receipt thereof by such officer or the sending of such facsimile and
(ii) if sent by registered or certified first-class mail, postage prepaid, on
the third Business Day following the mailing thereof.

21. GOVERNING LAW.

      THIS CREDIT AGREEMENT AND, EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED
THEREIN, EACH OF THE OTHER LOAN DOCUMENTS ARE CONTRACTS UNDER THE LAWS OF THE
STATE OF CALIFORNIA AND SHALL FOR ALL PURPOSES BE CONSTRUED IN ACCORDANCE WITH
AND GOVERNED BY THE LAWS OF SAID STATE OF CALIFORNIA (EXCLUDING THE LAWS
APPLICABLE TO CONFLICTS OR CHOICE OF LAW). THE BORROWER AGREES THAT ANY SUIT FOR
THE ENFORCEMENT OF THIS CREDIT AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS MAY
BE BROUGHT IN THE COURTS OF THE STATE OF CALIFORNIA OR ANY FEDERAL COURT SITTING
THEREIN AND CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURT AND SERVICE
OF PROCESS IN ANY SUCH SUIT BEING MADE UPON THE BORROWER BY MAIL AT THE ADDRESS
SPECIFIED IN SECTION 20. THE BORROWER HEREBY WAIVES ANY OBJECTION THAT IT MAY
NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT
SUCH SUIT IS BROUGHT IN AN INCONVENIENT COURT.

22. HEADINGS.

      The captions in this Credit Agreement are for convenience of reference
only and shall not define or limit the provisions hereof.

23. COUNTERPARTS.

      This Credit Agreement and any amendment hereof may be executed in several
counterparts and by each party on a separate counterpart, each of which when
executed and delivered shall be an original, and all of which together shall
constitute one instrument. In proving any matter with respect to this Credit
Agreement it shall not be necessary to produce or account for more than one such
counterpart signed by the party against whom enforcement is sought.

24. ENTIRE AGREEMENT, ETC.

      The Loan Documents and any other documents executed in connection herewith
or therewith express the entire understanding of the parties hereto and thereto
with respect to the transactions contemplated hereby and thereby. Neither this
Credit Agreement nor any term hereof may be changed, waived, discharged or
terminated, except as provided in Section 26.


                                       61
<PAGE>   62
25. WAIVER OF JURY TRIAL.

      The Borrower hereby waives its right to a jury trial with respect to any
action or claim arising out of any dispute in connection with this Credit
Agreement, the Notes or any of the other Loan Documents, any rights or
obligations hereunder or thereunder or the performance of which rights and
obligations. Except as prohibited by applicable law, the Borrower hereby waives
any right it may have to claim or recover in any litigation referred to in the
preceding sentence any special, exemplary, punitive or consequential damages or
any damages other than, or in addition to, actual damages. The Borrower (i)
certifies that no representative, agent or attorney of any Bank or any Bank
Agent has represented, expressly or otherwise, that such Bank or such Bank Agent
would not, in the event of litigation, seek to enforce the foregoing waivers and
(ii) acknowledges that the Agent, the Bank Agents and the Banks have been
induced to enter into this Credit Agreement, the other Loan Documents to which
it is a party and the Subordinated Debt Documents to which it is a party by,
among other things, the waivers and certifications contained herein.

26. CONSENTS, AMENDMENTS, WAIVERS, ETC.

      Any consent or approval required or permitted by this Credit Agreement to
be given by all of the Banks may be given, and any term of this Credit
Agreement, the other Loan Documents or any other instrument related hereto or
mentioned herein may be amended, and the performance or observance by the
Borrower or any of its Subsidiaries of any terms of this Credit Agreement, the
other Loan Documents or such other instrument or the continuance of any Default
or Event of Default may be waived (either generally or in a particular instance
and either retroactively or prospectively) with, but only with, the written
consent of the Borrower and the written consent of the Majority Banks.
Notwithstanding the foregoing, the rate of interest on the Notes, the timing of
any regularly scheduled payment date for principal, interest or fees, the term
of the Notes, the amount of the Commitments of the Banks and the amount of
Commitment Fee or Letter of Credit Fees hereunder may not be changed without the
written consent of the Borrower and the written consent of each Bank affected
thereby (except that the Commitments may be changed pursuant to and in
connection with assignments made in accordance with Section 19 hereof); the
definition of Majority Banks may not be amended wiTHOUT the written consent of
all of the Banks; the amount of any Letter of Credit Fees payable for the
Issuing Bank's account may not be amended without the written consent of the
Issuing Bank and the amount of the Agent's Fee and Section 15 may not be amended
without the written consent of the Agent, and this sentence may not be waived or
modified except with the written consent of all of the Banks. No waiver shall
extend to or affect any obligation not expressly waived or impair any right
consequent thereon. No course of dealing or delay or omission on the part of the
Agent or any Bank in exercising any right shall operate as a waiver thereof or
otherwise be prejudicial thereto. No notice to or demand upon the Borrower shall
entitle the Borrower to other or further notice or demand in similar or other
circumstances.

27. SEVERABILITY.

      The provisions of this Credit Agreement and each of the other Loan
Documents are severable and if any one clause or provision hereof or thereof
shall be held invalid or unenforceable in whole or in part in any jurisdiction,
then such invalidity or unenforceability


                                       62
<PAGE>   63
shall affect only such clause or provision, or part hereof or thereof, in such
jurisdiction, and shall not in any manner affect such clause or provision in any
other jurisdiction, or any other clause or provision of this Credit Agreement or
any of the other Loan Documents in any jurisdiction.

28. CONFIDENTIALITY.

      Each Bank Agent and each Bank agrees to take, and to cause its respective
affiliates to take, reasonable precautions in accordance with its safe and sound
banking practice and its customary procedures, to maintain the confidentiality
of all non-public information relating to the Borrower or any Subsidiary
provided to such Bank Agent or Bank in connection with this Credit Agreement or
any other Loan Document, and none of the Bank Agents, the Banks, nor any of
their respective affiliates shall use any such information other than in
connection with or in enforcement of this Credit Agreement and the other Loan
Documents or in connection with other business now or hereafter existing or
contemplated with the Borrower or any Subsidiary, except to the extent such
information (i) was or becomes generally available to the public other than as a
result of disclosure by the Bank Agents or the Banks, or (ii) was or becomes
available on a non-confidential basis from a source other than the Borrower, so
long as such source is not bound by a confidentiality agreement with the
Borrower known to such Bank; provided, however, that the provisions of this
Section 28 shall not restrain the Bank AgeNTS or the Banks from divulging such
information (A) at the request or pursuant to any requirement of any
governmental authority to which a Bank Agent or Bank is subject or in connection
with an examination of such Bank Agent or Bank by any such authority; (B)
pursuant to subpoena or other court process; (C) when required to do so in
accordance with the provisions of any applicable legal requirement; (D) to the
extent reasonably required in connection with any litigation or proceeding to
which any Bank Agent or Bank or any of their respective affiliates may be party;
(E) to the extent reasonably required in connection with the exercise by a Bank
Agent or Bank of any right or remedy hereunder or under any other Loan
Documents; (F) to a Bank Agent's or Bank's independent auditors and other
professional advisors; (G) to any participant or assignee, actual or potential,
provided that such Person agrees in writing to keep such information
confidential to the same extent required of the assigning Bank Agent or Bank
hereunder; (H) as expressly permitted under the terms of any other document or
agreement regarding confidentiality to which the Borrower or any Subsidiary is
party or is deemed party with any Bank Agent or Bank, or any affiliate of such
Bank Agent or Bank; and (I) to its affiliates, which shall be deemed to be bound
by the provisions of this Section 28.

29. ORIGINAL AGREEMENT.

      This Credit Agreement is not intended to be, and shall not be construed to
create, a novation or accord and satisfaction, and, except as otherwise provided
herein, the Original Credit Agreement, as delivered on November 30, 1995, and
amended by that certain Amendment No. 1 dated as of January 8, 1996 and that
certain Amendment No. 2 dated as of March 31, 1996 prior to the execution hereof
and as amended and restated hereby, shall remain in full force and effect.


                                       63
<PAGE>   64


      IN WITNESS WHEREOF, the undersigned have duly executed this Credit
Agreement as a sealed instrument as of the date first set forth above.

                                    HMT TECHNOLOGY CORPORATION

                                        /s/ Peter S. Norris
                                    By:_________________________________________
                                     Title:


                                    BANQUE PARIBAS, individually and as
                                    Co-Syndication Agent

                                        /s/ Nanci Meyer
                                    By:_________________________________________
                                     Title:

                                        /s/ Lee S. Buckner
                                    By:_________________________________________
                                     Title:


                                    THE FIRST NATIONAL BANK OF BOSTON,
                                    individually and as Agent and
                                    Co-Syndication Agent

                                        /s/ Maia D. Heymann
                                    By:_________________________________________
                                     Title:


                                    UNION BANK OF CALIFORNIA, N.A.

                                        /s/ Patrick J. Clemens
                                    By:_________________________________________
                                     Title:



                                    BANK OF AMERICA NATIONAL TRUST AND
                                    SAVINGS ASSOCIATION

                                        /s/ Christopher Gernhard
                                    By:_________________________________________
                                     Title:


                                    FLEET NATIONAL BANK

                                        /s/ Thomas Davies
                                    By:_________________________________________
                                     Title:


                                       64

<PAGE>   1
                                                                EXHIBIT 4.12

                         FIRST AMENDMENT TO AMENDED AND
                       RESTATED REVOLVING CREDIT AGREEMENT

            This FIRST AMENDMENT TO SECOND AMENDED AND RESTATED REVOLVING CREDIT
AGREEMENT (this "First Amendment") is entered into as of January __, 1997 by and
between (a) HMT TECHNOLOGY CORPORATION (the "Borrower"), a Delaware corporation
having its principal place of business at 1055 Page Avenue, Fremont, California
94538, (b) THE FIRST NATIONAL BANK OF BOSTON, a national banking association,
BANQUE PARIBAS, acting through its Los Angeles branch, and the other lending
institutions listed on Schedule 1.1, (c) THE FIRST NATIONAL BANK OF BOSTON as
administrative and co-syndication agent for itself, the other lending
institutions listed on Schedule 1.1, and the other Bank Agents (as defined
herein), and (d) BANQUE PARIBAS, as co-syndication agent for itself, the other
lending institutions listed on Schedule 1.1, and the other Bank Agents.

                                    RECITALS

            A. Borrower, Banks, and Bank Agents are parties to that certain
Amended and Restated Revolving Credit Agreement dated as of August 28, 1996 (the
"Credit Agreement"), pursuant to which the Banks agreed to make available to
Borrower certain credit facilities.

            B. Borrower has requested that the Banks agree to various amendments
to the Credit Agreement which will permit, inter alia, the issuance of certain
convertible subordinated securities of the Borrower. Banks have agreed to make
such amendments, subject to the conditions and in reliance on the
representations and warranties set forth below.

            NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, Bank, Bank Agents and Borrower hereby
agree as follows:

                                    AGREEMENT

            1. DEFINED TERMS; SECTION REFERENCES. Initially capitalized terms
used but not defined in this First Amendment shall have the meanings assigned to
such terms in the Credit Agreement. All "Section " references herein are to
sections of the Credit Agreement unless otherwise specified.

            2. AMENDMENTS TO SECTION 1.1 OF THE CREDIT AGREEMENT. Section 1.01
of the Credit Agreement shall be revised in relevant part as follows:

            (a) The definition of "Replacement Subordinated Debt " shall be
deleted in its entirety and a new definition substituted therefor which reads as
follows:

            Replacement Subordinated Debt. Unsecured subordinated Indebtedness
            of the Borrower, in an original principal amount not to exceed Two
            Hundred Fifty Million Dollars ($250,000,000), as to which all of the
            following conditions are satisfied: (i) the first proceeds of such
            subordinated Indebtedness shall be used to pay the Subordinated Debt
            in full; (ii) the proceeds of such subordinated Indebtedness shall
            not be used to make payments to the holders of, and redemptions of,
            Borrower's Preferred Stock or to make any other Restricted Payments,
            provided, however, that


                                       1
<PAGE>   2
            if the total proceeds of such subordinated Indebtedness exceed One
            Hundred Fifty Million Dollars ($150,000,000), the proceeds of such
            subordinated Indebtedness may be used to make payments to the
            holders of Borrower's Preferred Stock in accordance with the terms
            of such Preferred Stock; (iii) the terms and conditions governing
            such subordinated Indebtedness shall be substantially the same as
            those described in that certain preliminary offering memorandum
            relating to the issuance by Borrower of Two Hundred Million Dollars
            ($200,000,000) in convertible subordinated notes due 2004, dated on
            or about January 14, 1997, (iv) the coupon applicable to such
            subordinated Indebtedness shall not exceed eight percent (8%) per
            annum; and (v) such Indebtedness is incurred in a transaction that
            is consummated not later than April 1, 1997.

            3. AMENDMENTS TO SECTION 9.4 OF THE CREDIT AGREEMENT. Section 9.4 of
the Credit Agreement shall be amended in relevant part as follows:

            (a) The word "and" shall be deleted from the end of subsection (c)
of Section 9.4.

            (b) The period shall be deleted from the end of subsection (d) of
Section 9.4, and in its place shall be inserted "; and".

            (c) A new subsection (e) will be added to Section 9.4 of the Credit
Agreement, as follows:

            (e) payments to the holders of, and redemptions of, Preferred Stock
            of the Borrower funded by the proceeds of Replacement Subordinated
            Debt, (provided that such payments may not be made unless the total
            proceeds of the Replacement Subordinated Debt exceed One Hundred
            Fifty Million Dollars ($150,000,000)).

            4. NEW SECTION 9.13 OF THE CREDIT AGREEMENT. A new Section 9.13
shall be added to the Credit Agreement, which shall provide as follows:

            9.13 DESIGNATED SENIOR DEBT UNDER THE INDENTURE. If the Borrower
            creates any Designated Senior Debt, as such term is defined in the
            Indenture, the instruments evidencing or governing such Designated
            Senior Debt will provide that the holders or the representative of
            any such Designated Senior Debt shall have no ability to exercise
            rights under the Indenture to block payment to the holders of
            Replacement Subordinated Debt without first obtaining the written
            consent of the Agent.

            5. Amendments to Section 13.1 of the Credit Agreement. Section 13.1
of the Credit Agreement shall be amended in relevant part as follows:

            (a) The word "or" shall be deleted from the end of subsection (o) of
Section 13.1.

            (b) The period shall be deleted from the end of subsection (p) of
Section 13.1, and in its place shall be inserted "; or".


                                       2
<PAGE>   3
            (c) A new subsection (q) will be added to Section 13.1 of the Credit
            Agreement, as follows:

            (q) (i) the subordination provisions of the indenture or any
            agreement or instrument governing the Subordinated Debt or
            Replacement Subordinated Debt shall for any reason be revoked or
            invalidated, or otherwise cease to be in full force and effect.

            6. CONDITIONS PRECEDENT TO THE EFFECTIVENESS OF THIS FIRST
AMENDMENT. Each Bank's obligations under this First Amendment are conditioned
upon, and this First Amendment shall not be effective until, satisfaction in
full of each of the following:

            (a) Agent shall have received this First Amendment, duly executed on
behalf of Borrower and Majority Banks by the appropriate Person and in form and
substance satisfactory to Agent and its counsel;

            (b) Borrower shall have paid to Agent all amounts then due and
payable including, without limitation, all fees and expenses incurred by Agent
in connection with this First Amendment, and all other amounts then payable
pursuant to Section 16 of the Credit Agreement which shall have been presented
for payment;

            (c) All of the representations and warranties of Borrower contained
herein, in the Credit Agreement and in each other Loan Document shall be true
and correct in all material respects on and as of the effective date of this
First Amendment, as though made on and as of that date (except to the extent
that such representations and warranties expressly relate to an earlier date or
reflect changes brought about by this First Amendment);

            (d) Borrower shall have delivered to Agent certified copies of
resolutions of its Board of Directors authorizing Borrower to execute and
deliver this First Amendment and an incumbency certificate, each in form and
substance satisfactory to Agent in its sole and absolute discretion;

            (e) No Event of Default or Unmatured Event of Default shall have
occurred and be continuing or would result from the consummation of the
transactions contemplated in this First Amendment;

            (f) All other documents, certificates, consents and opinions
reasonably required by Bank Agent in connection with the transactions
contemplated by this First Amendment shall have been executed and delivered in
form and substance satisfactory to Bank Agent; and

            (g) Each of the Banks shall have received a copy of the most current
draft of the Indenture proposed to be executed in connection with the
Replacement Subordinated Debt. .

            7. REPRESENTATIONS AND WARRANTIES. In order to induce Bank to enter
into this First Amendment, Borrower makes the following representations and
warranties:

            (a) The representations and warranties contained in the Credit
Agreement (and in the Schedules thereto) and each of the other Loan Documents
(and in the Schedules thereto) are true, correct and complete in all material
respects at and as of the effective date of this First Amendment (except to the
extent that such representations and warranties expressly relate to an earlier
date or reflect changes brought about by this First Amendment);


                                       3
<PAGE>   4
            (b) This First Amendment and all other agreements and documents
executed by Borrower in connection herewith have been duly executed and
delivered by Borrower and constitute the legal, valid and binding obligations of
Borrower, enforceable against Borrower in accordance with their terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium
or similar laws relating to the enforcement of the rights of creditors
generally, or the exercise of judicial discretion with respect to equitable
remedies.

            8. REFERENCES. All references in the Credit Agreement to "this
Restated Agreement", "hereof", "herein", "hereto", or words of similar import,
and all references in all other Loan Documents to "the Credit Agreement" shall
be, and shall be deemed to be for all purposes, references to the Credit
Agreement as amended.

            9. CREDIT AGREEMENT AND OTHER LOAN DOCUMENTS OTHERWISE NOT AFFECTED.
Except as expressly amended pursuant to this First Amendment, the Credit
Agreement and each of the other Loan Documents shall remain unchanged and in
full force and effect and are hereby ratified and confirmed in all respects.
Each Bank continues to reserve any and all rights and remedies under the Credit
Agreement and each of the other Loan Documents, and no failure, delay or
discontinuance on the part of any Bank in exercising any right, power or remedy
thereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy. This First
Amendment and the Credit Agreement shall be read together, as one document.

            10. BINDING EFFECT. This First Amendment shall be binding upon,
inure to the benefit of and be enforceable by Borrower and each Bank and their
respective successors and assigns, as permitted pursuant to the Credit
Agreement.

            11. TIME OF THE ESSENCE. Time and exactitude of each of the terms,
obligations, covenants and conditions of this First Amendment are hereby
declared to be of the essence.

            12. GOVERNING LAW. THIS FIRST AMENDMENT IS A CONTRACT UNDER THE LAWS
OF THE STATE OF CALIFORNIA AND SHALL FOR ALL PURPOSES BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY SUCH LAWS (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR
CHOICE OF LAW).

            13. COUNTERPARTS. This First Amendment may be executed in several
counterparts and by each party on a separate counterpart, each of which when
executed and delivered shall be an original, and all of which together shall
constitute one instrument. In proving any matter with respect to this First
Amendment it shall not be necessary to produce or account for more than one such
counterpart signed by the party against whom enforcement is sought.

            14. CONFIDENTIALITY. Each Bank Agent and each Bank agrees to take,
and to cause its respective affiliates to take, reasonable precautions in
accordance with its safe and sound banking practice and its customary
procedures, to maintain the confidentiality of all non-public information
relating to the Borrower or any Subsidiary provided to such Bank Agent or Bank
in connection with this First Amendment, and none of the Bank Agents, the Banks,
nor any of their respective affiliates shall use any such information other than
in connection with or in enforcement of the Credit Agreement, as amended by this
First Amendment, and the other Loan Documents or in connection with other
business now or hereafter existing or contemplated with


                                       4
<PAGE>   5
the Borrower or any Subsidiary, except to the extent such information (i) was or
becomes generally available to the public other than as a result of disclosure
by the Bank Agents or the Banks, or (ii) was or becomes available on a
non-confidential basis from a source other than the Borrower, so long as such
source is not bound by a confidentiality agreement with the Borrower known to
such Bank; provided, however, that the provisions of this Section 14 shall not
restrain the Bank Agents or the Banks from divulging such information (A) at the
request or pursuant to any requirement of any governmental authority to which a
Bank Agent or Bank is subject or in connection with an examination of such Bank
Agent or Bank by any such authority; (B) pursuant to subpoena or other court
process; (C) when required to do so in accordance with the provisions of any
applicable legal requirement; (D) to the extent reasonably required in
connection with any litigation or proceeding to which any Bank Agent or Bank or
any of their respective affiliates may be party; (E) to the extent reasonably
required in connection with the exercise by a Bank Agent or Bank of any right or
remedy hereunder or under any other Loan Documents; (F) to a Bank Agent's or
Bank's independent auditors and other professional advisors; (G) to any
participant or assignee, actual or potential, provided that such Person agrees
in writing to keep such information confidential to the same extent required of
the assigning Bank Agent or Bank hereunder; (H) as expressly permitted under the
terms of any other document or agreement regarding confidentiality to which the
Borrower or any Subsidiary is party or is deemed party with any Bank Agent or
Bank, or any affiliate of such Bank Agent or Bank; and (I) to its affiliates,
which shall be deemed to be bound by the provisions of this Section 14.

            IN WITNESS WHEREOF, the parties hereto have duly executed this First
Amendment, as of the date first above written.

                                    HMT TECHNOLOGY CORPORATION

                                        /s/ Peter S. Norris             
                                    By:_________________________________________
                                     Title:


                                    BANQUE PARIBAS, individually and as
                                    Co-Syndication Agent

                                        /s/ Nanci Meyer
                                    By:_________________________________________
                                     Title:

                                        /s/ Stanley P. Berkman
                                    By:_________________________________________
                                     Title:


                                    THE FIRST NATIONAL BANK OF BOSTON,
                                    individually and as Agent and
                                    Co-Syndication Agent
                            
                                        /s/ Joseph L. Massimo
                                    By:_________________________________________
                                     Title:


                                       5
<PAGE>   6
                                    UNION BANK OF CALIFORNIA, N.A.


                                        /s/ Patrick J. Clemens
                                    By:_________________________________________
                                     Title:



                                    BANK OF AMERICA NATIONAL TRUST AND
                                    SAVINGS ASSOCIATION


                                        /s/ Christopher Gernhard
                                    By:_________________________________________
                                     Title:


                                    FLEET NATIONAL BANK


                                         /s/ Matthew M. Glauninger
                                    By:_________________________________________
                                     Title:


                                       6

<PAGE>   1
                                                                    Exhibit 99.1


HMT Technology Corporation Announces Completion of Private Placement of
Convertible Subordinated Notes

January 22, 1997, 5:09 PM EST

FREMONT, Calif.--(BUSINESS WIRE)--Jan. 22, 1997--HMT Technology Corporation
(NASDAQ:HMTT) announced today that it completed a $230 million private placement
of convertible subordinated notes to qualified institutional investors.

The company stated that the purposes of the offering were to prepay the
principal balance of currently outstanding subordinated promissory notes and to
redeem the currently outstanding Mandatorily Redeemable Series A Preferred Stock
and for capital expenditures, working capital and other general corporate
purposes.

The convertible subordinated notes have an interest rate of 5 3/4 percent, are
convertible into shares of common stock of the company at a conversion price of
$23.75 per share, subject to adjustment in certain events, and have a seven-year
term. The convertible subordinated notes are redeemable, in whole or in part, at
the option of the company, at any time on and after Jan. 20, 2000.

The securities to be offered will not be registered under the Securities Act of
1933, as amended, or applicable state securities laws and may not be offered or
sold in the United States absent registration under the Securities Act and
applicable state securities laws or available exemptions from the registration
requirements.

                                      # # #


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